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Date: 2022-05-28 Page is: DBtxt003.php L0900-QN-quantification-02a
Without Measurement, There is No Management
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Standard value is key to efficient analysis

The core hypothesis that justifies the development and deployment of TVM is that money profit is not enough, there also has to be value. But value will never the there if value cannot be quantified in a widely accepted way.

If you cannot measure it … you cannot manage it

The TVM solution to this problem is to make use of “standard values” rather like “standard costs” are used in cost accounting … but even this has to be done with care. Value is not a simple metric … but it is a very important one.

Value is subjective … and this is part of of its importance as a key metric of progress and performance. A simplified value construct will not work to guide society to its best performance … or even to know what best performance might be.

Ignoring value … which is essentially what has been done in money accounting and economics certainly simplifies analysis, but over time the result of this is increasingly poor allocation of resources. Value is subjective, and as such its quantification has to have an element of pragmatism in order to be practical.

One part of the solution is to have standard values for everything that is of value … in other words, for everything.

The idea of a standard value in TVM is similar to the concept of standard cost in cost and management accounting. Everything has its standard value computed, just as everything has its standard cost computed. Periodic comparison of actual cost to standard cost makes it possible to have standard costs that reflect the actual cost very closely. Routine management analysis may be done using the standard costs … and the answers are good enough for most day-to-day decisions. Similarly with standard values … they may be used in day-to-day analysis and the answers are good enough, and easy to get.
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