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Vox has a much more nuanced analysis of the finding: http://www.vox.com/2015/4/1/8320937/this-26-year-old-grad-student-didnt-really-debunk-piketty-but-what-he

Vox has a much more nuanced analysis of the finding: http://www.vox.com/2015/4/1/8320937/this-26-year-old-grad-student-didnt-really-debunk-piketty-but-what-he http://www.vox.com/2015/4/1/8320937/this-26-year-old-grad-st...

rcarrigan87 11y ago
This is a much better analysis and should really be swapped with the current article.
fernly 11y ago
Thank you, that was informative. But something seems very wrong to my uneducated understanding. Quoting the Vox writer, >The issue here is depreciation. When a firm buys a computer, the value of that purchase erodes with time. A $2,000 computer bought in 2012 is not worth $2,000 in 2014. When you take that into account, business profits look less impressive. That the resale (or "book" or "scrap") value of a $2K laptop is small after two years' use means nothing in practical terms. It's a significant item in the asset-accounting for the business, sure. But the damn laptop is still working, still being used, still grinding out Excel spreadsheets under Windows XP, two, five, even seven years after it was bought. The department that bought it for $2K in 2012 is, bitter employee experience proves, NOT going to get authorization to replace it with a shiny new one in 2014, nor 2015 either. So although the $2K capital cost of the laptop might evaporate from the company's books, the UTILITY of the laptop remains and it replacement cost is NOT incurred. This I think would apply with even more force to something like an assembly-line robot. At least my impression from seeing videos of car and motorcycle assembly lines is that the robots and other high-tech tools are quite well built -- better built than the average laptop fer sure -- and although they might depreciate, they won't stop working. In fact don't they become MORE valuable and profitable as their book value drops while their productivity contribution remains steady?
- Futurebot 11y ago
  You're correct that "utility"-type depreciation isn't that fast when it comes to the day-to-day, but "business profits" don't typically (ever?) take that into account in the calculation. So it's really two different things. As an aside, here are the BEA's depreciation rates: http://www.bea.gov/scb/account_articles/national/wlth2594/tableC.htm http://www.bea.gov/scb/account_articles/national/wlth2594/ta... None of the above take into account the "utility goes to zero" fact for certain computer hardware: i.e., if a machine winds up too slow to run the latest software because of ever-increasing system requirements, the practical value of said hardware can go from "less than recently calculated resale value" to "possible resale value of raw parts" or even "zero."

rcarrigan87 11y ago

This is a much better analysis and should really be swapped with the current article.

fernly 11y ago

Thank you, that was informative. But something seems very wrong to my uneducated understanding. Quoting the Vox writer, >The issue here is depreciation. When a firm buys a computer, the value of that purchase erodes with time. A $2,000 computer bought in 2012 is not worth $2,000 in 2014. When you take that into account, business profits look less impressive. That the resale (or "book" or "scrap") value of a $2K laptop is small after two years' use means nothing in practical terms. It's a significant item in the asset-accounting for the business, sure. But the damn laptop is still working, still being used, still grinding out Excel spreadsheets under Windows XP, two, five, even seven years after it was bought. The department that bought it for $2K in 2012 is, bitter employee experience proves, NOT going to get authorization to replace it with a shiny new one in 2014, nor 2015 either. So although the $2K capital cost of the laptop might evaporate from the company's books, the UTILITY of the laptop remains and it replacement cost is NOT incurred. This I think would apply with even more force to something like an assembly-line robot. At least my impression from seeing videos of car and motorcycle assembly lines is that the robots and other high-tech tools are quite well built -- better built than the average laptop fer sure -- and although they might depreciate, they won't stop working. In fact don't they become MORE valuable and profitable as their book value drops while their productivity contribution remains steady?

Futurebot 11y ago
You're correct that "utility"-type depreciation isn't that fast when it comes to the day-to-day, but "business profits" don't typically (ever?) take that into account in the calculation. So it's really two different things. As an aside, here are the BEA's depreciation rates: http://www.bea.gov/scb/account_articles/national/wlth2594/tableC.htm http://www.bea.gov/scb/account_articles/national/wlth2594/ta... None of the above take into account the "utility goes to zero" fact for certain computer hardware: i.e., if a machine winds up too slow to run the latest software because of ever-increasing system requirements, the practical value of said hardware can go from "less than recently calculated resale value" to "possible resale value of raw parts" or even "zero."