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Date: 2024-07-26 Page is: DBtxt001.php txt00024146

MANAGEMENT METRICS
THE FOUR CAPITAL MODEL
THE FOUR CAPITAL MODEL, MATRIX AND ACCOUNTS ... by-Bojan-Radej

Open PDF ... The-Four-Capital-Model-by-Bojan-Radej
'http://truevaluemetrics.org/DBpdfs/Economics/OECD/The-Four-Capital-Model-by-Bojan-Radej.pdf'

Peter Burgess COMMENTARY
The idea of multiple capitals has been fundamental to my thinking going back to my university days. Capital and capitalism are difficult to understand without some clear appreciation that capital is more or less equivalent to resource.

The prevailing management metrics which use money as the ubiquitous measure for everything cannot work. By (economic) definition the value of money is determined in large part by a 'market mechanism', while a core characteristic of a good 'measure' is that it has a constant characteristic. On this, of course, money fails, yet it is a core component of everything to do with economic management. Why is this?

I think it has something to do with the behavioral characteristics of humankind. Some people have a lust for power and figure out how this can be achieved. Others are more subservient and 'go along with the flow'. This can work, but it also can result in catastrophe ... and experience suggests that the latter happens more often than not.

But something else has been going on during the last few thousand years that we know about. People have built up a store of knowledge and learned more and more about how to be more and more 'productive'. A multitude of tools and materials have been invented over the years, and the pace of this has accelerated in an amazing way in the recent few centuries. The pace has never been more rapid than in the last few decades.

Sadly, this is not all good. The power of modern technology has the potential to be deployed for the wrong reasons as well as for the right reasons and it has become fairly clear that much of modern technology is doing rather little to make quality of life better for the majority of people nor to preserve nature and the environment so that these essential services are available into the future.

It should be of concern that the USA ... arguably the richest economy and society in all of history ... has a society that is so unhappy. What has gone wrong? What needs to be sone to fix the problem?
Peter Burgess

THE FOUR CAPITAL MODEL, MATRIX AND ACCOUNTS ... by-Bojan-Radej
Abstract:
The sustainability imperative can be translated into a claim for homothetic growth (Giraud, 1996) which equalises growth opportunities for all forms of capital: economic, social, human and natural. In order to apply this imperative, policymakers need empirical and analytically rigorous tools to present interactions between capitals as multiple and parallel. For this purpose Ekins and Medhurst (2003) compiled the four capital model based on the combined quantitative-qualitative methodology of ‘sustainability assessment framework’ that is derived from impact assessment methodology. This expert-based assessment technique is well-known in ecological and sustainable economics. The paper finds that Ekins and Medhurst applied microscopic (project) assessment approach for studying macroscopic phenomena such as development programmes consisting of tens or hundreds projects. The methodological consequence is that they could not fully utilize the potential of the model in its complexity. Thus, a more orthodox formulation is proposed which at first transforms the sustainability assessment framework into the standard Leontief’s (1970) input-output matrix from which the standard accounting tool – an integrated system of capital accounts – is derived. It is only after this adjustment of the starting model that one can tell not only how the realisation of the particular policy, plan or programme will influence each of the four forms of capital; but more relevantly, one can identify also all trade-offs and synergies that would be initiated with these policies amongst the forms of capital themselves. Recognition of these multiple relations appears as a precondition for balanced sustainable wealth creation.

The text being discussed is available at

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