Free Enterprise - Principle 13

Principle 13: Each time value is added to a product/service its worth is increased and its price will go up.

There is a seed in a packet at the store. A farmer buys the packet of seeds—berry seeds. Each seed cost about one half penny apiece. At his farm he plants a seed. His soil nourishes the growing seed. He works the ground, making sure there are no weeds and that the seeds are watered. They grow into a whole bush of berries. The farmer buys little boxes in which to put the berries—so they will look nice at the market. He takes the berries to market and a baker buys them. He bakes a wonderful berry pie! The woman who runs the restaurant buys the pie. She puts it on display in the restaurant. It looks so good, possibly the world’s best berry pie! A customer sees the pie and suddenly feels very hungry for pie. He eats one piece of it, for which he paid $3.75.

In the drawing you can see that a packet of seeds became a berry bush and then the bush turned into a pie! At the beginning the seeds were one half penny each and now just one piece of the pie costs $3.75! What happened? Along the way the seed got more and more valuable. Value was added when the seed became a bush of many berries. More value was added when farmer put them in pretty boxes. No one bought them on his farm, so he took them to town where they were more valuable. Changing their location from farm to market made them more valuable.

After the baker had made them in to a pie, they were more valuable still. When the restaurant owner bought them she took them to a place (restaurant) where they would be highly valued—a restaurant full of hungry people!

The price kept increasing because the value kept increasing. Each time a person added value to the item it became worth more. They raised the price to cover their time and effort to make it more valuable.

Story

David knew that the plastic he and Kovrich had found right after the crash was not really theirs. But they decided to keep it. Maybe it would come in handy someday.

“Remember when we first decided to keep it?” asked David. “We have been taking care of it ever since—I think that first decision made it ours.”

Kovrich agreed, “If we had not kept it out of the direct sunlight it might have gotten brittle and broken up by now. Because of our efforts, it’s still useful.”

“That’s right, and we didn’t just keep it around, we did something else to make it more valuable—can you guess what?” David asked.

Kovrich seemed stumped for the moment. He did not have an answer for David.

“It’s like this,” David continued. “When we found out about Andre and Allen forming a company to sell huts, we put our heads together and started thinking about windows. We thought about what size a window should be, should they all be the same size and how many are needed in a hut and so on—we did that, and we became window experts.”

“Golly, you’re right!” Kovrich exclaimed. “And you know what else—we cut them into proper sizes to fit the hut windows. And we keep them sorted by size, and we keep them safe.”

“So it is pretty clear to me, after all the work we have put into this—both mental work and physical work—we have made the plastic much more valuable than it was when we found it.” That is what David actually thought, and he had just voiced it out loud to Kovrich. It made him feel good to have the truth openly stated.

Kovrich summed it up nicely: “We made it more valuable. We took it from being merely a roll of plastic to being proper windows sorted by size and safely stored.. It has gotten more valuable. We will be financially rewarded for adding all that value. We will get a good price for our windows.”

In the meantime Allen and Andre were having a similar experience. They had gathered a lot of wood from the trees and the plane wreck. They gathered other useful items from the wreckage they might be able to use later.

Allen was feeling playful. Pretending to be serious, he posed a question to Andre.

“Lying here half buried in the mud, what I see lying at my feet is just a piece of junk. It is worthless. Do you think it will stay worthless?” He stooped down and picked it up. He held the hinge high in the air, like it was a great prize. He was grinning!

“Hmmm,” Andre mused. “Now let’s see, how can we make a piece of junk a thing of value?” He was grinning too. They both knew where this was heading.

“You mean increase the value so we can increase the price?” teased Allen, in a pretend question, as his grin grew bigger.

“Well, maybe build a door. For example, we could build a door for a hut. Attach the hinge to the door … and presto! We have a real door that opens and closes easily. I think we can get a good price for our hinge once it is part of a smoothly operating door!”

Activity: The students can have the experience, step by step, of making an item more valuable. Teacher can decide if the class should work as one group or be divided into two or more smaller groups. We will assume you have just one group, but the process is the same regardless of how many groups you have. Either have the group bring something from home (for example, a shirt hanger, kitchen bowl or a piece of wood) that has little value or you bring something for them to work with. It is easier for you to keep track of the process if all groups work with the same item.

Either way, the group has an item of very low value. Lead them in brain storming about what they could make from this item that someone might want. A bowl could end up being an attractive plant holder with a plant in it, or the shirt hanger shaped into an animal, painted and with buttons for eyes and it becomes a decoration for a child’s room.

Let’s say they work with the kitchen bowl. After they decide what it could become, have them break the building process into specific steps. If the bowl is to become a planter maybe the bowl needed to be painted or covered with aluminum foil (step one). They will need to put gravel (step two) in the bottom, and then add dirt (step three). They need to find a simple plant (step four) and plant it (step five). It does not need to be a fancy plant—even a “weed” will work for this example. They may want other decorations in addition to the plant—some bark, little rocks, feathers, etc. (step six). Then they need to decide where they could display their product (step seven). Then they will need to get permission from someone to actually display it— the principle, you, the teacher, or a store owner (step eight).

Let them decide who will do which step in making the once valueless bowl become valuable. Help them decide how much to charge for adding value at each step.

Now, actually do it. Work with the bowl step by step! Have the designated students do the first step, then sell the partially completed product to the next person in the chain (they can pay with written promises to pay—pretend of course, actual money need not change hands).

This continues, adding value and getting paid for doing so, until all the steps are done and the group has an attractive planter placed in a display location. Maybe someone will really buy the product (another teacher, a parent, etc.) However, the main point is that the students had hands on experience of it getting more and more valuable and getting “paid” for making it so. The final product should sell for enough to cover the fee/charge of each one who added value. And don’t forget, making the final sale of the finished product to a customer is valuable activity—that person gets some profit for his/her efforts too.

You can point out that: In a free market, adding value to an item makes it worth more and therefore the price of the items goes up.