Archive for the ‘Business’ Category

Living Capital Metrics for Financial and Sustainability Accounting Standards

May 1, 2015

I was very happy a few days ago to come across Jane Gleeson-White’s new book, Six Capitals, or Can Accountants Save the Planet? Rethinking Capitalism for the 21st Century. The special value for me in this book comes in the form of an accessible update on what’s been going on in the world of financial accounting standards. Happily, there’s been a lot of activity (check out, for instance, Amato & White, 2013; Rogers & White, 2015). Less fortunately, the activity seems to be continuing to occur in the same measurement vacuum it always has, despite my efforts in this blog to broaden the conversation to include rigorous measurement theory and practice.

But to back up a bit, recent events around sustainability metric standards don’t seem to be connected to previous controversies around financial standards and economic modeling, which were more academically oriented to problems of defining and expressing value. Gleeson-White doesn’t cite any of the extensive literature in those areas (for instance, Anielski, 2007; Baxter, 1979; Economist, 2010; Ekins, 1992, 1999; Ekins, Dresner, & Dahlstrom, 2008; Ekins, Hillman, & Hutchins, 1992; Ekins & Voituriez, 2009; Fisher, 2009b, 2009c, 2011; Young & Williams, 2010). Valuation is still a problem, of course, as is the analogy between accounting standards and scientific standards (Baxter, 1979). But much of the sensitivity of the older academic debate over accounting standards seems to have been lost in the mad, though well-intentioned, rush to devise metrics for the traditionally externalized nontraditional forms of capital.

Before addressing the thousands of metrics in circulation and the science that needs to be brought to bear on them (the ongoing theme of posts in this blog), some attention to terminology is important. Gleeson-White refers to six capitals (manufactured, liquid, intellectual, human, social, and natural), in contrast with Ekins (1992; Ekins, et al., 2008), who describes four (manufactured, human, social, and natural). Gleeson-White’s liquid capital is cash money, which can be invested in capital (a means of producing value via ongoing services) and which can be extracted as a return on capital, but is not itself capital, as is shown by the repeated historical experience in many countries of printing money without stimulating economic growth and producing value. Of her remaining five forms of capital, intellectual capital is a form of social capital that can satisfactorily be categorized alongside the other forms of organization-level properties and systems involving credibility and trust.

On pages 209-227, Gleeson-White takes up questions relevant to the measurement and information quality topics of this blog. The context here is informed by the International Integrated Reporting Council’s (IIRC) December 2013 framework for accounting reports integrating all forms of capital (Amato & White, 2013), and by related efforts of the Sustainability Accounting Standards Board (SASB) (Rogers & White, 2015). Following the IIRC, Gleeson-White asserts that

“Not all the new capitals can be quantified, yet or perhaps ever–for example, intellectual, human and social capital, much of natural capital–and so integrated reports are not expected to provide quantitative measures of each of the capitals.”

Of course, this opinion flies in the face of established evidence and theory accepted by both metrologists (weights and measures standards engineers and physicists) and psychometricians as to the viability of rigorous measurement standards for the outcomes of education, health care, social services, natural resource management, etc. (Fisher, 2009b, 2011, 2012a, 2012b; Fisher & Stenner, 2011a, 2013, 2015; Fisher & Wilson, 2015; Mari & Wilson, 2013; Pendrill, 2014; Pendrill & Fisher, 2013, 2015; Wilson, 2013; Wilson, Mari, Maul, & Torres Irribarra, 2015). Pendrill (2014, p. 26), an engineer, physicist, and past president of the European Association of National Metrology Institutes, for instance, states that “The Rasch approach…is not simply a mathematical or statistical approach, but instead [is] a specifically metrological approach to human-based measurement.” As is repeatedly shown in this blog, access to scientific measures sets the stage for a dramatic transformation of the potential for succeeding in the goal of rethinking capitalism.

Next, Gleeson-White’s references to several of the six capitals as the “living” capitals (p. 193) is a literal reference to the fact that human, social, and natural capital are all carried by people, organizations/communities, and ecosystems. The distinction between dead and living capital elaborated by De Soto (2000) and Fisher (2002, 2007, 2010b, 2011), which involves making any form of capital fungible by representing it in abstract forms negotiable in banks and courts of law, is not taken into account, though this would seem to be a basic requirement that must be fulfilled before the rethinking of capitalism could said to have been accomplished.

Gleeson-White raises the pointed question as to exactly how integrated reporting is supposed to provoke positive growth in the nontraditional forms of capital. The concept of an economic framework integrating all forms of capital relative to the profit motive, as described in Ekins’ work, for instance, and as is elaborated elsewhere in this blog, seems just over the horizon, though repeated mention is made of natural capitalism (Hawken, Lovins, & Lovins, 1999). The posing of the questions provided by Gleeson-White (pp. 216-217) is priceless, however:

“…given integrated reporting’s purported promise to contribute to sustainable development by encouraging more efficient resource allocation, how might it actually achieve this for natural and social capitals on their own terms? It seems integrated reporting does nothing to address a larger question of resource allocation….”

“To me the fact that integrated reporting cannot address such questions suggests that as with the example of human capital, its promise to foster efficient resource allocation pertains only to financial capital and not to the other capitals. If we accept that the only way to save our societies and planet is to reconceive them in terms of capital, surely the efficient valuing and allocation of all six capitals must lie at the heart of any economics and accounting for the planet’s scarce resources in the twenty-first century.
“There is a logical inconsistency here: integrated reporting might be the beginning of a new accounting paradigm, but for the moment it is being practiced by an old-paradigm corporation: essentially, one obliged to make a return on financial capital at the cost of the other capitals.”

The goal requires all forms of capital to be integrated into the financial bottom line. Where accounting for manufactured capital alone burns living capital resources for profit, a comprehensive capital accounting framework defines profit in terms of reduced waste. This is a powerful basis for economics, as waste is the common root cause of human suffering, social discontent and environmental degradation (Hawken, Lovins, & Lovins, 1999).

Multiple bottom lines are counter-productive, as they allow managers the option of choosing which stakeholder group to satisfy, often at the expense of the financial viability of the firm (Jensen, 2001; Fisher, 2010a). Economic sustainability requires that profits be legally, morally, and scientifically contingent on a balance of powers distributed across all forms of capital. Though the devil will no doubt lurk in the details, there is increasing evidence that such a balance of powers can be negotiated.

A key point here not brought up by Gleeson-White concerns the fact that markets are not created by exchange activity, but rather by institutionalized rules, roles, and responsibilities (Miller & O’Leary, 2007) codified in laws, mores, technologies, and expectations. Translating historical market-making activities as they have played out relative to manufactured capital in the new domains of human, social, and natural capital faces a number of significant challenges, adapting to a new way of thinking about tests, assessments, and surveys foremost among them (Fisher & Stenner, 2011b).

One of the most important contributions advanced measurement theory and practice (Rasch, 1960; Wright, 1977; Andrich, 1988, 2004; Fisher & Wright, 1994; Wright & Stone, 1999; Bond & Fox, 2007; Wilson, 2005; Engelhard, 2012; Stenner, Fisher, Stone, & Burdick, 2013) can make to the process of rethinking capitalism involves the sorting out of the myriad metrics that have erupted in the last several years. Gleeson-White (p. 223) reports, for instance, that the Bloomberg financial information network now has over 750 ESG (Environmental, Social, Governance) data fields, which were extracted from reports provided by over 5,000 companies in 52 countries.  Similarly, Rogers and White (2015) say that

“…today there are more than 100 organizations offering more than 400 corporate sustainability ratings products that assess some 50,000 companies on more than 8,000 metrics of environmental, social and governance (ESG) performance.”

As is also the case with the UN Millennium Development Goals (Fisher, 2011b), the typical use of these metrics as single-item “quantities” is based in counts of relevant events. This procedure misses the basic point that counts of concrete things in the world are not measures. Is it not obvious that I can have ten rocks to your two, and you can still have more rock than I do? The same thing applies to any kind of performance ratings, survey responses, or test scores. We assign the same numeric increase to every addition of one more count, but hardly anyone experimentally tests the hypothesis that the counts all work together to measure the same thing. Those who think there’s no need for precision science in this context are ignoring the decades of successful and widespread technical work in this area, at their own risk.

The repetition of history here is fascinating. As Ashworth (2004, p. 1,314) put it, historically, “The requirements of increased trade and the fiscal demands of the state fuelled the march toward a regular form of metrology.” For instance, in 1875 it was noted that “the existence of quantitative correlations between the various forms of energy, imposes upon men of science the duty of bringing all kinds of physical quantity to one common scale of comparison” (Everett, 1875, p. 9). The moral and economic  value of common scales was recognized during the French revolution, when, Alder (2002, p. 32) documents, it was asked:

“Ought not a single nation have a uniform set of measures, just as a soldier fought for a single patrie? Had not the Revolution promised equality and fraternity, not just for France, but for all the people of the world? By the same token, should not all of the world’s people use a single set of weights and measures to encourage peaceable commerce, mutual understanding, and the exchange of knowledge? That was the purpose of measuring the world.”

The value of rigorously measuring human, social and natural capital includes meaningfully integrating qualitative substance with quantitative convenience, reduced data volume, augmenting measures with uncertainty and consistency indexes, and the capacity to take missing data into account (making possible instrument equating, item banking, etc.)  In contrast with the usual methods, rigorous science demands that experiments determine which indicators cohere to measure the same thing by repeatedly giving the same values across samples, over time and space, and across subsets of indicators. Beyond such data-based results, advanced theory makes it possible to arrive at explanatory, predictive methods that add a whole new layer of efficiency to the generation of indicators (de Boeck & Wilson, 2004; Stenner, et al., 2013).

