maintenance is recovered in pay work products, | thought Mill and Sraffa might have
reasoned partway there.
My belief then that human depreciation is exhausted is satisfying tastes seemed defensible then. I argued, sensibly to a point, that getting older meant surviving. | suppose | might still argue the same but for the parable of the boss and her
secretary.
Another Look at Depreciation Theory
My pay rules, illustrated in the parable of the boss and her secretary, depends on my idea that depreciation and amortization are the same. Capital means present value of a typically finite series of forseen cash flows. As each year passes, present value of the most distant and most discounted one is lost. Depreciation/amortization is that loss. It begins at a maximum, and rises steadily as the end point nears.
I faulted national accounts for projecting an opposite trajectory from evidence of actual sales. | suggested a second look at likely circumstances and motivations. Depreciable assets are mostly structures and equipment. They tend to have been designed and modified for original users. Original users typically expect to own and operate them to the end. Then what is the likely driver of exceptions? Are secondary trades of plant and equipment likelier to be driven by pressure to buy or pressure to
sell?
Human capital, anyhow, is exempt from both pressures. We're struck with what we have. We can invest more, as a homeowner might add a pool room, but we cannot
sell. The years roll by, and present value of the most distant one’s pay is lost.
Consider what happens when the expected end point changes. Say that the boss and her secretary, at the beginning of what was to be the last day, are both persuaded to re-up for another five years at the same pay. Human capital of each jumps from a little less than one day’s pay to present value of five years’ pay. But human
depreciation of each is sharply reduced! At the beginning of what seemed the last
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