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Meaningful Metrics for a Smart Society
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Date: 2017-11-23 Page is: DBtxt001.php L070-UA-UNITS-OF-ACCOUNT

UNITS OF ACCOUNT
UNITS OF ACCOUNT FOR EVERYTHING THAT MATTERS IN THE SOCIO-ENVIRO-ECONOMIC SYSTEM
HUMAN VALUE / NATURE'S VALUE / FINANCIAL CAPITAL / PROCESSES and PRODUCTS
Quality of Life / Natural Capital / Corporate Performance / Financial Capital / Physical Capital / Environment
MULTIPLE UNITS OF ACCOUNT ... CONTEXT
WAY MORE POWERFUL THAN A SIMPLISTIC MONETIZING OF IMPACT
Conventional financial accounting uses money as its unit of account, and there are established methods for the use of multiple currencies when this is needed because of the nature of the business.
Money and conventional double entry accounting was a very powerful system for accountability when the economy was relatively small and impact on society and the environment was ignored without much consequence.
But the 21st century is different. The population of the world is at record levels, and the degradation of the environment in many different ways has become consequential.
There is a need now for UNITS OF ACCOUNT that are relevent for ALL the impacts associated with economic transactions.
The money measure needs to be better understood. It is common to use a reference currency like the US dollar, but local currency also matters, and there may be funding currency as well. Besides the US$, other reference currencies might be the Euro, Japanese Yen or Chinese Yuan
With TVIA, multiple UNITS OF ACCOUNT are used in a similar way to account for the way in which different activities impact ALL the CAPITALS that make up the SOCIO-ENVIRO-ECONOMIC SYSTEM. This is more powerful and more flexible than the idea of valuing everything using money and markets
ABOUT NAVIGATION FOR UNITS OF ACCOUNT IN PAGE SITE NAVIGATION
CREATED FINANCIAL CAPITAL / MONEY
Long history as the foundation for ALL economic measurement ... but in need of complementary metrics to address all issues
GO #CFC Open L0700-UA-CFC-MONEY
UNITS OF ACCOUNT for CREATED PHYSICAL CAPITAL
Created Physical Capital needs conventional money accounting plus impact related to human, social and natural capital
GO #CPC Open L0700-UA-CPC-UNITS
UNITS OF ACCOUNT for CREATED INTANGIBLE CAPITAL
Created Physical Capital needs conventional money accounting plus impact related to human, social and natural capital
GO #CIC Open L0700-UA-CIC-UNITS
A UNIT OF ACCOUNT for HUMAN CAPITAL
LIFE and QUALITY OF LIFE for the INDIVIDUAL is the most important measure of PROGRESS and PERFORMANCE for HUMAN CAPITAL
GO #HC Open L0700-UA-HC-HUMAN-CAPITAL
A UNIT OF ACCOUNT for SOCIAL CAPITAL
LIFE and QUALITY OF LIFE for SOCIETY (family, friends, nighborhoods, communities, PLACE)
GO #SC Open L0700-UA-SC-SOCIAL-CAPITAL
UNITS OF ACCOUNT for NATURAL CAPITAL
CONSUMPTION of NATURAL CAPITAL has enabled the growth of CREATED CAPITAL that supports modern QUALITY OF LIFE
GO #NC
A UNIT OF ACCOUNT for NATURAL CAPITAL - LAND
LAND IS LIMITED and there are many alternative uses that are required in a sustainable system.
GO #NCL Open L0700-UA-NC-LAND
A UNIT OF ACCOUNT for NATURAL CAPITAL - WATER
WATER is vital for human life as well as for production in both people built systems and in natural systems
GO #NCW Open L0700-UA-NC-WATER
A UNIT OF ACCOUNT for NATURAL CAPITAL - AIR
Degradation of CLEAN AIR has consequences including deterioration of human health
GO #NCA Open L0700-UA-NC-AIR
A UNIT OF ACCOUNT for NATURAL CAPITAL - CARBON / CLIMATE
Changes in the ATMOSPHERE as a result of Green-House-Gas (GHG) emissions are changing climate behavior with huge existential implications.
GO #NCC Open L0700-UA-NC-CARBON-CLIMATE
A UNIT OF ACCOUNT for NATURAL CAPITAL - BIODIVERSITY
Changes in the ATMOSPHERE as a result of Green-House-Gas (GHG) emissions are changing climate behavior with huge existential implications.
GO #NCB Open L0700-UA-NC-BIODIVERSITY
A UNIT OF ACCOUNT for NATURAL CAPITAL - ECO-SYSTEM SERVICES
Changes in the ATMOSPHERE as a result of Green-House-Gas (GHG) emissions are changing climate behavior with huge existential implications.
GO #NCE Open L0700-UA-NC-ECOSYSTEM-SERVICES
A UNIT OF ACCOUNT for NATURAL CAPITAL - RESOURCES
Changes in the ATMOSPHERE as a result of Green-House-Gas (GHG) emissions are changing climate behavior with huge existential implications.
GO #NCR Open L0700-UA-NC-RESOURCES