Finally, Gleeson-White (pp. 220-221) reports that “In July 2011, the SASB [Sustainability Accounting Standards Board] was launched in the United States to create standardized measures for the new capitals.” “Founded by environmental engineer and sustainability expert Jean Rogers in San Francisco, SASB is creating a full set of industry-specific standards for sustainability accounting, with the aim of making this information more consistent and comparable.” As of May 2014, the SASB vice chair is Mary Schapiro, former SEC chair, and the chairman of SASB is Michael Bloomfield, former mayor of NYC and founder of the financial information empire. The “SASB is developing nonfinancial standards for eighty-nine industries grouped in ten different sectors and aims to have completed this grueling task by February 2015. It is releasing each set of metrics as they are completed.”

Like the SASB and other groups, Gleeson-White (p. 222) reports, Bloomberg

“aims to use its metrics to start ‘standardizing the discourse around sustainability, so we’re all talking about the same things in the same way,’ as Bloomberg’s senior sustainability strategist Andrew Park put it. What companies ‘desperately want,’ he says, is ‘a legitimate voice’ to tell them: ‘This is what you need to do. You exist in this particular sector. Here are the metrics that you need to be reporting out on. So SASB will provide that. And we think that’s important, because that will help clean up the metrics that ultimately the finance community will start using.’
“Bloomberg wants to price environmental, social and governance externalities to legitimize them in the eyes of financial capital.”

Gleeson-White (p. 225) continues, saying

“Bloomberg wants to do more generally what Trucost did for Puma’s natural capital inputs: create standardized measures for the new capitals–such as ecosystem services and social impacts–so that this information can be aggregated and used by investors. Park and Ravenel call the failure to value clean air, water, stable coastlines and other environmental goods ‘as much a failure to measure as it is a market failure per se–one that could be addressed in part by providing these ‘unpriced’ resources with quantitative parameters that would enable their incorporation into market mechanisms. Such mechanisms could then appropriately ‘regulate’ the consumption of those resources.'”

Integrating well-measured living capitals into the context of appropriately configured institutional rules, roles, and responsibilities for efficient markets (Fisher, 2010b) should indeed involve a capacity to price these resources quantitatively, though this capacity alone would likely prove insufficient to the task of creating the markets (Miller & O’Leary, 2007; Williamson, 1981, 1991, 2005). Rasch’s (1960, pp. 110-115) deliberate patterning of his measurement models on the form of Maxwell’s equations for Newton’s Second Law provides a mathematical basis for connecting psychometrics with both geometry and natural laws, as well as with the law of supply and demand (Fisher, 2010c, 2015; Fisher & Stenner, 2013a).

This perspective on measurement is informed by an unmodern or amodern, post-positivist philosophy (Dewey, 2012; Latour, 1990, 1993), as opposed to a modern and positivist, or postmodern and anti-positivist, philosophy (Galison, 1997). The essential difference is that neither a universalist nor a relativist perspective is necessary to the adoption of practices of traceability to metrological standards. Rather, focusing on local, situated, human relationships, as described by Wilson (2004) in education, for instance, offers a way of resolving the false dilemma of that dichotomous contrast. As Golinski (2012, p. 35) puts it, “Practices of translation, replication, and metrology have taken the place of the universality that used to be assumed as an attribute of singular science.” Haraway (1996, pp. 439-440) harmonizes, saying “…embedded relationality is the prophylaxis for both relativism and transcendance.” Latour (2005, pp. 228-229) elaborates, saying:

“Standards and metrology solve practically the question of relativity that seems to intimidate so many people: Can we obtain some sort of universal agreement? Of course we can! Provided you find a way to hook up your local instrument to one of the many metrological chains whose material network can be fully described, and whose cost can be fully determined. Provided there is also no interruption, no break, no gap, and no uncertainty along any point of the transmission. Indeed, traceability is precisely what the whole of metrology is about! No discontinuity allowed, which is just what ANT [Actor Network Theory] needs for tracing social topography. Ours is the social theory that has taken metrology as the paramount example of what it is to expand locally everywhere, all while bypassing the local as well as the universal. The practical conditions for the expansion of universality have been opened to empirical inquiries. It’s not by accident that so much work has been done by historians of science into the situated and material extension of universals. Given how much modernizers have invested into universality, this is no small feat.
“As soon as you take the example of scientific metrology and standardization as your benchmark to follow the circulation of universals, you can do the same operation for other less traceable, less materialized circulations: most coordination among agents is achieved through the dissemination of quasi-standards.”

As Rasch (1980: xx) understood, “this is a huge challenge, but once the problem has been formulated it does seem possible to meet it.” Though some metrologically informed traceability networks have begun to emerge in education and health care (for instance, Fisher & Stenner, 2013, 2015; Stenner & Fisher, 2013), virtually everything remains to be done to make the coordination across stakeholders as fully elaborated as the standards in the natural sciences.

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An Entrepreneurial Investment Model Alternative to Picketty’s Taxation Approach to Eliminating Wealth Disparities

May 14, 2014

Is taxation the only or the best solution to inequality? The way discussions of wealth disparities inevitably focus on variations in how, whom or what to tax, it is easy to assume there are no viable alternatives to taxation. But if the point is to invest in those with the most potential for making significant gains in productivity, so as to maximize the returns we realize, do we not wrongly constrain the domain of possible solutions when we misconceive an entrepreneurial problem in welfare terms?

Why can’t we require minimum levels of investment in social capital stocks and bonds offered by schools, hospitals, NGOs, etc? In human capital instruments offered by individuals? Why should not we expect those investments to be used to create new value? What supposed law of nature says it is impossible to associate new human, social and environmental value with stable and meaningful prices? And if there is such a law (such as Kenneth Arrow (1963) proposed), how can we break it? Why can’t we reconceive human and social capital stocks and flows in new ways?

There is one very good reason why we cannot now make such requirements, and it is the same reason why liberals (including me) had better become accustomed to accepting the failure of their agenda. That reason is this: social and environmental externalities. Inequality is inevitable only as long as we do not change the ways we deal with externalities. They can no longer be measured and managed in the same ways. They must be put on the books, brought into the models, measured scientifically, and traded in efficient markets. We have to invent accountability and accounting systems that harness the energy of the profit motive for the greater good—that actually grow authentic wealth and not mere money—and we have to do this far more effectively than has ever been done before.

It’s a tall order. But there are resources available to us that have not yet been introduced into the larger conversation. There are options to consider that need close study and creative experimentation. Proceeding toward the twin futilities of premature despair or unrealistic taxation will only set up another round of self-fulfilling prophecies inexorably grinding to yet another unforeseen but fully foretold disaster. Conversations about how to shape the roles, rules and institutions that make markets what they are (Miller and O’Leary, 2007) need to take place for human, social, and natural capital (Fisher and Stenner, 2011b). Indeed, those conversations are already well underway, as can be seen in the prior entries in this blog and in the sources listed below.

Arrow, K. J. (1963). Uncertainty and the welfare economics of medical care. American Economic Review, 53, 941-973.

Fisher, W. P., Jr. (2007). Living capital metrics. Rasch Measurement Transactions, 21(1), 1092-1093 [http://www.rasch.org/rmt/rmt211.pdf].

Fisher, W. P., Jr. (2009a). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement, 42(9), 1278-1287.

Fisher, W. P., Jr. (2009b). NIST Critical national need idea White Paper: Metrological infrastructure for human, social, and natural capital (http://www.nist.gov/tip/wp/pswp/upload/202_metrological_infrastructure_for_human_social_natural.pdf). Washington, DC: National Institute for Standards and Technology (11 pages).

Fisher, W. P., Jr. (2010a, 22 November). Meaningfulness, measurement, value seeking, and the corporate objective function: An introduction to new possibilities. Sausalito, California: LivingCapitalMetrics.com (http://ssrn.com/abstract=1713467).

Fisher, W. P. J. (2010b). Measurement, reduced transaction costs, and the ethics of efficient markets for human, social, and natural capital (http://ssrn.com/abstract=2340674). Bridge to Business Postdoctoral Certification, Freeman School of Business: Tulane University.

Fisher, W. P., Jr. (2010c, June 13-16). Rasch, Maxwell’s method of analogy, and the Chicago tradition. In G. Cooper (Ed.), https://conference.cbs.dk/index.php/rasch/Rasch2010/paper/view/824. Probabilistic models for measurement in education, psychology, social science and health: Celebrating 50 years since the publication of Rasch’s Probabilistic Models. FUHU Conference Centre, Copenhagen, Denmark: University of Copenhagen School of Business.

Fisher, W. P., Jr. (2011a). Bringing human, social, and natural capital to life: Practical consequences and opportunities. Journal of Applied Measurement, 12(1), 49-66.

Fisher, W. P., Jr. (2011b, Thursday, September 1). Measurement, metrology and the coordination of sociotechnical networks. In S. Bercea (Ed.), New Education and Training Methods. International Measurement Confederation (IMEKO). Jena, Germany: http://www.db-thueringen.de/servlets/DerivateServlet/Derivate-24491/ilm1-2011imeko-017.pdf.

Fisher, W. P., Jr. (2012a). Measure and manage: Intangible assets metric standards for sustainability. In J. Marques, S. Dhiman & S. Holt (Eds.), Business administration education: Changes in management and leadership strategies (pp. 43-63). New York: Palgrave Macmillan.

