Re: AltInst: Means of production.

From: George L. O'Brien <>
Date: Tue Jun 30 1998 - 21:31:59 PDT

At 11:51 PM 6/28/98 -0700, you wrote:
> (John Carter) writes:
>>If the state believes an asset is undervalued on a form by more than
>>50% and can prove it by publically finding a buyer at twice the stated
>>value, the state can repossess that asset and sell it to that
>>buyer. The stated value goes to the owner, and the rest goes to the

I am curious about the method a prospective buyer uses in valuing an asset.
 Current valuation methods assume that business assets are valued as the
discounted present values of future cash flows. In theory, where a stream
of cash payments and an end cash value have similar risk factors, the
difference in amounts is the implicit time value of money (pure interest)
buried in the future value of property.

To the degree that the lump sum liquidation value is "capped" but there is
no offsetting factor for the failue to meet said value (ie matching of
gains and losses as is the case in the U.S. tax system); the incentives
will be entirely toward short term cash returns over value enhancement.

This was the general impact of Third World nationalizations beginning in
the late 1950's. The overall effect was economic stagnation. By the late
'70's, nationalization was abandoned and often reversed. However, it is
very hard to find buyers when the risk of having enhanced asset values
being seized remains high (witness the problems in Russia).

George L. O'Brien

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Received on Wed Jul 1 04:57:09 1998

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