> Off the top of my head, I don't know if the capital consumption
> (depreciation) measure is supposed to reflect commercial
> obsolesence (i.e., a working machine is devalued in the market
> by the appearance of something newer), or more simply the
> estimated effect of the capital's aging (wear and tear) relative
> to its original cost.
It's the former, Max. Since 1976, the BEA has determined capital consumption allowances by estimating the service life and retirement pattern of each of more than 40 different types of assets (equipment and structures), valuing the asset at its replacement cost, and using a straight formula for the calculation. Prior to that, they had used original cost depreciation as tabulated from IRS tax returns filed by businesses, which not only ignored the effects of technological and price changes, but was influenced by changes in tax code depreciation rules. At the time of the change, the BEA based asset life on IRS estimates (they used 85% of that number). As you know the BEA likes to tinker with these kinds of things, and I haven't kept up with all they have done, but that is their basic approach.
Max also said:
>Changes in the values of financial assets are not included (in GDP
estimates).<
This is a fundamental point. The NIPA, the national income and product accounts, can be viewed in two ways: as a sum of the gross product (value added) of individual firms--output--and as the sum of charges against (factor payments in) production: depreciation of fixed capital, employee compensation, profits, interest payments, and various taxes and subsidies--income. But increasingly today, as you indicate, income can be made outside of production. In marxian terms, the C in M-C-M' is bypassed; it's M-M'. The money received from an increase in the value of financial assest buys a loaf of bread just like the money a capitalist gets from the dividends he pays himself.
So I have a small question or two. How should we think about this, Max (Doug, Rakesh, anybody)? In marxian terms how can these two forms of surplus value--returns from production and gains from asset value changes outside the process of production and exchange--be combined in such a way as to make analytical sense? What are some of the primary effects on the expansion of capital; i.e., the laws of motion?
Max again:
>I'm not sure true that a neglect of other items that
>are not counted in the GDP is irrelevant to distribution or
>equity. I'm thinking of the length of the working day, but
>I'm not going to attempt an explanation right now. Maybe
>someone else can expound on it; I'd be interested.
Lengthening the working day is just one way capital attempts to increase surplus value. Today, I think, capital has much more powerful ways.
More Max:
> Second, since GDP is a flow measure, it does not aim to measure
> the value of the capital stock. Additions to capital stock -- net
> investment -- are measured at cost, which is obviously not
> necessarily the same as 'value.'
>
> There are related Gov stats and reports to measure the value
> of the capital stock in terms of cost and other ways.
>
> So neither 'speculative growth' nor 'real accumulation' are
> at issue in GDP: it measures neither.
>
> It is not supposed to measure distribution, so criticisms of
> it from this standpoint are along the lines of, bicycles are
> inadequate because they don't fly over rivers.
>
Amen to these points. Though the factor payment side of the NIPA is putatively about distribution, the use of bourgeios categories makes it virtually useless for that purpose (as I argued to Doug a while back). Interesting to note, btw, the abstract Doug posted from the guy who proposes to eliminate business owner income from employee compensation in the NIPA. That's one small step.......
Roger