Fisher, W. P., Jr. (2012b, May/June). What the world needs now: A bold plan for new standards [Third place, 2011 NIST/SES World Standards Day paper competition]. Standards Engineering, 64(3), 1 & 3-5 [http://ssrn.com/abstract=2083975].

Fisher, W. P., Jr., & Stenner, A. J. (2011a, January). Metrology for the social, behavioral, and economic sciences. http://www.nsf.gov/sbe/sbe_2020/submission_detail.cfm?upld_id=36.

Fisher, W. P., Jr., & Stenner, A. J. (2011b, August 31 to September 2). A technology roadmap for intangible assets metrology. In Fundamentals of measurement science. International Measurement Confederation (IMEKO) TC1-TC7-TC13 Joint Symposium. Jena, Germany: http://www.db-thueringen.de/servlets/DerivateServlet/Derivate-24493/ilm1-2011imeko-018.pdf.

Fisher, W. P., Jr., & Stenner, A. J. (2013a). On the potential for improved measurement in the human and social sciences. In Q. Zhang & H. Yang (Eds.), Pacific Rim Objective Measurement Symposium 2012 Conference Proceedings (pp. 1-11). Berlin, Germany: Springer-Verlag.

Fisher, W. P., Jr., & Stenner, A. J. (2013b). Overcoming the invisibility of metrology: A reading measurement network for education and the social sciences. Journal of Physics: Conference Series, 459(012024), http://iopscience.iop.org/1742-6596/459/1/012024.

Miller, P., & O’Leary, T. (2007, October/November). Mediating instruments and making markets: Capital budgeting, science and the economy. Accounting, Organizations, and Society, 32(7-8), 701-734.

What the Economy Needs?

September 5, 2012

Expanding on remarks made by Thomas Friedman in the course of an interview with Charlie Rose broadcast on August 31, 2012…

Friedman broke the problem down to three key points. We have to have 1) a plan, 2) a fair tax contribution from the rich, and 3) aspirations for improving the overall quality of life, economically and  democratically.

The plan outlined from various points of view in this blog is to create a scientific and market infrastructure for intangible assets (human, social and natural capital), assets amounting to at least 90%of the capital under management.

The plan is fair in its advancement of equal opportunity to invest in and realize returns from one’s skills, motivations, health and trustworthiness. Everyone will be able to invest in, and receive their share of the profits from, the human, social, and natural capital stocks of individuals, communities, schools, hospitals, social service agencies, firms, etc. The rich will then both contribute to the advancement of the greater good at the same time they are able to profit from the growth in the authentic wealth created by improvements to human, community, and environmental value.

The plan aspires to great accomplishments in the depth and breadth of the innovation it will facilitate, its fulfillment of democratic principles, and the new economic growth it promises.

And so I would now like to raise a couple of sets of questions. What if all the money put into Medicare, Medicaid, education, HUD, food stamps, the EPA, etc. was instead invested in an infrastructure for intangible assets metrology and HSN capital stocks (individual, organizational–school, hospital, nonprofit, NGO, firm–and community)? Usually, talk of letting the market solve social and environmental problems is nothing but a self-serving excuse for allowing greed to rule at the expense of the greater good. Those so-called market solutions do nothing to actually shape the institutions, rules, and roles by which markets are created, and so the end result would be catastrophic. But there is an essential and unnoticed inconsistency in previously proposed approaches that involves the double standards used in defining and actualizing the various forms of capital.

As previous posts (like this one or this one) in this blog, and several of my publications, have argued, manufactured capital and property have long since been brought to life by transferable representations (titles, deeds, precision quantity measures, etc.) and the various legal, financial, educational, and scientific institutions built up around them. Human, social, and natural capital have not been brought to life and so we remain unable to take proper possession of our own properties, the ones that we most value and on which life, liberty, and happiness are most dependent.

But what if we created the needed market institutions, rules, and roles? What if everyone knew how many shares of community capital they owned, and what the current price of those shares in the market was? What if tuition for an advanced degree was denominated in the shares of literacy capital one obtained, as evident in the increased literacy measures achieved? What if taxes were abolished and minimum investments in human, social, and natural capital stocks were required? What if real, efficient, functional markets in intangible assets were created, and the associated governmental programs and departments were abolished? How much would the federal budget decrease? How much would government shrink? How much might the economy grow if that much money was invested in human, social, and natural capital stocks paying even a minimal reasonable profit?

Another round of questions asks whether we have the optimal social safety net in the current institutional context, or if perhaps that safety net could be significantly improved by following through on the concepts of impact investing and outcome-based budgeting to create a truly sustainable and socially responsible economic system? What if everyone held known numbers of tradable shares of their intangible assets (their skills, motivation, health, trust)? What if the value of those shares was common public knowledge? What if the investment paths to increasing the number and value of shares held were all well known? What if monetary profit could be derived–and could only be derived–by increasing the value of human, social, and natural capital shares? What if groups of people joined together in various kinds of organizations (schools, hospitals, businesses) to collectively grow the value of their authentic wealth? What if lean thinking was applied to the 90% of the capital under management (the human, social, and natural capital) that is currently nearly unmanageable because it is not measured in universally uniform scientific units?

The balance scale is a common symbol of justice. We do not usually aspire to take that symbol as seriously as we could. We ought to have a plan for economic justice that does not have to coerce anyone to acknowledge, pay back, and re-invest in the broad support they received en route to becoming successful. And we ought to have a plan that reinvigorates the aspirations for equal opportunity and freedom that have become a model for people all over the world. Friedman got the broad strokes right. Now’s the time to start filling in the details.

Review of “Advancing Social Impact Investments Through Measurement”

August 24, 2012

Over the last few days, I have been reading several of the most recent issues of the Community Development Investment Review, especially volume 7, number 2, edited by David Erickson of the Federal Reserve Bank of San Francisco, reporting the proceedings of the March 21, 2011 conference in Washington, DC on advancing social impact investments through measurement. I am so excited to see this work that I am (truly) fairly trembling with excitement. I feel as though I’ve finally made my way home. There are so many points of contact, it’s hard to know where to start. After several days of concentrated deep breathing and close study of the CDIR, it’s now possible to formulate some coherent thoughts to share.

The CDIR papers start to sort out the complex issues involved in clarifying how measurement might contribute to the integration of impact investing and community development finance. I am heartened by the statement that “The goal of the Review is to bridge the gap between theory and practice and to enlist as many viewpoints as possible—government, nonprofits, financial institutions, and beneficiaries.” On the other hand, the omission of measurement scientists from that list of viewpoints adds another question to my long list of questions as to why measurement science is so routinely ignored by the very people who proclaim its importance. The situation is quite analogous to demanding more frequent conversational interactions from colleagues while ignoring the invention of the telephone and not providing them with the tools and network connections.

The aims shared by the CDIR contributors and myself are evident in the fact that David Erickson opens his summary of the March 21, 2011 conference with the same quote from Robert Kennedy that I placed at the end of my 2009 article in Measurement (see references below; all papers referenced are available by request if they are not already online). In that 2009 paper, in others I’ve published over the last several years, in presentations I’ve made to my measurement colleagues abroad and at home, and in various entries in my blog, I take up virtually all of the major themes that arose in the DC conference: how better measurement can attract capital to needed areas, how the cost of measurement repels many investors, how government can help by means of standard setting and regulation, how diverse and ambiguous investor and stakeholder interests can be reconciled and/or clarified, etc.

The difference, of course, is that I present these issues from the technical perspective of measurement and cannot speak authoritatively or specifically from the perspectives represented by the community development finance and impact investing fields. The bottom line take-away message for these fields from my perspective is this: unexamined assumptions may unnecessarily restrict assessments of problems and their potential solutions. As Salamon put it in his remarks in the CDIR proceedings from the Washington meeting (p. 43), “uncoordinated innovation not guided by a clear strategic concept can do more than lose its way: it can do actual harm.”

A clear strategic concept capable of coordinating innovations in social impact measurement is readily available. Multiple, highly valuable, and eminently practical measurement technologies have proven themselves in real world applications over the last 50 years. These technologies are well documented in the educational, psychological, sociological, and health care research literatures, as well as in the practical experience of high stakes testing for professional licensure and certification, for graduation, and for admissions.

Numerous reports show how to approach problems of quantification and standards with new degrees of rigor, transparency, meaningfulness, and flexibility. When measurement problems are not defined in terms of these technologies, solutions that may offer highly advantageous features are not considered. When the area of application is as far reaching and fundamental as social impact measurement, not taking new technologies into account is nothing short of tragic. I describe some of the new opportunities for you in a Technical Postscript, below.

In his Foreword to the CDIR proceedings issue, John Moon mentions having been at the 2009 SoCap event bringing together stakeholders from across the various social capital markets arenas. I was at the 2008 SoCap, and I came away from it with much the same impression as Moon, feeling that the palpable excitement in the air was more than tempered by the evident fact that people were often speaking at cross purposes, and that there did not seem to be a common object to the conversation. Moon, Erickson, and their colleagues have been in one position to sort out the issues involved, and I have been in another, but we are plainly on converging courses.

Though the science is in place and has been for decades, it will not and cannot amount to anything until the people who can best make use of it do so. The community development finance and impact investing fields are those people. Anyone interested in getting together for an informal conversation on topics of mutual interest should feel free to contact me.

