>Shane Mage wrote:
>
>>From a Marxist standpoint, there is nothing at all wrong with Lev's
>>argument. Capital is the mass of socially necessary labor time
>>accumulated to serve as the basis for production of surplus value.
>>The capital of each firm is subject to what Marx called "moral wear
>>and tear," which we nowadays call "obsolescence." But the obsolescence
>>of one firm's capital is produced by a technological advance that
>>provides a profitable [temporary] monopoly advantage to the firm
>>introducing the new technology. The laggard's capital is "destroyed,"
>>but that "destruction" is compensated by the market which capitalizes
>>the expected profit of the innovator at a much higher rate. This is how
>>capitalist fortunes are made when they are made
>>"honestly." From a
>>Marxist view, this is a transfer of capital from loser to winner. It is
>>also the very essence of capitalism as a continual revolution of the forces
>>of production (and the main thing that Schumpeter learned from Marx!)
>
>[...]
>
>>Once you realize this, you can grasp that [negative] "profitability" of a
>>technologically
>>dynamic firm, as measured by conventional, legally required, standards, is
>>not merely irrelevant to the rational capitalist but even tends to be
>>correlated with positive investment value.
>
>We're not talking profitability, we're talking profits being greater
>than zero. And we're not talking Marxian value, we're talking stock
>market value.
>
>Of course a new drug is likely to increase the "value," however
>defined, of its producing firm - but not because of some magical
>conceptual revaluation, but because it's likely to provide the firm
>with higher profits in the immediate future. The revaluation
>anticipates more transactions at a nice price. I don't see how a
>system based on M-C-M' can ever get beyond the transaction, as Lev
>and his anonymized paraphraser seem to argue.
>
>Doug
Of course *future* profits are anticipated from *future* transactions. That's the whole point. But not necessarily the "immediate" future in the extended sense of next year nor even the year after. If long-run profitability is the decisive criterion for the valuation of a firm, as both Marx and Market believe, then, as I said, Lev is perfectly correct and the GAAS are asinine.
Shane