We have discussed the time shape which the reinvestment curve in a large capital mass will acquire, given various assumptions with regard to the composition of the capital stock and given various requirements with regard to its maintenance. We shall now consider more closely the process which is responsible for the fact that the problem of reinvestment occurs at all, that is to say, the actual depreciation — i.e. the decline in the ability to produce output or the decline in value of the capital objects, which results from wear and tear or simply from becoming out of date.
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- 1.As a rule this is also the assumption of the tax laws. In this respect the American tax laws are very explicit: ‘The capital sum to be recovered shall be charged off over the useful life of the property. ... such ratable amount as may reasonably be considered necessary to recover during the remaining useful life of the property the unrecovered cost.’ Revenue Act of 1936. Regulations 94. Art. 23(1)–5.Google Scholar