Technical Postscript

There are at least six areas in efforts to advance social impact investments via measurement that will be most affected by contemporary methods. The first has to do with scale quality. I won’t go into the technical details, but numbers do not automatically stand for something that adds up the way they do. Mapping a substantive construct onto a number line requires specific technical expertise; there is no evidence of that expertise in any of the literature I’ve seen on social impact investing, or on measuring intangible assets. This is not an arbitrary bit of philosophical esoterica or technical nicety. This is one of those areas where the practical value of scientific rigor and precision comes into its own. It makes all the difference in being able to realize goals for measurement, investment, and redefining profit in terms of social impacts.

A second area in which thinking on social impact measurement will be profoundly altered by current scaling methods concerns the capacity to reduce data volume with no loss of information. In current systems, each indicator has its own separate metric. Data volume quickly multiplies when tracking separate organizations for each of several time periods in various locales. Given sufficient adherence to data quality and meaningfulness requirements, today’s scaling methods allow these indicators to be combined into a single composite measure—from which each individual observation can be inferred.

Elaborating this second point a bit further, I noted that some speakers at the 2011 conference in Washington thought reducing data volume is a matter of limiting the number of indicators that are tracked. This strategy is self-defeating, however, as having fewer independent observations increases uncertainty and risk. It would be far better to set up systems in which the metrics are designed so as to incorporate the amount of uncertainty that can be tolerated in any given decision support application.

The third area I have in mind deals with the diverse spectrum of varying interests and preferences brought to the table by investors, beneficiaries, and other stakeholders. Contemporary approaches in measurement make it possible to adapt the content of the particular indicators (counts or frequencies of events, or responses to survey questions or test items) to the needs of the user, without compromising the comparability of the resulting quantitative measure. This feature makes it possible to mass customize the content of the metrics employed depending on the substantive nature of the needs at that time and place.

Fourth, it is well known that different people judging performances or assigning numbers to observations bring different personal standards to bear as they make their ratings. Contemporary measurement methods enable the evaluation and scaling of raters and judges relative to one another, when data are gathered in a manner facilitating such comparisons. The end result is a basis for fair comparisons, instead of scores that vary depending more on which rater is observing than on the quality of the performance.

Fifth, much of the discussion at the conference in Washington last year emphasized the need for shared data formatting and reporting standards. As might be guessed from the prior four areas I’ve described, significant advances have occurred in standard setting methods. It is suggested in the CDIR proceedings that the Treasury Department should be the home to a new institute for social impact measurement standards. In a series of publications over the last few years, I have suggested a need for an Intangible Assets Metric System to NIST and NSF (see below for references and links; all papers are available on request). That suggestion comes up again in my third-prize winning entry in the 2011 World Standards Day paper competition, sponsored by NIST and SES (the Society for Standards Professionals), entitled “What the World Needs Now: A Bold Plan for New Standards.” (See below for link.)

Sixth, as noted by Salamon (p. 43), “metrics are not neutral. They not only measure impact, they can also shape it.” Though this is not likely exactly what Salamon meant, one of the most exciting areas in measurement applications in education in recent years, one led in many ways by my colleague, Mark Wilson, and his group at UC Berkeley, concerns exactly this feedback loop between measurement and impact. In education, it has become apparent that test scaling reveals the order in which lessons are learned. Difficult problems that require mastery of easier problems are necessarily answered correctly less often than the easier problems. When the difficulty order of test questions in a given subject remains constant over time and across thousands of students, one may infer that the scale reveals the path of least resistance. Individualizing instruction by targeting lessons at the student’s measure has given rise to a concept of formative assessment, distinct from the summative assessment of accountability applications. I suspect this kind of a distinction may also prove of value in social impact applications.

Relevant Publications and Presentations

Fisher, W. P., Jr. (2002, Spring). “The Mystery of Capital” and the human sciences. Rasch Measurement Transactions, 15(4), 854 [http://www.rasch.org/rmt/rmt154j.htm].

Fisher, W. P., Jr. (2004, Thursday, January 22). Bringing capital to life via measurement: A contribution to the new economics. In  R. Smith (Chair), Session 3.3B. Rasch Models in Economics and Marketing. Second International Conference on Measurement in Health, Education, Psychology, and Marketing: Developments with Rasch Models, The International Laboratory for Measurement in the Social Sciences, School of Education, Murdoch University, Perth, Western Australia.

Fisher, W. P., Jr. (2005, August 1-3). Data standards for living human, social, and natural capital. In Session G: Concluding Discussion, Future Plans, Policy, etc. Conference on Entrepreneurship and Human Rights [http://www.fordham.edu/economics/vinod/ehr05.htm], Pope Auditorium, Lowenstein Bldg, Fordham University.

Fisher, W. P., Jr. (2007, Summer). Living capital metrics. Rasch Measurement Transactions, 21(1), 1092-3 [http://www.rasch.org/rmt/rmt211.pdf].

Fisher, W. P., Jr. (2008, 3-5 September). New metrological horizons: Invariant reference standards for instruments measuring human, social, and natural capital. Presented at the 12th International Measurement Confederation (IMEKO) TC1-TC7 Joint Symposium on Man, Science, and Measurement, Annecy, France: University of Savoie.

Fisher, W. P., Jr. (2009, November). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement, 42(9), 1278-1287.

Fisher, W. P.. Jr. (2009). NIST Critical national need idea White Paper: Metrological infrastructure for human, social, and natural capital (Tech. Rep., http://www.nist.gov/tip/wp/pswp/upload/202_metrological_infrastructure_for_human_social_natural.pdf). Washington, DC: National Institute for Standards and Technology.

Fisher, W. P., Jr. (2010). The standard model in the history of the natural sciences, econometrics, and the social sciences. Journal of Physics: Conference Series, 238(1), http://iopscience.iop.org/1742-6596/238/1/012016/pdf/1742-6596_238_1_012016.pdf.

Fisher, W. P., Jr. (2011). Bringing human, social, and natural capital to life: Practical consequences and opportunities. In N. Brown, B. Duckor, K. Draney & M. Wilson (Eds.), Advances in Rasch Measurement, Vol. 2 (pp. 1-27). Maple Grove, MN: JAM Press.

Fisher, W. P., Jr. (2011). Measuring genuine progress by scaling economic indicators to think global & act local: An example from the UN Millennium Development Goals project. LivingCapitalMetrics.com. Retrieved 18 January 2011, from Social Science Research Network: http://ssrn.com/abstract=1739386.

Fisher, W. P., Jr. (2012). Measure and manage: Intangible assets metric standards for sustainability. In J. Marques, S. Dhiman & S. Holt (Eds.), Business administration education: Changes in management and leadership strategies (pp. 43-63). New York: Palgrave Macmillan.

Fisher, W. P., Jr. (2012, May/June). What the world needs now: A bold plan for new standards. Standards Engineering, 64(3), 1 & 3-5 [http://ssrn.com/abstract=2083975].

Fisher, W. P., Jr., & Stenner, A. J. (2011, January). Metrology for the social, behavioral, and economic sciences (Social, Behavioral, and Economic Sciences White Paper Series). Retrieved 25 October 2011, from National Science Foundation: http://www.nsf.gov/sbe/sbe_2020/submission_detail.cfm?upld_id=36.

Fisher, W. P., Jr., & Stenner, A. J. (2011, August 31 to September 2). A technology roadmap for intangible assets metrology. In Fundamentals of measurement science. International Measurement Confederation (IMEKO) TC1-TC7-TC13 Joint Symposium, http://www.db-thueringen.de/servlets/DerivateServlet/Derivate-24493/ilm1-2011imeko-018.pdf, Jena, Germany.

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Comments on the New ANSI Human Capital Investor Metrics Standard

April 16, 2012

The full text of the proposed standard is available here.

It’s good to see a document emerge in this area, especially one with such a broad base of support from a diverse range of stakeholders. As is stated in the standard, the metrics defined in it are a good place to start and in many instances will likely improve the quality and quantity of the information made available to investors.

There are several issues to keep in mind as the value of standards for human capital metrics becomes more widely appreciated. First, in the context of a comprehensively defined investment framework, human capital is just one of the four major forms of capital, the other three being social, natural, and manufactured (Ekins, 1992; Ekins, Dresden, and Dahlstrom, 2008). To ensure as far as possible the long term stability and sustainability of their profits, and of the economic system as a whole, investors will certainly want to expand the range of the available standards to include social and natural capital along with human capital.

Second, though we manage what we measure, investment management is seriously compromised by having high quality scientific measurement standards only for manufactured capital (length, weight, volume, temperature, energy, time, kilowatts, etc.). Over 80 years of research on ability tests, surveys, rating scales, and assessments has reached a place from which it is prepared to revolutionize the management of intangible forms of capital (Fisher, 2007, 2009a, 2009b, 2010, 2011a, 2011b; Fisher & Stenner, 2011a, 2011b; Wilson, 2011; Wright, 1999). The very large reductions in transaction costs effected by standardized metrics in the economy at large (Barzel, 1982; Benham and Benham, 2000) are likely to have a similarly profound effect on the economics of human, social, and natural capital (Fisher, 2011a, 2012a, 2012b).

