I received this query from a student:

I was thinking about value added, the other day, and started thinking about second hand books.

Now, the process to get to a new book, has added value, from resources such as trees, ink etc, throughout the chain, to be sold brand new in a book store (for example). A person enters the store, purchases the book, with the intention to read the book.

They buy it for 10 dollars, then read it, fully consuming the value that they have purchased it for.

Then, they later choose to sell it again, at a price of 5 dollars. Is this value added? I mean… they have already consumed the full 10 dollars of value that they initially purchased the book for the purpose of. Now they are making an additional 5 dollars.

OR

Is it the creation of a new product, from new resources? Ie. In reading the book/consuming the book, the person has realised it’s value. What is left is now just a resource. They then sell this resource in the market for a new price.

OR

Is it value reduction, as they sell it for a lower price than they buy it for?

To which I replied:

Nice.

Adding value means moving resources into a position or into some form so that they can better add to someone’s utility. When you bought the book, there was no value added by you, although there had been by the bookseller in doing whatever was required to make the book available. Reading the book gave you whatever pleasure it might have done and when you had finished it, there it lay. However to earn that later return, the book had to be shifted from your bedside where you left it when it was finished and moved to a position where it could be bought by someone else. So taking the book to the bookseller to resell was your contribution to the value adding process for which you received $5. Upon resale again, the bookseller again gets the $10 you originally paid, indicating that another $5 of value has been added to the process. Had you left the book undisturbed by the side of your bed, it could not have provided this additional $10’s worth of additional value, which was split between you and the bookseller.

Note that the original production costs of the book at no stage fit into the story.

Classical economics is just so clear headed.