>
> No, its nothing to do with "user cost"... its to do with "circulating
> capital". He claims that if a capitalist has invested a certain amount
> within a plant and this plant is undermined through competition the original
> investor will continue their investment because its already laid.
>
> Let's go archaic... I build a railway. In order to do so I take out a load
> of debt. Two years later someone builds a railway for less money that's
> faster and more efficient due to (lower labour costs/technological
> innovation). What do I do? Do I default...
>
> Or... do I continue to try and run my railway to try and make as much as
> possible OUT OF MY ALREADY FIXED CAPITAL????
User cost is in fact a way of talking about circulating capital. It means the cost of operating fixed capital, less the cost that would be incurred in holding the fixed capital without using it. It includes the cost of intermediate goods as well as the wage costs involved in running the fixed capital, (except to the extent that the firm has no alternative use for its workers and cannot lay them off, in which case these wage costs would form part of the cost incurred in holding the fixed capital without using it). Clearly it's pretty abnormal behaviour for a firm to operate its plant if the revenue from doing so does not cover the user cost. There might be circumstances in which a firm would do that, e.g., to hold onto market share, but in such a case it would presumably be expecting to replace the inefficient means-of-production in the foreseeable future.
Railways are a particularly bad example for your case, because the great railway boom of the mid-19th century did in fact end with many defaults and great devaluations of fixed capital. This brings home another point - that whether a particular piece of fixed capital is scrapped is not necessarily up to the firm that owns it. The firm can go bankrupt. Alternatively, in a case where its rate of profit falls relative to other firms in the same industry, its share price is likely to follow, so that if the firm itself does not scrap the inefficient capital and restructure, someone will buy it and restructure or dispose of the assets. The effective cost of the prey's fixed capital to the predator may be at a substantial discount relative to what it cost originally, changing the profitability equation.
Still have one more post to respond to, but it will have to wait for tomorrow as I have exhausted my daily three-post limit. :)
Mike Beggs