CH. 6 APPENDIX ON USER COST 71

estimated normal cost. The present value or user cost of a tonof surplus copper will then be equal to the greatest of the valuesobtainable by subtracting from the estimated future value at anygiven date of a ton of copper the interest cost and the currentsupplementary cost on a ton of copper between that date and thepresent.

In the same way the user cost of a ship or factory or machine,when these equipments are in redundant supply, is its estimatedreplacement cost discounted at the percentage rate of its interestand current supplementary costs to the prospective date ofabsorption of the redundancy.

We have assumed above that the equipment will be replacedin due course by an identical article. If the equipment in ques-tion will not be renewed identically when it is worn out, then itsuser cost has to be calculated by taking a proportion of the usercost of the new equipment, which will be erected to do its workwhen it is discarded, given by its comparative efficiency.

III

The reader should notice that, where the equipment is notobsolescent but merely redundant for the time being, the differ-ence between the actual user cost and its normal value(i.e.the value when there is no redundant equipment) varies withthe interval of time which is expected to elapse before the re-dundancy is absorbed. Thus if the type of equipment in ques-tion is of all ages and not“bunched”, so that a fair proportionis reaching the end of its life annually, the marginal user cost willnot decline greatly unless the redundancy is exceptionally ex-cessive. In the case of a general slump, marginal user cost willdepend on how long entrepreneurs expect the slump to last.Thus the rise in the supply price when affairs begin to mend maybe partly due to a sharp increase in marginal user cost due to arevision of their expectations.

It has sometimes been argued, contrary to the opinion ofbusiness men, that organised schemes for scrapping redundantplant cannot have the desired effect of raising prices unless theyapply to the whole of the redundant plant. But the concept ofuser cost shows how the scrapping of(say) half the redundantplant may have the effect of raising prices immediately. Forby bringing the date of the absorption of the redundancy nearer,this policy raises marginal user cost and consequently increasesthe current supply price.‘Thus business men would seem to