More from Boudreaux and Café Hayek.
consider the folk wisdom that insists that it’s better to make computer chips than to make potato chips.This adage is nonsense. Herman Lay made millions producing potato chips. And in the process of producing his personal fortune, he made consumers and workers better off.
And not just Herman Lay. We have Indians who follow the same path. Amrit Agro popularised the “Uncle Chipps” brand. Then sold it to Frito-Lay and are now into language education. I know Vikram Bajaj personally. A fine businessman, and better still, a businessman not afraid to extoll the virtues of capitalism. Way to go!
It is a question of “network effects” and “added value” (not value-added). Not considering peripheral services like branding, conferences, research etc, the value chain would be:
Potato chips
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Chemicals=>Fertilizers=>Farmers=>Manufacturers=>=>Distribution=>Consumer=>Manure=>Municipality=>Praja.org=>Yazad jal
Silicon Chips
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Chemicals=>Manufacturers (designers) ==>Manufacturers(Foundry)=> OEMs =>Consumers=>Manufacturers(home office, small business, software applications, appliances) => Consumers => potential infinite loop between consumers and manufacturers.
The benefits of network effects and added value is much more in the case of computer chips.