UNITS OF ACCOUNT FOR CREATED FINANCIAL CAPITAL ... MONEY
A GOOD UNITS OF ACCOUNT FOR FINANCIAL CAPITAL
INADEQUATE FOR EVERYTHING ELSE IN THE SOCIO-ENVIRO-ECONOMIC SYSTEM
GO TOP
Money / Profit growth / GDP growth / Stock Prices / Cost push inflation / Wages chasing prices
For FINANCIAL CAPITAL AND FINANCIAL TRANSACTIONS
MONEY

Everyone is familiar with money as a unit of account. Money serves two purposes:
(1) as a medium of exchange for the transaction; and
(2) as a store of value.
Over time ... a very long time ... coin or money or currency emerged as the common way to act as a unit of account and the medium of exchange and the store of value ... but this ought to be challenged in the modern world which has become so much faster moving and complex. But the idea that there should be units of account for things that really matter seems to be a natural and needed evolution.
Open L0700-UA-CFC-MONEY

Open L0700-CFC-CREATED-FINANCIAL-CAPITAL
The changing value of money
A good 'MEASURE' is going to be one where the unit of measure does not change over time ... this is not a strong characteristic of modern money. The US dollar has deteiorated in value dramatically over the past century.
Open L0700-UA-CFC-MONEY

Open L0700-CFC-CREATED-FINANCIAL-CAPITAL

UNITS OF ACCOUNT FOR CREATED PHYSICAL CAPITAL
THE BASIS FOR MODERN MATERIALSIM
GO TOP
CREATED PHYSICAL CAPITAL
Intangible capital has many forms. It arises because certain transactions or processes create more VALUE than the value that is consumed. This is a foundational principle in nature and science where reactions take place to change the way things are without actually creating any new foundational elements.
The way intangible capital needs to be measured is complex, but simplified by combining value balance sheet to reflect the history of the past to the prsent, and the idea of a net present value to account for the potential and risks of the present into the future.
Created Physical Capital
Physical capital includes products, the goods and services needed for people to have a decent quality of life, it includes buildings and infrastructure. Physical capital needs to measured both in static and in dynamic terms, and in terms of money units and in terms of various impact units. Of special note are products that flow through the enviro-socio-economic system delivering impact in the form of quality of life and impact on everything else as they go through the life cycle.


UNITS OF ACCOUNT FOR CREATED INTANGIBLE CAPITAL
THE BASIS FOR MODERN CIVILIZATION
GO TOP
CREATED INTANGIBLE CAPITAL
Intangible capital has many forms. It arises because certain transactions or processes create more VALUE than the value that is consumed. This is a foundational principle in nature and science where reactions take place to change the way things are without actually creating any new foundational elements.
The way intangible capital needs to be measured is complex, but simplified by combining value balance sheet to reflect the history of the past to the prsent, and the idea of a net present value to account for the potential and risks of the present into the future.
Institutional Capital
Institution capital has impact. There are money costs to support institutional capital and impact costs when institutional capital is inadequate. There is both a static and a dynamic dimension.
Knowledge Capital
Knowledge capital is the enabler of a high performance enviro-socio-economic system. Knowledge may be thought to behave somewhat like energy ... potential energy, kinetic energy, heat energy and so on. Knowledge has money costs to support research and all sorts of impacts when knowledge is used, bot good and bad. There is both a static and a dynamic dimension.

UNIT OF ACCOUNT FOR LIFE / PEOPLE / HUMAN CAPITAL
QUALITY OF LIFE IS THE MOST IMPORTANT DIMENSION OF THE SOCIO-ENVIRO-ECONOMIC SYSTEM
GO TOP
Human Capital / Babies / Families / Healthy Food
For LIFE itself and for the human dimension of QUALITY OF LIFE
VALUE of LIFE UNIT

A unit of measure for quality of life may be driven by reference to the value of life itself. There is life, and there is quality of life. The value of life should not be directly related to a money unit, but be defined independently from money.
A standard life unit could be defined as 1 life = 1 million standard life units. Everything to do with quality of life is associated to this unit.
A new born has a value of 1 million SLUs
By the time a person is 100 this value of life has depreciated (straight line) to 0 ... that is a decline of 10,000 SLUs per year.
There is a cost to maintaining life, this is the basic cost of living. The unit of account for this is USD or another currency.
A person has the capacity for doing things of value. The is usually expressed in terms of job and the associated salaries and benefits for which the unit of account is USD or another currency.
A person often does things that are not paid for, even though these things ... like parenting ... have huge value. These should be valued in terms of SLUs.
Open L0700-UA-HC-HUMAN-CAPITAL

