On Mar 6, 2011, at 1:56 AM, Jordan Hayes wrote:
> michael perelman writes:
>
>> Economic depreciation takes
>> into account new technology, changing demand, ....
>
> Rubbish. Those things can accelerate depreciation, but you paid
> what you paid when you paid. Peter's math is wrong because it only
> looks at the current year. I don't know what you guys are trying to
> prove, but leave depreciation out of it. In both cases -- economic
> and tax depreciation -- you're trying to come up with an estimate
> for the lifetime of an asset; you will in most cases be wrong. When
> you know the truth -- either you wore it out, or you withdrew it
> from use because it got replaced by something better -- you can then
> determine what it was actually worth.
>
> Up until then, you're just guessing...
But in the aggregate, the average of such "guesses" of *real* capital consumption (unrelated to tax-law depreciation rates, which are biased upward in regard to buildings in order to convert profit into lower- taxed capital gains when the buildings are sold) must be taken as very accurate unless most of the "guesses" can be shown to be determined by factors biasing them in one direction or another. Discovering empirically what those "guesses" actually are is another matter entirely.
Shane Mage
"All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods."
Herakleitos of Ephesos, fr, 90