Thank you, Mason, for your mentioning of importance of the reuse of old 
sites.  One important byproduct of this discussion of creative 
destruction is the logical conclusion that we have absolutely no 
theoretical concept of depreciation and that the rules of thumb that we 
have may be useful but they are far from precise.

Of course, if depreciation is unknown because of creative destruction, 
so too is profit.  Future depreciation becomes as much a part of animal 
spirits as expectations of future demand.

Finally, the discovery of new uses of old capital stock introduces the 
possibility of negative depreciation -- that capital may become 
increasingly valuable over time.

I am convinced that replacement investment represents one of the many 
soft underbellies of economic theory.

Here is a brief extract from my book, Keynes, Investment Theory and the 
Economic Slowdown: The Role of Replacement Investment and q Ratios (NY 
and London: St. Martin's and Macmillan, 1989):

"A survey of plants with more than 100,000 sq. ft. in the North Central 
US, which closed between 1 July 1977 and 1 September 1980, found that 
about half the idle plants had been constructed after 1947 (Institute of 
Science and Technology, 1984, pp. 6-7).  Of the 56 plant closings 
analysed in the study, more than one-third had been demolished or 
abandoned or were still on the market.  The fact that many of the plants 
studied in the survey stood idle or even no longer existed did not 
demonstrate the absolute absence of an economic potential;  instead it 
was a bleak testimony to a failure to recognize that potential.  A 
detailed architectural study of such buildings, combined with relevant 
economic analysis, found that such buildings might be ideal for certain 
purposes;  for example, the same plants that might be inappropriate for 
an assembly line process, might well suit the gravity feed and batch 
milling of pharmaceutical powders (Institute of Science and Technology, 
1984, p. 19).

In fact, with enough ingenuity such plants can successfully accommodate 
traditional smokestack industries.  For instance, General Motors 
profitably renovated its half-century old Baltimore manufacturing plant 
with a 1500 person retrofit team using a winding roller-coaster-like 
assembly line (Zaslow, 1985, p. 9c).  Finally, many old industrial 
plants near Boston now house some of the prestigious high technology 
companies springing up in the region."

Michael Perelman