Open L0700-HC-HUMAN-CAPITAL

UNIT OF ACCOUNT FOR SOCIAL CAPITAL
SOCIAL CAPITAL IS A MAJOR DETERMINANT OF QUALITY OF LIFE
GO TOP
Social Capital / Families / Friends / Neighborhoods / Place
The SOCIAL dimension of QUALITY OF LIFE which is largely influenced by FAMILY and FRIENDS and the characteristics of the PLACE
SOCIAL VALUE UNIT

Social capital is the group version of individual human capital. Social capital has impact on individual human capital and individual human capital has impact on social capital. There is both a static and a dynamic dimension.
A unit of measure for social value is
Open L0700-UA-SC-SOCIAL-CAPITAL

Open L0700-SC-SOCIAL-CAPITAL

UNITS OF ACCOUNT FOR NATURAL CAPITAL
NATURAL CAPITAL ... everything that exists in nature ... upon which everything depends!
GO TOP
Planet Earth / Water / Trees / Climate instability / Resource depletion /
A series of STANDARD VALUE UNITS for NATURAL CAPITAL:
There need to be several units of measure within natural capital (NC) because of the many roles that natural capital plays in the success of everything. It would be good if these could be be summarized or consolidated into a single unit of measure of natural capital as a whole, but this requires more understanding of natural capital values than there is at the present.
LAND VALUE UNIT GO #NCL Open L0700-UA-NC-LAND
WATER VALUE UNIT GO #NCW Open L0700-UA-NC-WATER
AIR VALUE UNIT GO #NCA Open L0700-UA-NC-AIR
CARBON / CLIMATE VALUE UNIT GO #NCC Open L0700-UA-NC-CARBON-CLIMATE
BIO VALUE UNIT GO #NCB Open L0700-UA-NC-BIODIVERSITY
ECOSYSTEM-SERVICE VALUE UNIT GO #NCE Open L0700-UA-NC-ECOSYSTEM
NATURAL RESOURCE VALUE UNIT GO #NCR Open L0700-UA-NC-RESOURCES

UNIT OF ACCOUNT FOR LAND
LAND ... a critical constraint on QUALITY OF LIFE
GO TOP
Land
The value of land should be related to a land value unit, and adjusted to reflect all the various uses there are for land, and not just those that a priced into money units as a result of trade.
There is value in land when used for eco-services (forests for carbon, wetlands for fisheries, wildland for bio-diversity, natural land for water purification, etc).
The unit of measure of land could be that 1 hectare of land = 1000 land units. Land use is constrained by a limited and fixed amount of land, and the value will change depending on the use being made of the land.
Land may be used for urban development, suburban communities, rural agriculture, industrial use, tourism and various forms of ecoservice and habitat for bio-diversity.
Many things associated with land and land use could be related to the idea that 1 hectare of undeveloped natural land equals 1000 (say)
Open L0700-UA-NC-LAND

Open L0700-NC-LAND

UNIT OF ACCOUNT FOR WATER
WATER ... 'Water, water, everywhere, but not a drop to drink!
GO TOP
Water
The value of water should be related to the value of life more than to the value of money.
The price or cost of water varies depending on the abundance of water and whether or not water is renewable in the place where it is uses.
The cost of water use must include both the depletion of the stock of water due to consumption but als the cost of the water pollution resulting from post-use discharge.
The unit of account for water could be that 1 liter of net water consumption = 1 water unit.
Many things associated with water and water pollution could be related to the idea that 1 liter of fresh water has a value of 1 (say).
http://www.truevaluemetrics.org/DBpdfs/NaturalCapital/Water/NC-Water-001-150102.pdf
Open L0700-UA-NC-WATER

Open L0700-NC-WATER
Open PDF ... NC-Water-001-150102

UNIT OF ACCOUNT FOR AIR
AIR ... essential for life
GO TOP
Air Pollution
The atmosphere has been used as a waste dump for gaseous effluents since the beginning of time, but this became a serious matter during the era of industrialization and increase in energy use.
Many noxious gases get released into the atmosphere by industrial processes and transport vehicles as well as particulates, all of which are detrimental to health and quality of life.
Open L0700-UA-NC-AIR