The potential for dramatic change in the conceptualization of metrics is most evident in the proposed standard in the sections on leadership quality and employee engagement. For instance, in the section on leadership quality, it is stated that “Investors will be able to directly compare all organizations that are using the same vendor’s methodology.” This kind of dependency should not be allowed to stand as a significant factor in a measurement standard. Properly constructed and validated scientific measures, such as those that have been in wide use in education, psychology and health care for several decades (Andrich, 2010; Bezruzcko, 2005; Bond and Fox, 2007; Fisher and Wright, 1994; Rasch, 1960; Salzberger, 2009; Wright, 1999), are equated to a common unit. Comparability should never depend on which vendor is used. Rather, any instrument that actually measures the construct of interest (leadership quality or employee engagement) should do so in a common unit and within an acceptable range of error. “Normalizing” measures for comparability, as is suggested in the standard, means employing psychometric methods that are 50 years out of date and that are far less rigorous and practical than need be. Transparency in measurement means looking through the instrument to the thing itself. If particular instruments color or reshape what is measured, or merely change the meaning of the numbers reported, then the integrity of the standard as a standard should be re-examined.

Third, for investments in human capital to be effectively managed, each distinct aspect of it (motivations, skills and abilities, health) needs to be measured separately, just as height, weight, and temperature are. New technologies have already transformed measurement practices in ways that make the necessary processes precise and inexpensive. Of special interest are adaptively administered precalibrated instruments supporting mass customized—but globally comparable—measures (for instance, see the examples at http://blog.lexile.com/tag/oasis/ and that were presented at the recent Pearson Global Research Conference in Fremantle, Australia http://www.pearson.com.au/marketing/corporate/pearson_global/default.html; also see Wright and Bell 1984, Lunz, Bergstrom, and Gershon, 1994, Bejar, et al., 2003).

Fourth, the ownership of human capital needs clarification and legal status. If we consider each individual to own their abilities, health, and motivations, and to be solely responsible for decisions made concerning the disposition of those properties, then, in accord with their proven measured amounts of each type of human capital, everyone ought to have legal title to a specific number of shares or credits of each type. This may transform employment away from wage-based job classification compensation to an individualized investment-based continuous quality improvement platform. The same kind of legal titling system will, of course, need to be worked out for social and natural capital, as well.

Fifth, given scientific standards for each major form of capital, practical measurement technologies, and legal title to our shares of capital, we will need expanded financial accounting standards and tools for managing our individual and collective investments. Ongoing research and debates concerning these standards and tools (Siegel and Borgia, 2006; Young and Williams, 2010) have yet to connect with the larger scientific, economic, and legal issues raised here, but developments in this direction should be emerging in due course.

Sixth, a number of lingering moral, ethical and political questions are cast in a new light in this context. The significance of individual behaviors and decisions is informed and largely determined by the context of the culture and institutions in which those behaviors and decisions are executed. Many of the morally despicable but not illegal investment decisions leading to the recent economic downturn put individuals in the position of either setting themselves apart and threatening their careers or doing what was best for their portfolios within the limits of the law. Current efforts intended to devise new regulatory constraints are misguided in focusing on ever more microscopically defined particulars. What is needed is instead a system in which profits are contingent on the growth of human, social, and natural capital. In that framework, legal but ultimately unfair practices would drive down social capital stock values, counterbalancing ill-gotten gains and making them unprofitable.

Seventh, the International Vocabulary of Measurement, now in its third edition (VIM3), is a standard recognized by all eight international standards accrediting bodies (BIPM, etc.). The VIM3 (http://www.bipm.org/en/publications/guides/vim.html) and forthcoming VIM4 are intended to provide a uniform set of concepts and terms for all fields that employ measures across the natural and social sciences. A new dialogue on these issues has commenced in the context of the International Measurement Confederation (IMEKO), whose member organizations are the weights and standards measurement institutes from countries around the world (Conference note, 2011). The 2012 President of the Psychometric Society, Mark Wilson, gave an invited address at the September 2011 IMEKO meeting (Wilson, 2011), and a member of the VIM3 editorial board, Luca Mari, is invited to speak at the July, 2012 International Meeting of the Psychometric Society. I encourage all interested parties to become involved in efforts of these kinds in their own fields.

References

Andrich, D. (2010). Sufficiency and conditional estimation of person parameters in the polytomous Rasch model. Psychometrika, 75(2), 292-308.

Barzel, Y. (1982). Measurement costs and the organization of markets. Journal of Law and Economics, 25, 27-48.

Bejar, I., Lawless, R. R., Morley, M. E., Wagner, M. E., Bennett, R. E., & Revuelta, J. (2003, November). A feasibility study of on-the-fly item generation in adaptive testing. The Journal of Technology, Learning, and Assessment, 2(3), 1-29; http://ejournals.bc.edu/ojs/index.php/jtla/article/view/1663.

Benham, A., & Benham, L. (2000). Measuring the costs of exchange. In C. Ménard (Ed.), Institutions, contracts and organizations: Perspectives from new institutional economics (pp. 367-375). Cheltenham, UK: Edward Elgar.

Bezruczko, N. (Ed.). (2005). Rasch measurement in health sciences. Maple Grove, MN: JAM Press.

Bond, T., & Fox, C. (2007). Applying the Rasch model: Fundamental measurement in the human sciences, 2d edition. Mahwah, New Jersey: Lawrence Erlbaum Associates.

Conference note. (2011). IMEKO Symposium: August 31- September 2, 2011, Jena, Germany. Rasch Measurement Transactions, 25(1), 1318.

Ekins, P. (1992). A four-capital model of wealth creation. In P. Ekins & M. Max-Neef (Eds.), Real-life economics: Understanding wealth creation (pp. 147-155). London: Routledge.

Ekins, P., Dresner, S., & Dahlstrom, K. (2008). The four-capital method of sustainable development evaluation. European Environment, 18(2), 63-80.

Fisher, W. P., Jr. (2007). Living capital metrics. Rasch Measurement Transactions, 21(1), 1092-3 [http://www.rasch.org/rmt/rmt211.pdf].

Fisher, W. P., Jr. (2009a). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement, 42(9), 1278-1287.

Fisher, W. P.. Jr. (2009b). NIST Critical national need idea White Paper: metrological infrastructure for human, social, and natural capital (http://www.nist.gov/tip/wp/pswp/upload/202_metrological_infrastructure_for_human_social_natural.pdf). Washington, DC: National Institute for Standards and Technology.

Fisher, W. P.. Jr. (2010). Rasch, Maxwell’s method of analogy, and the Chicago tradition. In G. Cooper (Chair), https://conference.cbs.dk/index.php/rasch/Rasch2010/paper/view/824. Probabilistic models for measurement in education, psychology, social science and health: Celebrating 50 years since the publication of Rasch’s Probabilistic Models.., University of Copenhagen School of Business, FUHU Conference Centre, Copenhagen, Denmark.

Fisher, W. P., Jr. (2011a). Bringing human, social, and natural capital to life: Practical consequences and opportunities. In N. Brown, B. Duckor, K. Draney & M. Wilson (Eds.), Advances in Rasch Measurement, Vol. 2 (pp. 1-27). Maple Grove, MN: JAM Press.

Fisher, W. P., Jr. (2011b). Measurement, metrology and the coordination of sociotechnical networks. In  S. Bercea (Chair), New Education and Training Methods. International Measurement Confederation (IMEKO), http://www.db-thueringen.de/servlets/DerivateServlet/Derivate-24491/ilm1-2011imeko-017.pdf, Jena, Germany.

Fisher, W. P., Jr. (2012a). Measure local, manage global: Intangible assets metric standards for sustainability. In J. Marques, S. Dhiman & S. Holt (Eds.), Business administration education: Changes in management and leadership strategies (pp. in press). New York: Palgrave Macmillan.

Fisher, W. P., Jr. (2012b). What the world needs now: A bold plan for new standards. Standards Engineering, 64, in press.

Fisher, W. P., Jr., & Stenner, A. J. (2011a). Metrology for the social, behavioral, and economic sciences (Social, Behavioral, and Economic Sciences White Paper Series). Retrieved 25 October 2011, from National Science Foundation: http://www.nsf.gov/sbe/sbe_2020/submission_detail.cfm?upld_id=36.

Fisher, W. P., Jr., & Stenner, A. J. (2011b). A technology roadmap for intangible assets metrology. In Fundamentals of measurement science. International Measurement Confederation (IMEKO) TC1-TC7-TC13 Joint Symposium, http://www.db-thueringen.de/servlets/DerivateServlet/Derivate-24493/ilm1-2011imeko-018.pdf, Jena, Germany.

Fisher, W. P., Jr., & Wright, B. D. (Eds.). (1994). Applications of probabilistic conjoint measurement. International Journal of Educational Research, 21(6), 557-664.

Lunz, M. E., Bergstrom, B. A., & Gershon, R. C. (1994). Computer adaptive testing. International Journal of Educational Research, 21(6), 623-634.

Rasch, G. (1960). Probabilistic models for some intelligence and attainment tests (Reprint, with Foreword and Afterword by B. D. Wright, Chicago: University of Chicago Press, 1980). Copenhagen, Denmark: Danmarks Paedogogiske Institut.

Salzberger, T. (2009). Measurement in marketing research: An alternative framework. Northampton, MA: Edward Elgar.

Siegel, P., & Borgia, C. (2006). The measurement and recognition of intangible assets. Journal of Business and Public Affairs, 1(1).

Wilson, M. (2011). The role of mathematical models in measurement: A perspective from psychometrics. In L. Mari (Chair), Plenary lecture. International Measurement Confederation (IMEKO), http://www.db-thueringen.de/servlets/DerivateServlet/Derivate-24178/ilm1-2011imeko-005.pdf, Jena, Germany.

