Friday, December 24, 2010

Malcom's Question about Measurement in an Organizational Economic Model

What about designing an economic system that properly accounts for the environmental damage done in extracting materials and manufacturing things, finally followed by the removal, destruction or recyling of the expired/ broken/waste product. The price we pay for stuff never reflects the true cost to the earth system.

If you can create the proper organizational process architecture and if the metrics regarding the linkages from the vision and mission statements includes those costs, then there is no reason that the system cannot be more optimized.  Unfortunately, “more optimized” is not “optimized.”  Arrow’s paradox demonstrates that unless you only optimize on “clean water”, at the expense of education, health, air pollution, and most economic progress, etc., you will never completely clean the water.

In the 1980s and 1990s,  I was a member ofa technical committee of the Agility Forum, out of Lehigh University, that defined Key Needs for the Virtual Extended Enterprise.  One Key Need was to fully account for the lifecycle costs of a product during design—the lifecycle is as you describe, from shovel to shovel (design to disposal).  It was a retreaded “new” concept then and still is not integrated into financial management’s thinking.

The reason I’m so interested in organizational economics coupled with enterprise architecture is that it provides new ways, (other than simple financial metrics) for measuring value—at least a notional model of mine does; one that will take a long time to implement technically, and a much longer time, culturally—it really is a cultural paradigm shift.

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