Re: re: profit rates

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

I would like to expand on what Daniel said.  The problem with the BEA accounting
is that it presumes that depreciation follows a preset, regular pattern
regardless of changing economic conditions.  In addition, the depreciation rates
apply to broad ranges of capital goods.

I do not doubt for a moment what Doug said about the BEA people being courteous
and intelligent.  The problem is that their task is impossible.  According to
economic theory, the value of the capital goods reflect their future earning
potential, which is unknown.  So the BEA reverts to past depreciation rates and
assumes them to follow a predetermined pattern.

I am always struck by the way economists pay close attention to analyzing
residuals in their econometrics, but rarely pay much attention to their data
sources, except when they need to make "adjustments" to improve their
statistical results.


> Daniel Davies writes:> The assets of WorldCom and Global Crossing are
> worth exactly what they were worth before the meltdown, as stock market
> movements don't mean much to cables in the ground.  The fact that the
> stock market's assessment of the future excess returns to be earned from
> renting out those cables no longer provide a viable basis for making
> interest payments don't change the capital employed for the purpose of the
> BEA numbers.<

--

Michael Perelman
Economics Department
California State University
michael@xxxxxxxxxxxxxxxxx
Chico, CA 95929
530-898-5321
fax 530-898-5901