Wright, B. D. (1999). Fundamental measurement for psychology. In S. E. Embretson & S. L. Hershberger (Eds.), The new rules of measurement: What every educator and psychologist should know (pp. 65-104 [http://www.rasch.org/memo64.htm]). Hillsdale, New Jersey: Lawrence Erlbaum Associates.

Wright, B. D., & Bell, S. R. (1984, Winter). Item banks: What, why, how. Journal of Educational Measurement, 21(4), 331-345 [http://www.rasch.org/memo43.htm].

Young, J. J., & Williams, P. F. (2010, August). Sorting and comparing: Standard-setting and “ethical” categories. Critical Perspectives on Accounting, 21(6), 509-521.

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Open Letter on New Infrastructure as a Platform for Economic Growth and Scientific Innovation

December 21, 2011

Dear Thought Leaders Everywhere,

As you are no doubt well aware, one issue in particular is being brought to a head by the lingering economic malaise and the continuing situation in Europe: the austerity measures needed for countering debt problems are going to severely limit growth potentials, if they do not lead straight to recession or depression, unless sources of new efficiencies are found. Given the huge existing levels of debt, it is increasingly difficult to justify the capital injections the economy needs, so thinkers from Paul Krugman to Bill Clinton have proposed the possibility that some new technical infrastructure could provide a platform for new growth, much as the Internet has.

Energy might be a productive area to focus on, for instance. Others go straight to immediately available technologies, and speak of investments in existing infrastructure, such as roads and bridges. But even if a program for bringing that kind of concrete engineering up to full capacity was put in place, it would provide only a small fraction of the jobs and growth actually needed.

The basic idea is right on the mark, though no one seems to realize there are types of infrastructure beyond tangible assets like energy, or roads and bridges. Stop a second and think about it. We say we manage what we measure. Standardized weights and measures are widely recognized as an essential core feature of productivity and innovation in science, engineering, and the economy. But existing standardized metrics are exclusively focused on physics and chemistry, machines and tools, and property. And that’s the problem: manufactured capital and property make up only about 10% of all the capital under management.

What’s the other 90%? Human capital: skills, motivations, health. Social capital: trust, commitment, loyalty. Natural capital: water and air purification services, genetic variation, fisheries. Why don’t we have standardized weights and measures for managing these essential core areas of education, health care, human and natural resource management, social services, etc.? After all, if we manage what we measure, and we lack measures for the vast majority of the capital in the economy, we are probably lucky to be doing as well as we are. Our faith in efficient markets is not misplaced as much as we have not yet really made it central to the economics of every form of capital.

There are a lot of reasons why we don’t have standardized metrics for measuring individual amounts of intangible assets like human, social, and natural capital, but the supposed “subjectivity” of those forms of capital is NOT one of them. Decades of research and practice prove the viability of the technology needed for unifying the measurement of everything from literacy capital to health capital, from social capital to natural capital. What stands in our way as a society has much more to do with preconceptions and unexamined assumptions than with the supposed “soft” nature of the social sciences and psychology.

White papers published online by NIST and NSF, and a recent award-winning essay forthcoming in Standards Engineering (full references are listed below), provide rational justifications for a new research agenda focused on developing and implementing an intangible assets metric system. Such a system would enable us to act on the truth that we can accomplish far more working together cooperatively in a common framework than we can as individuals.

Better measurement is essential to better management. In the context of today’s pressing economic and social issues, new questions about the way we manage every form of resource need to be raised. You are in a position from which these questions can be effectively put forward for consideration by thought leaders across a wide array of disciplines and industries. We hope you will see fit to do so. If we can be of any further assistance, please do not hesitate to let us know. Thank you.

Sincerely,

William P. Fisher, Jr., Ph.D.

A. Jackson Stenner, Ph.D.

Fisher, W. P., Jr. (2009). NIST Critical national need idea White Paper: metrological infrastructure for human, social, and natural capital (Tech. Rep. No. http://www.nist.gov/tip/wp/pswp/upload/202_metrological_infrastructure_for_human_social_natural.pdf). Washington, DC: National Institute for Standards and Technology.

Fisher, W. P., Jr. (2012). What the world needs now: A bold plan for new standards. Standards Engineering, forthcoming. For the ANSI press release, see http://webstore.ansi.org/NewsDetail.aspx?NewsGuid=590a225c-d779-4f81-804e-4d05ef239c37.)

Fisher, W. P., Jr., & Stenner, A. J. (2011, January). Metrology for the social, behavioral, and economic sciences (Social, Behavioral, and Economic Sciences White Paper Series). Retrieved 25 October 2011, from National Science Foundation: http://www.nsf.gov/sbe/sbe_2020/submission_detail.cfm?upld_id=36.

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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Rasch Measurement as a Basis for a New Standards Framework

October 26, 2011

The 2011 U.S. celebration of World Standards Day took place on October 13 at the Fairmont Hotel in Washington, D.C., with the theme of “Advancing Safety and Sustainability Standards Worldwide.” The evening began with a reception in a hall of exhibits from the celebrations sponsors, which included the National Institute for Standards and Technology (NIST), the Society for Standards Professionals (SES), the American National Standards Institute (ANSI), Microsoft, IEEE, Underwriters Laboratories, the Consumer Electronics Association, ASME, ASTM International, Qualcomm, Techstreet, and many others. Several speakers took the podium after dinner to welcome the 400 or so attendees and to present the World Standards Day Paper Competition Awards and the Ronald H. Brown Standards Leadership Award.

Dr. Patrick Gallagher, Under Secretary of Commerce for Standards and Technology, and Director of NIST, was the first speaker after dinner. He directed his remarks at the value of a decentralized, voluntary, and demand-driven system of standards in promoting innovation and economic prosperity. Gallagher emphasized that “standards provide the common language that keeps domestic and international trade flowing,” concluding that “it is difficult to overestimate their critical value to both the U.S. and global economy.”

James Shannon, President of the National Fire Protection Association (NFPA), accepted the R. H. Brown Standards Leadership Award in recognition for his work initiating or improving the National Electrical Code, the Life Safety Code, and the Fire Safe Cigarette and Residential Sprinkler Campaigns.

Ellen Emard, President of SES, introduced the paper competition award winners. As of this writing the titles and authors of the first and second place awards are not yet available on the SES web site (http://www.ses-standards.org/displaycommon.cfm?an=1&subarticlenbr=56). I took third place for my paper, “What the World Needs Now: A Bold Plan for New Standards.” Where the other winning papers took up traditional engineering issues concerning the role of standards in advancing safety and sustainability issues, my paper spoke to the potential scientific and economic benefits that could be realized by standard metrics and common product definitions for outcomes in education, health care, social services, and environmental resource management. All three of the award-winning papers will appear in a forthcoming issue of Standards Engineering, the journal of SES.

I was coincidentally seated at the dinner alongside Gordon Gillerman, winner of third place in the 2004 paper competition (http://www.ses-standards.org/associations/3698/files/WSD%202004%20-%203%20-%20Gillerman.pdf) and currently Chief of the Standards Services Division at NIST. Gillerman has a broad range of experience in coordinating standards across multiple domains, including environmental protection, homeland security, safety, and health care. Having recently been involved in a workshop focused on measuring, evaluating, and improving the usability of electronic health records (http://www.nist.gov/healthcare/usability/upload/EHR-Usability-Workshop-2011-6-03-2011_final.pdf), Gillerman was quite interested in the potential Rasch measurement techniques hold for reducing data volume with no loss of information, and so for streamlining computer interfaces.

Robert Massof of Johns Hopkins University accompanied me to the dinner, and was seated at a nearby table. Also at Massof’s table were several representatives of the National Institute of Building Sciences, some of whom Massof had recently met at a workshop on adaptations for persons with low vision disabilities. Massof’s work equating the main instruments used for assessing visual function in low vision rehabilitation could lead to a standard metric useful in improving the safety and convenience of buildings.

As is stated in educational materials distributed at the World Standards Day celebration by ANSI, standards are a constant behind-the-scenes presence in nearly all areas of everyday life. Everything from air, water, and food to buildings, clothing, automobiles, roads, and electricity are produced in conformity with voluntary consensus standards of various kinds. In the U.S. alone, more than 100,000 standards specify product and system features and interconnections, making it possible for appliances to tap the electrical grid with the same results no matter where they are plugged in, and for products of all kinds to be purchased with confidence. Life is safer and more convenient, and science and industry are more innovative and profitable, because of standards.

The point of my third-place paper is that life could be even safer and more convenient, and science and industry could be yet more innovative and profitable, if standards and conformity assessment procedures for outcomes in education, health care, social services, and environmental resource management were developed and implemented. Rasch measurement demonstrates the consistent reproducibility of meaningful measures across samples and different collections of construct-relevant items. Within any specific area of interest, then, Rasch measures have the potential of serving as the kind of mediating instruments or objects recognized as essential to the process of linking science with the economy (Fisher & Stenner, 2011b; Hussenot & Missonier, 2010; Miller & O’Leary, 2007). Recent white papers published by NIST and NSF document the challenges and benefits likely to be encountered and produced by initiatives moving in this direction (Fisher, 2009; Fisher & Stenner, 2011a).

