TITLE:
A Microeconomic (Vintage) Model of a Shipping Company: A Proposed Depreciation Strategy
AUTHORS:
Alexandros M. Goulielmos
KEYWORDS:
Vintage Models in Growth and Shipping, A New Depreciation Strategy, The World Economy and the Creation of New Rich, New Poor, New Homeless and New Jobless, Adam Smith’s Invisible Hand, Regression between Ship’s Age and Price
JOURNAL NAME:
Modern Economy,
Vol.12 No.8,
August
12,
2021
ABSTRACT: We dealt with an important
part of fixed cost, i.e., the depreciation expense in managing a shipping company owning 20
intangible fixed assets (ships), characterized by different vintages (ages),
and book values. Keynes
drew our attention to the importance of capital for the economy, and he
dealt with the ways not only to increase it, but also to keep it in tact,
through replacement. When economists tried to make Keynes dynamic, however,
(known as Keynesian growth theory), they faced with the problem that not only
capital’s productivity depends on capital’s vintage, but also its embodied
technical progress depends on age. In shipping, we use the concept of “sister1 ship”.
We used also a questionnaire on shipping depreciation filled-out by 45 Greek
shipping companies. The existing theory of depreciation is, for shipping,
wrong, we believe! While accountants want capital to be replaced after its
death, they “condemn” shipping firms to end, prematurely, when a severe
cycle occurs! Depreciation is related to gross profits, instead of to
market’s conditions! Thus, we proposed an alternative shipping depreciation
policy, using also an inexpensive statistical tool—a regression line—between ship age and price.
When accountants etc. proposed depreciation for the first time, they ignored cycles, inflation and (shipping) depressions! We were
surprised to find-out that economics … forbid “economies of scale”, when
average cost exceeds marginal cost, AC > MC! Any
society which wants a faster growth, has to adopt embodied technical
progress, reducing both capital and labor, than hitherto, and especially capital! Moreover, Society
committed the mistake to create unequal income and wealth since Keynes’s
time (1936), something which re-appeared in
its most grandiose form in 2019-2021, among a crisis and a pandemic, providing $13.1 trillion to just
2755 fellow citizens only, worldwide!