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|Date: 2022-07-07 Page is: DBtxt001.php bk0001040|
The Basic Concepts of True Value Metrics
What Version of Sustainable
TVM serves all versions. TVM is about metrics … that is data and analysis of what is and what could be, or should be. What something is called is less important than what something is … and the data will show as clearly as possible what something is, what it was, and what it could be … all in the context of what should be.
A lot of issues are subjective, but this does not matter for metrics that aim to report simply the factual reality. With TVM the issue of subjectivity and its variability is a part of the system.
TVM aims to be of utility whether the version of sustainability relates to:
Sustainable … what does it mean?
In many modern settings the word sustainable is almost meaningless … it has become a “fashionable” word, and is applied to anything and everything and means leas and less the more it is used.
In the case of the Columbia University conference the issue of sustainability was simply related to how best to use the revenues generated by extractive industries in the best possible way … starting off from the premise that much of what has been going on for a very long time is essentially unacceptable … essentially wrong!
A simple conceptual framework
TVM uses an engineering metaphor in its economic model for socio-economic progress. This is based on the very solid realities of science and engineering. It is a somewhat mechanical model of how an economy works ... not very sophisticated, but based on the observable connections between activities and outcomes at the community level and aggregated macro outcomes at the national and global levels.
In the main ... finite resources
TVM respects the fact that the world has a finite store of every economic input ... witrh the exception that energy from the sun is on an the astronomical scale.. In the global scheme of things, science, engineering and technology are all connected through ubiquitous laws of nature ... and economic laws have some similarity. The principles of Newtonian mechanics and engineering thermodynamics apply universally and preclude perpetual motion as an engineering outcome. TVM has a similar perspective about the dynamics of socio-economic progress.
Where has wealth come from?
The origins are miraculous … sun and life! But the accumulated wealth is also finite.
Wealth has its origin with the creation of the solar system including our sun and the planet earth. The sun has astronomical amounts of energy, earth has finite amounts of many valuable natural resources and a very special thing which is life.
Over time planet earth has accumulated more and more valuable resources by converting the energy of the sun into more resources ... what are today deposits of coal, petroleum, etc. For millions of years the world was getting wealthier ... accumulated wealth converted from sun's energy and storing it. In modern times we are able to exploit fossil wealth that has taken millions of years to accumulate.
This has all changed in the last dozen or so decades. In this recent period the world has been consuming its fossil wealth at an accelerating rate ... and people have not been paying much attention. The accumulation of wealth and its consumption by people and organizations has become a critical metric of economic progress and performance while the net consumption or loss of wealth by the planet is ignored.
Up to now the broad outcome of developing more human intellectual capacity has been to facilitate more rapid exploitation of the deposits of accumulated solar energy ... and more and more activities that consume these deposits.
In the process we have used metrics that suggest that more and more consumption is the goal … that more and more and more is a better quality of life, All of this is fundamentally wrong.
What Are the Limits?
What are the limits on wealth? Using conventional money metrics wealth is finite and quite limited. But the limits need not be a constraint to a global society that has a high quality of life.
The waste in modern society is a disgrace.
If the process of transforming the wealth of the planet into the wealth of the people and organizations was efficient ... and reversible ... the matter would be less serious than it is. But in fact the conversion is very inefficient and not easy to reverse ... maybe even impossible to reverse . Fossil fuel energy that took millions of years to be accumulated on the earth by conversion from solar energy will get consumed in a few hundred years ... and the prevailing metrics for wealth only account for the accumulation of wealth by people and organizations while ignoring totally the consumption of wealth associated with irreversible consumption of the world's resource wealth.
Quality of life does not need to be limited. More and more is not better and better. At what point does a “more and more” economy hit a brick wall … or go over the cliff … or become an economic train wreck? The money economic growth over the past two centuries has been very impressive … but few see the practical ways in which this economic model will be working well in another two hundred years. Analysts worry about the model coming apart by 2020 … in ten years … or 2050 … in 40 years.
What happens when the oil runs out? What happens when naturally occurring potable water is a distant memory? The answers are missing! The TVM engineering hybrid metaphor accepts that material and money wealth is finite … but value based economic performance has a whole lot more potential Less constraints when better quality of life is the goal
Value … better quality of life … may be created without the depletion of the earth's natural accumulated wealth. Value creation may be substantial merely with the use of human energy and intellect. Human intellect ... brain power ... has enabled people to make use of tools to do amazing things. Maybe ... just maybe ... the value creation associated with this could replace money wealth creation that has driven economic analysis for several hundred years.
There is a limit to exploiting the accumulated energy that has flowed from the sun over millions of years and is stored in fossil fuels, soils and tropical forests. Money metrics do not take this into account, but it is accounted for in TVM.
In TVM human intellectual energy, quality of life and well being are assets … good deeds, creating happiness and improving quality of life are as important as products and services. People and organizations should accumulate value wealth as well as money wealth and there should be improving quality of life without drawing down the natural wealth of the planet.
TVM is only metrics … with a limited role … to be good metrics. This role is to get the metrics in place so that the major key issues are being measured ... and then it is up to others to take the steps to reform the activities and organizations involved with socio-economic activity so that there can be positive outcomes ... value wealth accumulation ... for people (quality of life) , organizations (profit) and the planet (replenishing nature's bounty)!
Sustainable dynamic of sustainable socio-economic progress
The only development that is sustainable is development that is funded by the surplus production of society … everything else is a form of welfare and dependent on those that are willing to fund welfare. In most cases those that are prepared to fund welfare over a long period of time are not doing it “out of the goodness of their hearts” but because there is some benefit that they are obtaining.
A sustainable society is one where over time there is an equilibrium between what is consumed and what is created. There is socio-economic progress when the activities of the community generate a surplus. Development assistance in the form of subsidy is very different from assistance that is in the form of funding investment … in the former case subsidy tends to mask inefficiency while in the latter, investment should improve productivity.
In most cases, socio-economic progress that results from external intervention is fragile because there are external factors that detract even though they are often undocumented and overlooked. In most cases external intervention is also based on a welfare construct about development aid, and unsustainable idea. On the other hand, funding that facilitates the capitalization of business that can supply all the needs of society both capital reconstruction and operational services is a sustainable approach.
The virtuous cycle of sustainable development
A dynamic planning framework with people at the center of everything creates value in the community and the broader economy. When people are the key resource, everything is possible at an affordable cost. People are both the beginning and the end … they work to create value … and they live to enjoy value. In a community where there is a positive value dynamic there can be sustainable socio-economic progress.
The question “Who is going to pay for healthcare?” for example, has less negative impact when healthcare are jobs in the community and the benefit is good health in the community. The community economy fails when the only investment ever made is to enrich outsiders … and the community always succeeds when the investment adds value for the community.
The virtuous value chain works this way:
Note that for the value chain to result in a virtuous cycle of sustainable progress, the relationship between the amount of the wage remuneration and the amount of the socio-economic value adding … in other words, productivity is important. The same analysis applies as the wage money moves through the community … the better the productivity, the better the progress.
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