When should firms invest in old capital?

The present paper analyzes optimal investment policies when the production function depends on capital of various vintages. In such an environment it is natural to ask whether the firm will invest in old-vintage capital at all. Other studies do not tell us when investment in old capital will take place. In the present paper I derive such a condition. Predictably, investment in old capital takes place if the elasticity of substitution between old and new capital is low, and when the depreciation of capital is high. However, other parameters such as the rates of technological progress and depreciation matter as well.     

Does God practice a random walk? The 'financial physics' of a nineteenth-century forerunner,Jules Regnault

We analyse the work of a neglected French economist, Jules Regnault, whose Calcul des Chances et Philosophie de la Bourse (1863) laid the basis of modern stochastic models of price behaviour and contains an anticipation of econometrics. At a time when short-term speculation was denounced as immoral, he approached this question ‘scientifically’ and constructed two models. The first one was relative to short-term speculation and took the shape of a random walk - a model used by Bachelier (1900). The second one deals with long-term speculation and aims at evaluating the mean value of the French 3 per cent bond.