On the Monetarized and Non-monetarized Contributions to National Wealth

Abstract

We consider here the necessity of redefining the concept of economic value and the system of measuring the contributions to national wealth, to be included in a new paradigm in economics, whose application should guarantee constant improvement of human well-being. Such a paradigm should be based on an adequate cultural value system. We begin with a brief description of the traditional concept of value, in which the price of a good is determined by the equilibrium between its supply and demand resulting from an unimpeded exchange. Then, the concept of value that should be the basis for the future system necessary for measuring contributions to wealth is introduced. In this concept, the value of a commodity should comprise all the costs that appear during its entire lifetime as well as a margin of profit, and the resulting value ought to be compared with the value corresponding to the utility coming out of its consumption. The corresponding prices are called the total production price and the utilization price, respectively. This comparison should lead to the proper price of the commodity, to be determined using the tools of economic anthropology. This concept of value is nondeterministic. We further discuss the various forms of capital, which are physical, biological, human, social, manufactured and financial. We assume that capital as a whole cannot behave as a simple sum of its forms, and propose that the evolution of capital is modeled as the evolution of a complex system. Application of this approach may show that capital exhibits novel properties, which cannot be explained via the properties of its forms. The central part of the paper is devoted to clarifying the wrong assumption that each monetarized activity positively contributes to human welfare and security. It is explained that there are many such activities whose contributions to wealth are negative. Besides, there are numerous non-monetarized activities that substantially contribute to improving human well-being. We emphasize and illustrate the fact that the non-monetarized sector is a rich source and breeding ground for future progress. In the final part of the paper, we outline that the future system of measuring contributions to wealth should consist of three components— measuring the flow of all monetarized activities, the flow of all non-monetarized activities, and the resulting stocks of all forms of capital. Each component should include a set of indicators. The first component is well-known, but the comprised calculation should include the proper prices of commodities. The second and third components ought to be developed. The results obtained in measuring the value of the whole stock of capital would indicate whether the society is on the path toward sustainable development or not.