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?

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.

First you said:

Real value is created only in manufacturing, industry and agriculture. Service, finance and so on are add-ons to those fields.

Then you said:

I did not say that all service industries do not create value.

Actually, you did, in the comment I just quoted, less than a day earlier. What is wrong with your brain, child?

Value is created by scarcity.

Not only is that a stupid theory of value, it also fails to justify the conclusions you're trying to justify with it: waitresses (and the services they provide) are quite a bit scarcer than, say, corn.

Maybe you should test your theory of value by trying to give up something abundant for a few days. Try oxygen. Then you can tell me if oxygen has any value.

When I say "service" I mean things like waitressing or so on. Programming belongs to me in 'industry', so when the comment following mine categorized programming into service, I tried to explain what I meant.

I understand what you're saying Mark and I agree. I think waitress was an unfortunate example, though. Maybe I can offer a different perspective of what you're saying:

There's a 'pyramid of necessity' with "materials production" at the bottom, and at the top things like branding and marketing. In an expanding economy, such as we've had for the last 60 years, the top adds all the value (so, for example, you can just outsource the bottom). Generic bleach is often overstock from Clorox. Same product, but you're paying more for the name, image, etc. Service and finance industries fall in toward the top of the pyramid.

In a contracting economy, as we have now, the pointer on the pyramid drops relative to the size of the downturn. If it's severe, it's really only material production / commodities / etc. that matters. Who cares if it's a Nike? I need a shoe.

So it's not about "real value" meaning no value, but rather "real" vs. "nominal" value. The bottom of the pyramid has concrete value whereas the top has merely the nominal value of what people are currently willing to pay for it.

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?

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.

You have completely failed to articulate a meaningful distinction between autoworkers and waitresses, or between "real value" and whatever its opposite is (illusory value?).

Imagine a society with 30 million waitresses and 5 farmers. Those extra waitresses are useless, and such a society cannot work. ... A waitress is no value, a programmer is a lot of value,...

Unless you have robots to plow and harvest (which is harder than it sounds) being constructed by other robots, a society with 30 million programmers and 5 farmers can't work either; neither can you have a society with 30 million iron-ore miners or 30 million autoworkers and 5 farmers.

I really think you are simplifying things too much. Yes, 30 million farmers might be able to feed themselves. But there would be no doctors, because they would be busy working their fields. A waitress enables a doctor to exist by freeing him from cooking and shopping for food.

Producing a car does NOT create value if nobody wants or needs that car. It might even create negative value, because it might be costly to have it removed and brought to the junkyard.

That a waitress doesn't need training is rather irrelevant. What has been created is a) a place for the waitress to work (building a restaurant takes time and money) and b) her work produces doctors and other things - even cars, if the car manufacturers go to dine in the waitress' restaurant.

It is true that other services/industries could not exist without food production. But that does not imply that those other industries are worthless. In some cases, food production could not exist without the other industries/services, either (sick farmers can not produce food, they need doctors and cars to work their fields).

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?

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.

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.

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.

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.

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.

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.