Open L0700-NC-AIR
UNIT OF ACCOUNT for the CARBON CYCLE and CLIMATE
The CARBON CYCLE has an impact on many aspects of NATURAL SYSTEMS
GO TOP
Carbon / Greenhouse gas emissions.
In addition to the air pollution referred to above, there is also the environmental degradation arising from the impact of greenhouse gas emissions on the atmosphere and the equilibrium of the weather.
A unit of measure could be based on the idea that one metric ton of carbon dioxide emissions = 1000, and everything to do with air pollution gets related to this unit.
Many things associated with atmospheric pollution could be related to a ton of carbon dioxide emissions where 1 ton of CO2e equals 1,000 (say).
Open L0700-UA-NC-CARBON-CLIMATE

Open L0700-NC-CLIMATE

UNIT OF ACCOUNT FOR BIODIVERSITY
THE NATURAL SYSTEMS THAT ARE RESPONSIBLE FOR EVOLUTION AND CREATING MASSIVE VARIETY AND RESILIANCE
GO TOP
Trees / Plants / Animals / Insects / Fish / Birds
Biodiversity
Open L0700-UA-NC-BIODIVERSITY

Open L0700-NC-NATURE-BIODIVERSITY

UNIT OF ACCOUNT FOR ECOSYSTEM SERVICES
ECOSYSTEM SERVICES are essential to maintain a variety of natural equilibria
GO TOP
Ecosystem Services.
Nature is an amazing system. Even though there has been an immense amount of research and we know a lot, there is still a lot that we do not know.
What we do know is that nature provides many services to maintain the quality of the environment and make it sustainable that are of huge value, but not priced at all in the conventional analysis of the enviro-socio-economic system
Open L0700-UA-NC-ECOSYSTEM-SERVICES

Open L0700-NC-ECOSYSTEM-SERVICES

UNIT OF ACCOUNT for NATURAL RESOURCES
NATURAL RESOURCE CONSUMPTION is a driver of industrial production and created physical structures and systems
GO TOP
Energy Resources
Energy is the big driver of the modern enviro-socio-economic system. Energy is a critical input for almost everything that supports the high standard of living and quality of life that is now possible.
There is a sophisticated framework for analysis of cost, price and profit within the energy dimension of the modern enviro-socio-economic system but only a partial framework for the analysis and reporting of the value and impact of everything related to energy in this system.
Major investment has been made in technology to exploit carbon based fossil fuels but, until recently little has been done to exploit the massive flows of renewable energy that exist but have only been exploited on a very limited scale.
Mineral Resources
Minerals are an essential raw material for many industrial processes that in turn produce the goods and services people need to support their standard of living and quality of life.
As products move through the supply chain, the flow aspect of these economic transactions are reported using a money price, but the impact of the loss of the mineral resource is not accounted for in the state of the natural capital.
The value of a mineral resource may not need to be quantified when it remains in situ, but when it is depleted the value must be accounted for based on the value the resource contributes to economic performance.
Resources ... State and Consumption Open L0700-UA-NC-RESOURCES

METRICS / STANDARD VALUES ... FOR EVERYTHING
METRICS ... ESSENTIAL FOR DECISION MAKING AT EVERY LEVEL
GO TOP
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Accounting for the 21st Century - Metrics for profit, people and planet impact
Accounting for the 21st Century must include metrics that relate to the everything, not merely the activities of the organization and its owners. This is accounting for every part of this amazing and complex system that is the environment, the society and the economy.
True Value Accounting addresses this need. The goal is for TVA to be an easy to use tool that will expand the capabilities of conventional accounting so that the impact of economic activity on everything is brought into account.
Conventional accounting has a focus on a single dimension represented by money, while MDIA accounts for not only money transactions, but also the impact of economic activity on everything else … hence multi dimension and impact accounting. MDIA enables analysis that embraces not only the impact that money profit has on financial capital, but how economic activity impacts on all the other capitals.
TVA uses a framework of metrics that can be used in every parts of the socio-enviro-economic system. The same data architecture works for a person, for an organization, for a product, for a place and for all the processes that p[roduce a product as it flows through the supply chain.
The logic is relatively simple … but as usual, the devil is in the detail.

Quantification … Standard Value Profiles for Everything
TVA uses multiple units of measure … and use standard value profiles for the accounting. Standard values are something like standard costs in cost accounting.
Money had its origins in being a measure of the price in an economic transaction. It facilitated trade and was very much more efficient than barter. How money became a store of value is a long story, and how money became a key component in money wealth creation an even longer story. Money has its uses, but it is a very poor unit of measure for almost everything that is important in the world we live in. The size of a money unit has no definition at all … it is determined by a market that is also impossible to describe and replete with 'invisible hands' that may or may not control everything.
The value of a product … goods or service … is not the amount that it can be bought or sold for. That is a price. The value is what a product contributes … to a person directly and to society in general and also taking into account the impact there is on natural capital. What this means is that there is a need for several units of measure and related quantification along the following lines.
Open L070-SV-STANDARD-VALUE-PROFILES




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