The purpose of my rather unfinished example to woj was simply that in the Marxian frame warehousing and transport were value additive. Which was against his other worldly puzzle of how a shirt priced at 50$ could have an initial production cost of 2$. As if initial production costs were all that figured into the Marxist understanding of value added (SV). Perhaps if you had read Marx you would understand this (do not be upset it is just the same poisoned arrow directed back). I am sure we will reach a compromise.
[WS:] Thanks for explaining it, because I was losing sleep pondering over the meaning of your enumerations :).
In reply I would like to point out that your example may contradict my metaphor (i.e. that most of the $$ go to a name brand) but does not contradict my point that price is rather loosely (if at all) related to the "socially necessary cost of producing a good." What your example shows that the huge difference between the cost of production and selling price (exchange value?) is divvied up among many middlemen taking their various cuts of the spoils rather than a single profiteer as my metaphor suggested.
I may also add that apologists of the system may point to the above and claim that capitalism is more efficient in distributing wealth than any redistributive welfare system. It is so, because capitalism utilizes voluntary purchases of overpriced goods that feed many mouths that contribute something (or "add value") to the process, instead of involuntary taxes to fund welfare programs for those who contribute nothing. But this is just a pure logical exercise, since none of us is an apologist for capitalism ;).
In sum, I argue that the sole function of LOTV is to show that economic value is created solely by human labor rather than by capital (i.e. accumulated wealth), and beyond that it explains very little, especially how the actual prices are set. However, even in its main "role" of proving that labor is a sole value creator, LOTV is a rather blunt tool that fails to account for differences in contribution by different kind of labor. That is to say, a capitalist may, and often does, add a significant value in the form of organizing the production process by virtue of controlling productive resources that allow her making that contribution, and which she would be unable to do if it were not for that control. I may also add that this contribution may have a greater economic value than the value created by those who man the machines.
Another point: "value added" is simply a tautological concept in economic accounting (cf. SNA), which is simply a residual between sales and intermediate consumption; or if you want to approach it from the income distribution side - the sum total of the remunerations received by all actors in the production process (i.e. employee compensation + property income paid + profits). This is a "value added" by definition, since firms that do not "add value" (i.e. whose intermediate consumption exceeds sales) simply go out of business. So from that point of view, the enumeration that you cited is correct by definition as each of the middle men fetches a higher price than his costs are. This can be compared to the Windows operating system that does not "create" memory or computing power, but simply uses and redistributes as much of the computing resources as the hardware makes it available.
However, that does not address the issue from a Marxist point of view, which is whether this whole chain of middle men is "socially necessary" to produce goods or services that have "use value" to society. This question goes well beyond economic accounting - into sociology, organizational theory and social psychology. The answers fall in a continuum between viewing these middlemen as parasites leeching the consumer while contributing nothing to society, and viewing the whole process as a very efficient way of creating jobs and distributing wealth to a far greater number of individuals that can be employed if only the technical aspects of manufacturing were considered.
My own position on this issue is in between those two polar extremes. While there is a considerable degree of parasitism among the myriad of intermediaries taking their cuts of the national wealth, there is also substantial genuine "use value" added by some (if not most) of them in the form of organization, motivation, or innovation. The value of these less tangible contributions cannot be easily expressed in currency or physical units of labor. What is more, this process of intermediation (division of labor?) does play a significant social role of wealth distribution, which otherwise would have been much more concentrated in those few hands that are truly indispensable from the technical aspect of goods production.
I think this also addresses Carrol's question where do people get money to purchase goods - from that redistributive process in which many middlemen take their respective cuts, which BTW is social rather than purely economic in nature.
Wojtek