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Date: 2024-07-16 Page is: DBtxt001.php txt00000516

State, Progress and Performance
Metrics for a Value Market Economy

A Capitalist Market Economy needs to be reformed so that it becomes a Value Market Economy

A new value mindset
The 'capitalist market economy' has proved to be a very much better economic system than the communist economic system. Adam Smith recognized the immense complexity of the relationships in the economy, and described the nature of the 'market economy' and originated the idea of the oft quoted 'invisible hand'. Seven decades of communism as an economic system with top-down decisions showed that the 'invisible hand' and a capitalist market economy did a better job of allocating resources than the government bureaucracy.

But the capitalist market economy has serious flaws. It works well in surplus affluent economies but fails completely to allocated resources to important needs of society and especially the needs of people who live in poor societies. There are important needs at the economic 'base of the pyramid' (BOP) but not much profit. However a value market economy would improve the resource allocation dynamic so that needs could be satisfied.

The metrics for a new value market economy (NuVME) have the same construct as profit based money accountancy which has a balance sheet with assets and liabilities, and a profit and loss account which has expenses and revenues. and profit is the measure of performance. In the NuVME situation the balance sheet is used to describe the state, change in state is a metric for progress, and the use of resources relative to progress is performance.

State Elements in society that are positive for quality of life are included in a balance sheet on the asset side. Elements that are needed but not available are included as liabilities in the balance sheet.

Progress Progress is easily measured by comparing the state at one time with the state at a later time. The change in state is a measure or progress,

Performance Economic activities of all sorts are the driver of the society and determinant of the current state. The measure of performance is the resource consumption used to maintain the current state of society and any progress of the society.

Human resource Youth around the world are experiencing high unemployment. They are better educated than in the past. This may not be enough to get them employment in a capitalist-market-economy, but they represent a very important resource in a value-market-economy.This human capital is very important and should be a starting point for satisfying needs.

Critical needs People in a society need to be able to satsify their basic needs. There are two dimensions of this (1) the availability of the goods and services needed; and (2) the ability for people to be able to pay for what they need. The amount of critical need is a function of population.

Needs are satisfied with economic activity that produces the goods and services that are needed. Thus food needs are satisfied by activities in the agriculture sector. Shelter needs are satisfied by the activities or the housing sector. Health needs are satisfied by the health sector. All of these economic activities employ people, use goods and services and deliver goods and services to satisfy needs. These economic activities have to be funded. This is why there are banks and capital markets. It would be nice if people could satisfy a lot more than basic needs. The quality of life at the limit is constrained by the productivity of society. Productivity is a function of the installed investment in infrastructure, production equipment, working capital, human capital and knowledge. The best productivity is achieved when these elements are matched in the optimum way ... and in turn the best quality of life is achieved. Over the past several decades technology to improve productivity has improved impressively ... economic growth has been less impressive, and has only been driven by profit opportunity while value opportunity is ignored. Thus, if education is used to improve human capital and knowledge, there can be productivity improvement, but this improvement is only realized if the human capital and knowledge becomes an input into an economic activity that is producing to satisfy a need.



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