This article was previously published on the Learn Liberty blog.
We meet Rey, the heroine of Star Wars: The Force Awakens, when she is scavenging for parts from a wrecked star destroyer. She isn’t making anything, per se, but she is creating value by identifying resources in low-value uses and moving them to higher-value uses. In doing so, she’s giving us an important lesson in industrial policy.
Creation of value is not restricted to the manufacturing sector
American policymakers are obsessed with the manufacturing sector, as evidenced during the 2016 Presidential Election. Hillary Clinton’s campaign website stated that, “While too many politicians and experts in Washington gave up on American manufacturing, Hillary never did”. At a speech in Detroit, Donald Trump asserted that, “We will put our coal miners and steelworkers back to work”.
But creating value isn’t only about making stuff. It’s also about finding better ways to use what we already have. This might mean manufacturing—turning raw materials into finished goods—but it doesn’t have to. Services create value. For some services, it’s pretty easy to see the relationship between the effort and the outcome. My hair is shorter and better-looking thanks to my barber. The house is cleaner thanks to the cleaning lady. The food that was once raw is now cooked thanks to the people at the restaurant. And so on.
Policymakers trying to pick manufacturing-sector winners at the expense of service-sector losers are working at odds with consumers’ preferences and the forces that make us better off over the long run. Think for a moment about how you might use the extra disposable income you would enjoy if you weren’t overpaying for policy-privileged manufactured goods. At lower prices, you would buy more manufactured goods, but you would also buy more services like haircuts, car washes, and manicures that aren’t high-skill, high-wage endeavors. You might also buy high-skill, high-wage services like medical care and education.
In the wonderful book Peak: Secrets from the New Science of Expertise, authors Anders Ericsson and Robert Pool discuss the importance of teacher-guided deliberate practice for those who wish to master difficult tasks. How many more opportunities would we have to hire music teachers, tour guides, personal trainers, or givers of all sorts of lessons if we weren’t wasting resources producing manufactured goods inefficiently?
In both the Star Wars universe and the real world, people create value even when that value is a lot harder to see. Bankers move loanable funds from where they are of little value (sitting in a vault or as a computer entry) to where they are of higher value (the possession of people who will use them to provide new goods and services). Proprietors of secondhand stores and websites like eBay create value by making hard-to-find items easily available. And scavengers like Rey move scrap metal and star destroyer components from where they are of low value to where they are of higher value.
The what of a good or service can be valuable, but it won’t be if it isn’t paired with the appropriate where and when. That’s the value added by secondhand dealers and other people who are doing things that might at first glance look like mere reshuffling of already-existing stuff. Thanks to people like Rey, secondhand power converters make their way into the hands of idealistic young future pilots shopping at Tosche Station. Without people like Rey, they just sit there to rust.
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Edited by Russell Coates
This piece solely expresses the opinion of the author and not necessarily the organization as a whole. Students For Liberty is committed to facilitating a broad dialogue for liberty, representing a variety of opinions.