[amluto]

Sometimes I wonder how well attribution of added value works. If a US plant imports a laptop, a laptop manual, and a box, puts them all together to make a laptop in a box, and sells the laptop to Best Buy for 20% more than what it cost them to get the pieces manufactured abroad, did they really just manufacture 20% of the wholesale price of a laptop? If so, their productivity is high, but it has nothing to do with automation.

[usrusr]

My pet thought experiment for these questions is the luxury watch maker: the magic of brand gets them incredible amounts of "productivity" from working slow.

Now imagine some major policy mistakes that make all other economic activity fail. Average productivity would rise madly! And everybody would ask themselves, how can we have so much unemployment, when we have this totally awesome productivity? You can almost hear the knives getting whetted against foreign and domestic scapegoats, because clearly, with that awesome productivity inherent to "us" (people love thinking that!) , only foul play can be the explanation.

[starky]

This is one area of manufacturing that I am sorely lacking on knowledge in. However, isn't value added calculated on the COGS? That is, they take all the inputs, and then add labour, raw materials, property, etc. to get the total cost?

[amluto]

I’m not sure. I do suspect that a naive calculation of COGS gives essentially arbitrary results. Consider a hypothetical phone assembled in the USA. Maybe COGS is quite low. Then the maker shifts profits to Ireland by selling its IP to an Irish subsidiary and licensing it back at ruinous rates. Did COGS go up?

For factory productivity numbers, I assume that labor is not subtracted from value. If one person at $50/hr builds $51/hr of widgets completely from scratch, their productivity is $51/hr, not $1/hr.