Monday, September 20, 2010

EVA and EVC

As a species, we are obsessed with Economic Value Added(EVA) and Economic Value Consumed(EVC). If you cant be measured in money, then you cant be measured at all.

There is something inherently wrong with this premise. There are innumerable examples of value created, but we do not place any real worth on that value, just because it is not measured in currency.

Lets start with some examples:
1. Housekeeping
2. Childcare
3. Wikipedia and online free content (facebook included)
4. braingle.com and other peer created and peer shared content.
5. Blogs - where you get a lot of good reading, but dont have to pay for it.
6. Online newspapers.
7. When your doctor uses you as part of a clinical trial (have i mentioned, doctors in India dont think its important to tell the patient when he is being used in a clinical trial)
8. Case studies and research generated by students. its available in the library for free, and no one pays for it, except the student/university, depending on who usually bears the cost of the research.
9. Quid Pro Quo acts. e.g., neighbor housesitting for you and you returning the favor. These transactions are not monetised.
10. Volunteer work.
11. Kitchen gardens and private gardens.
(I am sure you have at least 2-3 examples of your own in the head right now)

If you want to put numbers on these, and most economists will want that, lets do some simple maths.

how much would you pay a housekeeper?
Multiply that by the no. of households in your city, and you have the EVA of the spouse.

How much would you pay for your vegetables? How much of that do you source from your kitchn garden? thats the EVA of the kitchen garden. Multiply that by the no. of houses in your neighborhood that have a kitchen garden, and you have a no. Multiply that some more and you have a very impressive number to take home.

You get the picture.

Now, we have 2 choices:
1. Either we start recognising the worth of this non monetary , but nonetheless important contribution. OR
2. We start putting currency numbers to all pro bono transactions, and start valuing those creating this free for us.

8 comments:

BK Chowla, said...

Agree that putting a value is right.

starry eyed said...

I feel sorry for the people who measure everything in terms of money. Intangible benefits are often linked to the most precious things, like friendship and parenting.

And what I have gained from the blogging world is invaluable, never even thought of putting numbers to it.

CY|\|O$|_|RE said...

nice one.....i agree with the 1st choice...but sometimes it gets important to move ahead with the 2nd choice....so situation matters....

callezee said...

i learned a new information here..

Onkar said...

Thought-provoking

Adee said...

sometimes i wonder how easily u explain these hard to understand economic theories!

thanks to you my mind is less cluttered :)

*hugs*

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Fortune Articles said...

EVA is calculated by deducting from net operating profit after taxes a capital charge representing the cost of capital.