Definitions for TrueValueMetrics
Dynamics of Society
Existing Models and Metrics are Inadequate. Over the past forty years the practice of econometrics has resulted in models that were meant to explain how the economy had behaved and predict how it would behave in the future. In fact, however, these macro models were quite limited in their capacity to understand what had happened and less able to do much useful about the future.
TVM is a different model ... much more basic ... and much more grounded in data that can be used for decision making as well as for operations research. TVM is about the economic dynamic of the community ... and how community is impacted by internal and external influences.
Economic models have become an important tool of modern economics ... but how good are they? The ones that are used to predict socio-economic progress for poor societies seem to be counter-productive ... and in reality most poor societies have progressed very slowly over a long period of time.
Nor is it clear how good economic models have been. It is not clear what economic models have used by the modern advanced private investment and banking community, but experience suggests that most users of models do not have a deep understanding of the assumptions used to create the models and their limitations.
It seems that most economic models are developed around the data for highly monetized economies ... but most of the poor world is only lightly monetized. Life is not driven by how much money but by how much of the necessities the family has ... some of which are obtained by money transactions, but much comes from self-production and petty trade that has a barter-like quality.
The TVM conclusion from economic modeling for poor communities is that productivity is the key issue that needs to be addressed, and experience suggests that when constraints on improving productivity are identified and removed, there can be amazing progress.
Crucial for effective policy formulation. Understanding the economic dynamics that drive what happens in society is important.