Thanks for this. Though, I'll admit this seems to raise more questions for me.
> I actually think the term is pretty useful. You're right, it is a concept
> based on market prices. The basic idea is simple: If you live in a market
> economy, you would rather engage in activities that people are willing to
> pay more money for. In principle it applies to domestic transactions as much
> as to international trade: For example, as a consumer, you would probably be
> willing to pay more money for one hour of the labor of a highly skilled auto
> mechanic than for one hour of the labor of somebody to mow your lawn.
> Therefore, as a *producer*, you would probably rather *be* an auto mechanic
> than be a guy who mows lawns. Analogously, the Chinese would rather that
> their workers be the international equivalent of auto mechanics (e.g.,
> designing circuit boards) than the equivalent of lawn-mowers (e.g.,
> assembling circuit boards).
But isn't this just because of certain conventions that have been instilled in the social division of labor that make one type of labor seem more important than another? In another era, the fact that you could imagine a circuit board at all would likely have been because you also knew how to put them together; likewise, without someone to put them together the idea is worth little at all. In other words, the fact that one kind is seen as higher "value added" in terms of contributing more a higher percentage in the point in the value chain seems to have less to do with the actual quality or quantity of the labor involved and more with the class and status of the person doing it. Likewise, it would have to do with the overall valorization process: after all, if there was only one person designing the circuit board and one person assembling circuit boards, the resulting product would be much more expensive. As in your example, I don't have anyone mow my lawn, but if I did, I would be paying them at regular intervals as the lawn grows. I might pay my mechanic more each time I see him, but if I had to see him more than once or twice a year, I'd want to find a new mechanic. In the end, I might pay the lawn guy and the mechanic about the same amount over the course of the year.
Alternatively, the ability to produce them in mass quantities is contingent on the ability to sell them in mass quantities. And this requires a relative standardization and interchangeability of parts. Thus if there were equal numbers of people designing and assembling circuit boards, there would likely be wildly different products, many incompatible with each other and most prohibitively expensive. We be back in the days when the computer revolution was just a glimmer in entrepreneur's eyes. the change eventually is only possible based on monopolistic practices, the inertia of first adoption and massive amounts of marketing and PR. When the latter are then also included in "value added labor," which I'm not sure they are, but they are certainly paid like they are, it is more obvious what the terms really mean.
> By definition, value added is (essentially) wages-plus-profits, so it
> applies equally to labor and capital. Or, put another way, value added
> equals the value added by labor plus the value added by capital. The
> equivalent of "skills" for capital is (essentially) "technological rents" -
> just as skilled workers earn more in part because their skills are scarce,
> capital invested in activities embodying technological rents earns a higher
> return because, by definition, "high technology" firms have less
> competition; relatively few firms/entrepreneurs have figured out how to
> carry out high-tech production processes.
But capital doesn't really add any value here; it just pays for the labor which has added the value and protects these advantages through IPR and, possibly, the equipment needed for the tech processes (incidentally, also produced by other laborers, etc.)--though this brings up the social process through which that labor is "skilled," often educated in state institutions and usually taking advantage of previous insights of other workers. So capital doesn't really "add" anything, right? It just puts up some money to get other people do add value or by other people's added value?
The equivalent of lawn-mowing for
> capital is what's called "commodity businesses": lines of production that
> are so easy to master, that embody so little scarce technological knowledge,
> that a very large number of producers are in the market, so many that
> there's essentially perfect competition and they're all price-takers. For
> example, you often hear that the manufacture of certain kinds of computer
> chips has "become a commodity business."
>
> I think your example of branded goods, where the brand was built up over
> many years, is just a special case of high-value added capital. In this case
> the capital is the brand, it embodies rents, but they're not so much
> technological rents as monopoly rents from patents and trademarks. (Usually
> technological rents and patent rents are somewhat hard to disentangle since
> patents usually embody some "technology," loosely defined, that the
> patent-holder invented or discovered first.) But I don't think you should
> let that special case distract from the basic point that any country (or
> subnational region) operating in a market economy would normally want its
> workers to have scarce skills and its capitalists to command scarce
> technologies, so that both can generate rents. That means "moving up the
> value chain."
So, in general, for this to be effected, it is actually not in a competitive environment. To have "high value added" you have to have either and effective or legal monopoly on one or more of the components or processes. And the "value added" of branded goods is basically just the ownership of the premium consumers might pay based on some fetish they attach to the commodity.
> As for the origins of the term, the OED says "value added" was first used in
> 1935 in connection with the development of the concept of a value-added tax:
>
>> 1935 Social Research II. 161 We may call the value added tax a 'refined
>> sales tax'. Ibid., A tax which chooses as its basis of assessment the sales
>> after deduction of all expenses for raw material and for repair or
>> replacement of equipment, that is, a tax on the 'value added by
>> manufacture'.
>
> But the concept of value added is ancient, going back at least to the 17th
> century mercantilists, who were interested in precisely the international
> division of labor. Here's something I wrote a few years ago. Sorry for any
> formatting messiness:
really interesting stuff here. What is the citation?
thanks again, s