Question of the day

The measurement of human, social, and natural capital has progressed to the point where we could have metrological reference standards for performance, ability, attitude, health, trust, and environmental quality metrics, if we cared to take the trouble to create them. My new article in Measurement (Elsevier) documents the science, and makes recommendations. (See http://dx.doi.org/10.1016/j.measurement.2009.03.014)

Having such standards would mean we’d be much better able to estimate the value of intangible forms of capital, to price them, and so to include them in econometric models and financial spreadsheets. Our investments in them would give measured returns, meaning we could include their value in stocks, bonds, other instruments, and in the Genuine Progress Index and the Happiness Index. Having this information would go a long way toward redefining profit as value for life.

In the days and weeks to come, I’ll spell out the technical issues involved. I’ll try to keep it jargon-free, and I hope you’ll help with that! Even without jargon, however, we’re moving into new territory, so new terms will need to be used. I’ll explain them the best I can, and I’ll also pay attention to new or special meanings of words that we might assume are already understood.

So here’s the first of many questions of the day:

Given the demonstrated viability of metrological reference standards for human, social, and natural capital, what would you say is the most important thing to do now to advance this cause?

I’ve been trying to answer this question from a fresh perspective everyday for years. It’s your turn.

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3 Responses to “Question of the day”

  1. Matt Barney Says:

    William,

    I still believe we need a good, testable model to combine the information from good instruments to perform valuation on all forms of Capital. My attempt at this I call the “Cue See” model, to help combine Rasch-scaled information (and other good physical science instruments) together to characterize the flow of value into the marketplace, where it can be monetized.

    Matt

    • livingcapitalmetrics Says:

      Thanks, Matt. Would love to see more on this. Do you see the monetization occuring primarily in econometric modeling or financial accounting, or emerging in the context of practical applications as people use a common metric and make associations between its values and costs?

  2. Matt Barney Says:

    I see these as cross-level effects, beginning with the most micro-level of analysis, which is the practical, voluntary transactions (free from coercion or violence) exchanging goods and services for money. Inevitably, prices and quality varies because individuals have different preferences. But these effects, when considered at higher levels of analysis are likely to have emergent effects (e.g. interaction effects) that may be more than the linear sum of the parts. I doubt the macro-economic approaches can improve on their predictive power without micro-level Rasch measures and models that account for these emergent effects.

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