Adam Smith concluded that economic value comes from capital. Karl Marx came later to say that in fact, labor is what creates value. As in most things in life, the situation is actually much more complex. Submitted for your consideration is my list of the sources of value in an economy:
1. Capital
Money creates value. Investing money in a business allows that business to get started, to expand, to obtain equipment and a location to operate, and so forth.
2. Labor
To create value, someone has to do the work to produce the good or service.
3. Management
Businesses have to be run. Without someone in charge, the business will operate at haphazard and accomplish nothing.
4. Idea
There must be an idea that guides the production of the good or service. Many times, that’s an invention, protected by a patent. It could be a new technique or process. Managers put this idea into practice.
5. Marketing
The best idea in the world is of no value if no one knows about it.
6. Distribution
If a customer is here, but the product is there, no economic transaction can take place.
7. Need
We could call this want or desire or wish, as well. Sometimes this need is artifically induced, often by marketing, but unless customers are convinced that they must have the product in question, no transaction will occur.
8. Resource
Goods are made of something. In mediaeval economics, land was seen as the sole legitimate cause of value. Certainly, land and other natural resources are one point of origin.
9. Regulation
A neutral body must exist to maintain order and to ensure fair competition and availability of knowledge.
10. Property
To have value, a good or service must be mine until I transfer it to you.
These ten are the causes of economic value–in other words, what makes a good or service worth something in an economic sense.
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