A diverse array of Rasch measurement presentations were made at the recent International Measurement Confederation (IMEKO) meeting of metrology engineers in Jena, Germany (see RMT 25 (1), p. 1318). With that start at a new dialogue between the natural and social sciences, the NIST and NSF white papers, and with the award in the World Standards Day paper competition, the U.S. and international standards development communities have shown their interest in exploring possibilities for a new array of standard units of measurement, standardized outcome product definitions, standard conformity assessment procedures, and outcome product quality standards. The increasing acceptance and recognition of the viability of such standards is a logical consequence of observations like these:

  • “Where this law [relating reading ability and text difficulty to comprehension rate] can be applied it provides a principle of measurement on a ratio scale of both stimulus parameters and object parameters, the conceptual status of which is comparable to that of measuring mass and force. Thus…the reading accuracy of a child…can be measured with the same kind of objectivity as we may tell its weight” (Rasch, 1960, p. 115).
  • “Today there is no methodological reason why social science cannot become as stable, as reproducible, and hence as useful as physics” (Wright, 1997, p. 44).
  • “…when the key features of a statistical model relevant to the analysis of social science data are the same as those of the laws of physics, then those features are difficult to ignore” (Andrich, 1988, p. 22).

Rasch’s work has been wrongly assimilated in social science research practice as just another example of the “standard model” of statistical analysis. Rasch measurement rightly ought instead to be treated as a general articulation of the three-variable structure of natural law useful in framing the context of scientific practice. That is, Rasch’s models ought to be employed primarily in calibrating instruments quantitatively interpretable at the point of use in a mathematical language shared by a community of research and practice. To be shared in this way as a universally uniform coin of the realm, that language must be embodied in a consensus standard defining universally uniform units of comparison.

Rasch measurement offers the potential of shifting the focus of quantitative psychosocial research away from data analysis to integrated qualitative and quantitative methods enabling the definition of standard units and the calibration of instruments measuring in that unit. An intangible assets metric system will, in turn, support the emergence of new product- and performance-based standards, management system standards, and personnel certification standards. Reiterating once again Rasch’s (1960, p. xx) insight, we can acknowledge with him that “this is a huge challenge, but once the problem has been formulated it does seem possible to meet it.”

 References

Andrich, D. (1988). Rasch models for measurement. (Vols. series no. 07-068). Sage University Paper Series on Quantitative Applications in the Social Sciences. Beverly Hills, California: Sage Publications.

Fisher, W. P.. Jr. (2009). Metrological infrastructure for human, social, and natural capital (NIST Critical National Need Idea White Paper Series, Retrieved 25 October 2011 from http://www.nist.gov/tip/wp/pswp/upload/202_metrological_infrastructure_for_human_social_natural.pdf). Washington, DC: National Institute for Standards and Technology.

Fisher, W. P., Jr., & Stenner, A. J. (2011a, January). Metrology for the social, behavioral, and economic sciences (Social, Behavioral, and Economic Sciences White Paper Series). Retrieved 25 October 2011 from http://www.nsf.gov/sbe/sbe_2020/submission_detail.cfm?upld_id=36. Washington, DC: National Science Foundation.

Fisher, W. P., Jr., & Stenner, A. J. (2011b). A technology roadmap for intangible assets metrology. In Fundamentals of measurement science. International Measurement Confederation (IMEKO), Jena, Germany, August 31 to September 2.

Hussenot, A., & Missonier, S. (2010). A deeper understanding of evolution of the role of the object in organizational process. The concept of ‘mediation object.’ Journal of Organizational Change Management, 23(3), 269-286.

Miller, P., & O’Leary, T. (2007, October/November). Mediating instruments and making markets: Capital budgeting, science and the economy. Accounting, Organizations, and Society, 32(7-8), 701-34.

Rasch, G. (1960). Probabilistic models for some intelligence and attainment tests (Reprint, with Foreword and Afterword by B. D. Wright, Chicago: University of Chicago Press, 1980). Copenhagen, Denmark: Danmarks Paedogogiske Institut.

Wright, B. D. (1997, Winter). A history of social science measurement. Educational Measurement: Issues and Practice, 16(4), 33-45, 52 [http://www.rasch.org/memo62.htm].

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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Question Authority: Queries In the Back of the Wall Street Demonstrators’ Minds

October 2, 2011

I think the Wall Street demonstrators’ lack of goals and the admission of not having a solution is very important. All solutions offered so far are band-aids at best, and most are likely to do more harm than good.

I think I have an innovative way of articulating the questions people have on their minds. I thought of scattering small pieces of paper anywhere there are these demonstrations going on, with questions like these on them:

Feeling robbed of the trust, loyalty, and commitment you invested?

Unable to get a good return on your investment in your education?

Feeling robbed of your share of the world’s natural resources?

How many shares of social capital do you own?

How many shares of literacy capital do you have on the market?

How many shares of health capital do you own?

How many shares of natural capital do you own?

Wishing there was an easy way to know what return rate you get on your health investments?

Wishing there was an easy way to know what return rate you get on your education investments?

Why don’t you have legal title to your literacy capital shares?

Why don’t you have legal title to your social capital shares?

Why don’t you have legal title to your health capital shares?

Why don’t you have legal title to your natural capital shares?

Why don’t you know how many literacy capital shares are rightfully yours?

Why don’t you know how many social capital shares are rightfully yours?

Why don’t you know how many health capital shares are rightfully yours?

Why don’t you know how many natural capital shares are rightfully yours?

Why is there no common currency for trading on your literacy capital?

Why is there no common currency for trading on your health capital?

Why is there no common currency for trading on your social capital?

Why is there no common currency for trading on your natural capital?

Why aren’t corporations accountable for their impacts on your literacy capital investments?

Why aren’t corporations accountable for their impacts on your natural capital investments?

Why aren’t corporations accountable for their impacts on your social capital investments?

Why aren’t corporations accountable for their impacts on your health capital investments?

Why aren’t governments accountable for their impacts on your literacy capital investments?

Why aren’t governments accountable for their impacts on your natural capital investments?

Why aren’t governments accountable for their impacts on your social capital investments?

Why aren’t governments accountable for their impacts on your health capital investments?

Why are educational outcomes not comparable in a common metric?

Why are health care outcomes not comparable in a common metric?

Why are social program outcomes not comparable in a common metric?

Why are natural resource management program outcomes not comparable in a common metric?

Why do accounting and economics focus on land, labor, and manufactured capital instead of putting the value of ecosystem services, and health, literacy, and social capital, on the books and in the models, along with property and manufactured capital?

If we truly do manage what we measure, why don’t we have a metric system for literacy capital?

Can we effectively manage literacy capital if we don’t have a universally recognized and accepted metric for it?

If we truly do manage what we measure, why don’t we have a metric system for health capital?

Can we effectively manage health capital if we don’t have a universally recognized and accepted metric for it?

If we truly do manage what we measure, why don’t we have a metric system for social capital?

Can we effectively manage social capital if we don’t have a universally recognized and accepted metric for it?

If we truly do manage what we measure, why don’t we have a metric system for natural capital?

Can we effectively manage natural capital if we don’t have a universally recognized and accepted metric for it?

How is our collective imagination being stifled by the lack of a common language for literacy capital?

How is our collective imagination being stifled by the lack of a common language for health capital?

How is our collective imagination being stifled by the lack of a common language for social capital?

How is our collective imagination being stifled by the lack of a common language for natural capital?

How can the voice of the people be heard without common languages for things that are important to us?

How do we know where we stand as individuals and as a society if we can’t track the value and volume of our literacy, health, social, and natural capital shares?

Why don’t NIST and NSF fund new research into literacy, health, social, and natural capital metrics?

Why aren’t banks required to offer literacy, health, social, and natural capital accounts?

If we want to harmonize relationships between people, within and between societies, and between culture and nature, why don’t we tune the instruments on which we play the music of our lives?

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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Reimagining Capitalism Again, Part III: Reflections on Greider’s “Bold Ideas” in The Nation

September 10, 2011

And so, The Nation’s “Bold Ideas for a New Economy” is disappointing for not doing more to start from the beginning identified by its own writer, William Greider. The soul of capitalism needs to be celebrated and nourished, if we are to make our economy “less destructive and domineering,” and “more focused on what people really need for fulfilling lives.” The only real alternative to celebrating and nourishing the soul of capitalism is to kill it, in the manner of the Soviet Union’s failed experiments in socialism and communism.

The article speaks the truth, though, when it says there is no point in trying to persuade the powers that be to make the needed changes. Republicans see the market as it exists as a one-size-fits-all economic panacea, when all it can accomplish in its current incomplete state is the continuing externalization of anything and everything important about human, social, and environmental decency. For their part, Democrats do indeed “insist that regulation will somehow fix whatever is broken,” in an ever-expanding socialistic micromanagement of every possible exception to the rules that emerges.

To date, the president’s efforts at a nonpartisan third way amount only to vacillations between these opposing poles. The leadership that is needed, however, is something else altogether. Yes, as The Nation article says, capitalism needs to be made to serve the interests of society, and this will require deep structural change, not just new policies. But none of the contributors of the “bold ideas” presented propose deep structural changes of a kind that actually gets at the soul of capitalism. All of the suggestions are ultimately just new policies tweaking superficial aspects of the economy in mechanical, static, and very limited ways.

The article calls for “Democratizing reforms that will compel business and finance to share decision-making and distribute rewards more fairly.” It says the vision has different names but “the essence is a fundamental redistribution of power and money.” But corporate distortions of liability law, the introduction of boardroom watchdogs, and a tax on financial speculation do not by any stretch of the imagination address the root causes of social and environmental irresponsibility in business. They “sound like obscure technical fixes” because that’s what they are. The same thing goes for low-cost lending from public banks, the double or triple bottom lines of Benefit Corporations, new anti-trust laws, calls for “open information” policies, added personal stakes for big-time CEOs, employee ownership plans, the elimination of tax subsidies for, new standards for sound investing, new measures of GDP, and government guarantees of full employment.

