The need to distinguish between Intrinsic Value (IV) and Extrinsic Value
(EV) is very important and it is required in order to evaluate and understand
such notions as Quality, Efficiency, Growth in Value, Structural and
Functional Progress, and ultimately Perfection. From the point of view of
Sustainability, these are extremely difficult notions to define, let alone
understand.
The current economic model fails to capture not only the intrinsic values of
assets, goods and services but also how these intrinsic values shape both the
consumers’ decisions and the decision system of the wider economy. Because
economic mathematics does not capture a single psychological component
inherent in the human decision system, it seems that no one knows how
value-added entities within the current economic model fluctuate between
intrinsic value-added mode and extrinsic value-added mode which is what is
needed to capture the performance value or the sustainability value of such
value-added entities (assets, commodities, and services). All that this means
is that, both intrinsic value-added and extrinsic value-added modes can and
do influence consumers’ decisions in a wide range of ways, and sometimes
with devastating consequences on both the local and global economies.
So, what is the natural distinction between intrinsic value and extrinsic value
and in what ways do they affect consumers’ decisions and the acquiring of
valued-added entities in the so-called free market? Let, me start by defining
these two concepts and establishing their relationships first. I will deal with
their effects right after.
Intrinsic Value is derived from anything or action that was designed to solve
a specific human problem, preferably to 100% degree of accuracy or
satisfaction. Of course we know that in the real ideal world this is not always
the case, for it seems that most value-added entities or events that we design
never solve our problems to 100% degree of human satisfaction without such
caveats as accidents, wear and tear, unexpected errors, miscalculations,
sabotage, and a wide range of other natural constraints. Because of these
inherent problems, the only next sensible thing for human beings to do is to
start improving all the value-added entities and events that they design with
the hope that one day these designs will finally attain their peaks of
structural and functional quality and accuracy in problems resolution. They
will finally solve the specific human problems to the level of satisfaction that
we originally intended. For example, a car is designed for the purpose of
transporting human beings and goods from point A to point B safely and on
time. The intrinsic value of a car, therefore, is the structural and functional
ability to convey a passenger from position A to Position B safely and on
time, that is, without any damage to the passenger. The physical state of the
passenger at position A must be identical to the physical state of the same
passenger at position B on arrival without any incident and this must be done
within a reasonable pre-set time period. Hence, when pricing the car and
conveyance event, the prices of both must capture only the intrinsic
components of this and nothing more. No arbitrary or strayed values other
than the safety component of the car design and time component of the
transportation event should be featured or be factored in.
Extrinsic Value on the other hand is any value that can be added to any
entity or event design for whatever reasons best known to the designer and
that can be completely removed from it or done away with without affecting
its original underlying intrinsic value. Consider for example, three car
manufacturers, one is appearance-focused, the second is functionality-
focused and the third is both-focused (takes advantage of both). The
appearance-focused manufacturer pays little or no attention to functionality
but continues to improve only the appearance of one model of its several
models. This model from the first day it came into the market had 50%
accidents rate, and after about six reissues of the same model on the market
the only noticed improvement to it was the appearance. The improved
appearance each time pushed not only the price of the model up to the
manufacturer’s delight but also it increased the sale of the model. Yet the
accidents rate still stood at 50% percent much to the ignorance of both its
customers and the motor and road safety authority. From the point of view
of sustainability, this manufacturer is not only getting away with murder but
also it is relying entirely on extrinsic value of the vehicle to stay in business.
The second manufacturer does the opposite. He introduced a car model into
the same market with little or no attention paid to appearance but with a
high level concentration on the internal functionality and safety of the car.
The car had an accident rate of 10% percent with a safety record of 90% and
after about six bouts of improvement and reissue, the accident rate reduced to
only 3% with a whopping 97% safety record. Yes, superior engineering of the
car’s functionality radically improved that car’s safety to such high level, but
under the current economic model where consumers seem to be influenced
far more by appearance (which is the extrinsic value of the product) the car
sales suffered greatly because this manufacturer paid little or no attention to
the improvement of the appearance as the time, the functionality and the
safety levels are improved.
The third manufacturer embraced both the functionality and the appearance
aspects of the design and introduced a similar car model into the same
market. The appearance of the car improved proportionately with the
functionality each time it is re-engineered and reissued into the market.
After about six redesigns and reissues, the car’s safety record shot up to 98%
with only 2% accident rate, and with future plans to push this level of
improvement further. The manufacturer’s sales record improved
proportionately because they were able to market both the physical and the
functional improvements in a value-added manner, such that not only did
these two types of improvement pushed the price of the model up each time
but also they were able to market it successfully. So, this third manufacturer
is laughing to the bank, but from the point of view of sustainability under the
present economic model, this has created and introduced a wide range of
problems of monumental scale into the economy in a highly unsuspecting
way as systematically explained below.
Firstly, the first car manufacturer is not supposed to exist all. Under
sustainable economy, sustainability principles and safeguards would not
permit this type of manufacturer to exist, let alone to participate in the
production and marketing of function-critical, value-added entities to the
detriment of the unsuspecting consumers as so explained. