4 ms·

The major problem is not finances, it's that moving money around does not create REAL value. Real value is created only in manufacturing, industry and agricultu

The major problem is not finances, it's that moving money around does not create REAL value. Real value is created only in manufacturing, industry and agriculture. Service, finance and so on are add-ons to those fields.

Tichy 18y ago
I think allocating money properly would be creating value. Deciding were to invest could be one of the most important decisions possible. That many finance types might have been involved in something else is another matter. Even if you want to manufacture stuff, you have to somehow organize the manufacturing. To say only manufacturing is worthwhile seems a bit shortsighted. Suppose all the finance guys would go to GM and work in their factories assembling cars, would it help much?
- markessien 18y ago
  Allocating money properly is not creating any value at all. It's just a regulatory service that works according to some rules - it's a bürocratic step in economic system, and though it is possible to create some valuable people by then developing skills or experience, but they don't create value. They move value around.
  - Tichy 18y ago
    Allocating money (or time or work hours) is a necessary step in creating anything. I don't think the hard nosed approach to estimating value is very useful. You could say that only the actual workers producing something physical create value, but at the end of the day, all people in the chain contributed to it. Consider a scenario where you have two alternatives: you could ship shit from one pile to another for 5 hours, or you could spend 5 hours brewing beer. Suppose the worker has no idea whatsoever as to which activity is more benefitial, so the finance guy decides whether 5 hours will be spent on moving shit around, or brewing beer. Suppose the value of beer is much greater than moving shit - I think at the end of the day the finance guy will have contributed to bringing the beer into existence. I know that there is this school of economics that tries to define value by the amount of (physical) work that went into it, but it really doesn't make much sense. You don't create value simply by doing something physical - it has to be useful, too. So I think the usefulness of the end result is a much better estimator of value.
    - markessien 18y ago
      Okay, it seems that what I'm trying to explain is difficult for you to understand. Let me change this a bit. Imagine you are made president of a 3rd world country which has not yet industrialized. You are now tasked with making this country actually rich. Where would you put the government money in? If you say you would equally create service and manufacturing industries, then your country would collapse quickly. The correct thing to do is to create goods that can be exported, or that have some use within the country itself. The other industries always develop themselves, because they are a sort of grease for the core industries. Allocation of time and money is not done by bankers. It's done by managers and owners, the bankers just approve or disapprove loans.
      - deleted 18y ago
        [deleted]
      - tptacek 18y ago
        A free-market economy without banks will have an awfully hard time starting new enterprises; pooling savings and investing in businesses is the purpose of a bank. Managers and owners can't allocate time and money without capital.
      - Tichy 18y ago
        I think bankers have to decide if a loan is promising or not. If you want a loan to start a business that is doomed, they should say no. Without money, the managers can't do anything. I don't want to defend all bankers, but I think it could be a service like other services. Your 3rd world example also falls short. I wouldn't create a "planned" economy, but go for demand. Actually a lot of 3rd world countries fare reasonably well with tourism, which is maybe more service than production? India also exports services - it is possible, so I think the generalization "products over services" fails. Both are necessary.
      - light3 18y ago
        If you discard the important finance decisions to do with not only the allocation of resources, but also protecting your country from outside financial 'wars' then you could be creating so much value but not able to retain that value, just look what happened during the Asian financial crisis.
kragen 18y ago
This is a very dubious assertion. What is your underlying theory of value from which you can deduce that assembling a car creates "REAL value," while fixing one (a service) or designing one on contract (also a service) doesn't?
- markessien 18y ago
  I did not say that all service industries do not create value. Designing a car or fixing one creates or maintains value, so is real wealth. But a waitress who moves food from the kitchen to the patrons plate does not create any value, she is simply a neccessary add-on to other value creating industries. No economy can function where 100% of the people are in these type of service industries. Value is created by scarcity, and most of the financial industry is in a similar type of service - no real value is created there. The value of other manufacturing industries is just exchanged there.
  - Tichy 18y ago
    Hm, the waitress produces the food on the table. The food in the kitchen would be not much use, unless the kitchen was big enough to accomodate the customers so that they could eat out of the pots (and the pots would clean themselves afterwards). So while she doesn't create "food", she produces "food on the table". I am not sure what you are really driving at: that too many people are in the service industry? But what if there is more demand for services than for products? Like there might be enough food being grown on the fields, but what good is it to me if nobody cooks it and brings it to my table?
    - markessien 18y ago
      Imagine a society with 30 million waitresses and 5 farmers. Those extra waitresses are useless, and such a society cannot work. The other way round - 30 million farmers and 5 waitresses - people will serve themselves and there will be a lot of excess food to be exported. Service industries that function as an add-on for a manufacturing industry needs to be specifically calibrated to the volume of the industry, otherwise the excess is wastage. The other way round does not hold. You have to understand what fundamental value in a world economy is. A waitress is no value, a programmer is a lot of value, and a guy working in the financial industry is basically the same as a waitress. He's an add-on for other industries, and the volume has to be calibrated also. If a country produces a car out of some metal in a mine, it created real value, irrelevant of if this car was exported or not. If a country produces a waitress who can be trained in 2 days and simply moves food from one place to another, the value it created is really minimal. I'm not saying that the service industry in the U.S is too small or too large, I don't know enough about it to say. I'm just saying that the backbone of any stable and real economy lies in constantly creating real value.