All of these proposals sound like what ought to be the effects and outcomes of efforts addressing the root causes of capitalisms’ shortcomings. Instead, they are band aids applied to scratched fingers and arms when multiple by-pass surgery is called for. That is, what we need is to understand how to bring the spirit of capitalism to life in the new domains of human, social, and environmental interests, but what we’re getting are nothing but more of the same piecemeal ways of moving around the deck chairs on the Titanic.

There is some truth in the assertion that what really needs reinventing is our moral and spiritual imagination. As someone (Einstein or Edison?) is supposed to have put it, originality is simply a matter of having a source for an analogy no one else has considered. Ironically, the best model is often the one most taken for granted and nearest to hand. Such is the case with the two-sided scientific and economic effects of standardized units of measurement. The fundamental moral aspect here is nothing other than the Golden Rule, independently derived and offered in cultures throughout history, globally. Individualized social measurement is nothing if not a matter of determining whether others are being treated in the way you yourself would want to be treated.

And so, yes, to stress the major point of agreement with The Nation, “the new politics does not start in Washington.” Historically, at their best, governments work to keep pace with the social and technical innovations introduced by their peoples. Margaret Mead said it well a long time ago when she asserted that small groups of committed citizens are the only sources of real social change.

Not to be just one of many “advocates with bold imaginations” who wind up marginalized by the constraints of status quo politics, I claim my personal role in imagining a new economic future by tapping as deeply as I can into the positive, pre-existing structures needed for a transition into a new democratic capitalism. We learn through what we already know. Standards are well established as essential to commerce and innovation, but 90% of the capital under management in our economy—the human, social, and natural capital—lacks the standards needed for optimal market efficiency and effectiveness. An intangible assets metric system will be a vitally important way in which we extend what is right and good in the world today into new domains.

To conclude, what sets this proposal apart from those offered by The Nation and its readers hinges on our common agreement that “the most threatening challenge to capitalism is arguably the finite carrying capacity of the natural world.” The bold ideas proposed by The Nation’s readers respond to this challenge in ways that share an important feature in common: people have to understand the message and act on it. That fact dooms all of these ideas from the start. If we have to articulate and communicate a message that people then have to act on, we remain a part of the problem and not part of the solution.

As I argue in my “The Problem is the Problem” blog post of some months ago, this way of defining problems is itself the problem. That is, we can no longer think of ourselves as separate from the challenges we face. If we think we are not all implicated through and through as participants in the construction and maintenance of the problem, then we have not understood it. The bold ideas offered to date are all responses to the state of a broken system that seek to reform one or another element in the system when what we need is a whole new system.

What we need is a system that so fully embodies nature’s own ecological wisdom that the medium becomes the message. When the ground rules for economic success are put in place such that it is impossible to earn a profit without increasing stocks of human, social, and natural capital, there will be no need to spell out the details of a microregulatory structure of controlling new anti-trust laws, “open information” policies, personal stakes for big-time CEOs, employee ownership plans, the elimination of tax subsidies, etc. What we need is precisely what Greider reported from Innovest in his book: reliable, high quality information that makes human, social, and environmental issues matter financially. Situated in a context like that described by Bernstein in his 2004 The Birth of Plenty, with the relevant property rights, rule of law, scientific rationality, capital markets, and communications networks in place, it will be impossible to stop a new economic expansion of historic proportions.

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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Reimagining Capitalism Again, Part II: Scientific Credibility in Improving Information Quality

September 10, 2011

The previous posting here concluded with two questions provoked by a close consideration of a key passage in William Greider’s 2003 book, The Soul of Capitalism. First, how do we create the high quality, solid information markets need to punish and reward relative to ethical and sustainable human, social, and environmental values? Second, what can we learn from the way we created that kind of information for property and manufactured capital? There are good answers to these questions, answers that point in productive directions in need of wide exploration and analysis.

The short answer to both questions is that better, more scientifically rigorous measurement at the local level needs to be implemented in a context of traceability to universally uniform standards. To think global and act local simultaneously, we need an efficient and transparent way of seeing where we stand in the world relative to everyone else. Having measures expressed in comparable and meaningful units is an important part of how we think global while acting local.

So, for markets to punish and reward businesses in ways able to build human, social, and environmental value, we need to be able to price that value, to track returns on investments in it, and to own shares of it. To do that, we need a new intangible assets metric system that functions in a manner analogous to the existing metric system and other weights and measures standards. In the same way these standards guarantee high quality information on volume, weight, thermal units, and volts in grocery stores and construction sites, we need a new set of standards for human abilities, performances, and health; for social trust, commitment, and loyalty; and for the environment’s air and water processing services, fisheries, gene pools, etc.

Each industry needs an instrumentarium of tools and metrics that mediate relationships universally within its entire sphere of production and/or service. The obvious and immediate reaction to this proposal will likely be that this is impossible, that it would have been done by now if it was possible, and that anyone who proposes something like this is simply unrealistic, perhaps dangerously so. So, here we have another reason to add to those given in the June 8, 2011 issue of The Nation (http://www.thenation.com/article/161267/reimagining-capitalism-bold-ideas-new-economy) as to why bold ideas for a new economy cannot gain any traction in today’s political discourse.

So what basis in scientific authority might be found for this audacious goal of an intangible assets metric system? This blog’s postings offer multiple varieties of evidence and argument in this regard, so I’ll stick to more recent developments, namely, last week’s meeting of the International Measurement Confederation (IMEKO) in Jena, Germany. Membership in IMEKO is dominated by physicists, engineers, chemists, and clinical laboratorians who work in private industry, academia, and government weights and measures standards institutes.

Several IMEKO members past and present are involved with one or more of the seven or eight major international standards organizations responsible for maintaining and improving the metric system (the Systeme Internationale des Unites). Two initiatives undertaken by IMEKO and these standards organizations take up the matter at issue here concerning the audacious goal of standard units for human, social, and natural capital.

First, the recently released third edition of the International Vocabulary of Measurement (VIM, 2008) expands the range of the concepts and terms included to encompass measurement in the human and social sciences. This first effort was not well informed as to the nature of widely realized state of the art developments in measurement in education, health care, and the social sciences. What is important is that an invitation to further dialogue has been extended from the natural to the social sciences.

That invitation was unintentionally accepted and a second initiative advanced just as the new edition of the VIM was being released, in 2008. Members of three IMEKO technical committees (TC 1-7-13; those on Measurement Science, Metrology Education, and Health Care) cultivate a special interest in ideas on the human and social value of measurement. At their 2008 meeting in Annecy, France, I presented a paper (later published in revised form as Fisher, 2009) illustrating how, over the previous 50 years and more, the theory and practice of measurement in the social sciences had developed in ways capable of supporting convenient and useful universally uniform units for human, social, and natural capital.

The same argument was then advanced by my fellow University of Chicago alum, Nikolaus Bezruczko, at the 2009 IMEKO World Congress in Lisbon. Bezruczko and I both spoke at the 2010 TC 1-7-13 meeting in London, and last week our papers were joined by presentations from six of our colleagues at the 2011 IMEKO TC 1-7-13 meeting in Jena, Germany. Another fellow U Chicagoan, Mark Wilson, a long time professor in the Graduate School of Education at the University of California, Berkeley, gave an invited address contrasting four basic approaches to measurement in psychometrics, and emphasizing the value of methods that integrate substantive meaning with mathematical rigor.

Examples from education, health care, and business were then elucidated at this year’s meeting in Jena by myself, Bezruczko, Stefan Cano (University of Plymouth, England), Carl Granger (SUNY, Buffalo; paper presented by Bezruczko, a co-author), Thomas Salzberger (University of Vienna, Austria), Jack Stenner (MetaMetrics, Inc., Durham, NC, USA), and Gordon Cooper (University of Western Australia, Crawley, WA, Australia; paper presented by Fisher, a co-author).

The contrast between these presentations and those made by the existing IMEKO membership hinges on two primary differences in focus. The physicists and engineers take it for granted that all instrument calibration involves traceability to metrological reference standards. Dealing as they are with existing standards and physical or chemical materials that usually possess deterministically structured properties, issues of how to construct linear measures from ordinal observations never come up.

Conversely, the social scientists and psychometricians take it for granted that all instrument calibration involves evaluations of the capacity of ordinal observations to support the construction of linear measures. Dealing as they are with data from tests, surveys, and rating scale assessments, issues of how to relate a given instrument’s unit to a reference standard never come up.

Thus there is significant potential for mutually instructive dialogue between natural and social scientists in this context. Many areas of investigation in the natural sciences have benefited from the introduction of probabilistic concepts in recent decades, but there are perhaps important unexplored opportunities for the application of probabilistic measurement, as opposed to statistical, models. By taking advantage of probabilistic models’ special features, measurement in education and health care has begun to realize the benefit of broad generalizations of comparable units across grades, schools, tests, and curricula.

Though the focus of my interest here is in the capacity of better measurement to improve the efficiency of human, social, and natural capital markets, it may turn out that as many or more benefits will accrue in the natural sciences’ side of the conversation as in the social sciences’ side. The important thing for the time being is that the dialogue is started. New and irreversible mutual understandings between natural and social scientists have already been put on the record. It may happen that the introduction of a new supply of improved human, social, and natural capital metrics will help articulate the largely, as yet, unstated but nonetheless urgent demand for them.

Fisher, W. P., Jr. (2009, November). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement, 42(9), 1278-1287.

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