Tuesday, October 09, 2012

Value added and the realization of Value

Saying, like in the previous post, that value is constantly added to products as they go up the chain from raw materials up to products, that then eventually reach the consumer, only catches one aspect of the process. Value is added by workers to products at each stage of the game, but it's latent value until those products are sold. The value that comes back to workers, managers, and owners, in businesses isn't the literal value produced by all of them unless they're selling all the products all the time.

So really, the chain of production, going from raw materials up through different products and ending up with consumer products--which fuel the whole thing, is a series of dashes, of production and added value punctuated by gaps in selling, where what's bought is then processed with value added to it and then put forward to be sold once more. Which means that market forces are at work shaping what production looks like in order for more of that value to be realized, even in the most ideal non-planned system.

The money that comes back in the form of revenue that's then distributed between workers, administrative workers, managers, and owners/stockholders, is conditioned by market forces, meaning that it's likely that there will be times when all of them, even workers in a situation where workers own the means of production, will get less money back than the value that they produce. But the question remains how, with the uncertain rate of return, that money and those funds should be allocated within an establishment based on who has done the most productive work to create those funds in general.

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