Tichy 18y ago

I think allocating money properly would be creating value. Deciding were to invest could be one of the most important decisions possible. That many finance types might have been involved in something else is another matter. Even if you want to manufacture stuff, you have to somehow organize the manufacturing. To say only manufacturing is worthwhile seems a bit shortsighted. Suppose all the finance guys would go to GM and work in their factories assembling cars, would it help much?

markessien 18y ago
Allocating money properly is not creating any value at all. It's just a regulatory service that works according to some rules - it's a bürocratic step in economic system, and though it is possible to create some valuable people by then developing skills or experience, but they don't create value. They move value around.
- Tichy 18y ago
  Allocating money (or time or work hours) is a necessary step in creating anything. I don't think the hard nosed approach to estimating value is very useful. You could say that only the actual workers producing something physical create value, but at the end of the day, all people in the chain contributed to it. Consider a scenario where you have two alternatives: you could ship shit from one pile to another for 5 hours, or you could spend 5 hours brewing beer. Suppose the worker has no idea whatsoever as to which activity is more benefitial, so the finance guy decides whether 5 hours will be spent on moving shit around, or brewing beer. Suppose the value of beer is much greater than moving shit - I think at the end of the day the finance guy will have contributed to bringing the beer into existence. I know that there is this school of economics that tries to define value by the amount of (physical) work that went into it, but it really doesn't make much sense. You don't create value simply by doing something physical - it has to be useful, too. So I think the usefulness of the end result is a much better estimator of value.
  - markessien 18y ago
    Okay, it seems that what I'm trying to explain is difficult for you to understand. Let me change this a bit. Imagine you are made president of a 3rd world country which has not yet industrialized. You are now tasked with making this country actually rich. Where would you put the government money in? If you say you would equally create service and manufacturing industries, then your country would collapse quickly. The correct thing to do is to create goods that can be exported, or that have some use within the country itself. The other industries always develop themselves, because they are a sort of grease for the core industries. Allocation of time and money is not done by bankers. It's done by managers and owners, the bankers just approve or disapprove loans.
    - deleted 18y ago
      [deleted]
    - tptacek 18y ago
      A free-market economy without banks will have an awfully hard time starting new enterprises; pooling savings and investing in businesses is the purpose of a bank. Managers and owners can't allocate time and money without capital.
    - Tichy 18y ago
      I think bankers have to decide if a loan is promising or not. If you want a loan to start a business that is doomed, they should say no. Without money, the managers can't do anything. I don't want to defend all bankers, but I think it could be a service like other services. Your 3rd world example also falls short. I wouldn't create a "planned" economy, but go for demand. Actually a lot of 3rd world countries fare reasonably well with tourism, which is maybe more service than production? India also exports services - it is possible, so I think the generalization "products over services" fails. Both are necessary.
    - light3 18y ago
      If you discard the important finance decisions to do with not only the allocation of resources, but also protecting your country from outside financial 'wars' then you could be creating so much value but not able to retain that value, just look what happened during the Asian financial crisis.

kragen 18y ago

This is a very dubious assertion. What is your underlying theory of value from which you can deduce that assembling a car creates "REAL value," while fixing one (a service) or designing one on contract (also a service) doesn't?

markessien 18y ago
I did not say that all service industries do not create value. Designing a car or fixing one creates or maintains value, so is real wealth. But a waitress who moves food from the kitchen to the patrons plate does not create any value, she is simply a neccessary add-on to other value creating industries. No economy can function where 100% of the people are in these type of service industries. Value is created by scarcity, and most of the financial industry is in a similar type of service - no real value is created there. The value of other manufacturing industries is just exchanged there.
- Tichy 18y ago
  Hm, the waitress produces the food on the table. The food in the kitchen would be not much use, unless the kitchen was big enough to accomodate the customers so that they could eat out of the pots (and the pots would clean themselves afterwards). So while she doesn't create "food", she produces "food on the table". I am not sure what you are really driving at: that too many people are in the service industry? But what if there is more demand for services than for products? Like there might be enough food being grown on the fields, but what good is it to me if nobody cooks it and brings it to my table?
  - markessien 18y ago
    Imagine a society with 30 million waitresses and 5 farmers. Those extra waitresses are useless, and such a society cannot work. The other way round - 30 million farmers and 5 waitresses - people will serve themselves and there will be a lot of excess food to be exported. Service industries that function as an add-on for a manufacturing industry needs to be specifically calibrated to the volume of the industry, otherwise the excess is wastage. The other way round does not hold. You have to understand what fundamental value in a world economy is. A waitress is no value, a programmer is a lot of value, and a guy working in the financial industry is basically the same as a waitress. He's an add-on for other industries, and the volume has to be calibrated also. If a country produces a car out of some metal in a mine, it created real value, irrelevant of if this car was exported or not. If a country produces a waitress who can be trained in 2 days and simply moves food from one place to another, the value it created is really minimal. I'm not saying that the service industry in the U.S is too small or too large, I don't know enough about it to say. I'm just saying that the backbone of any stable and real economy lies in constantly creating real value.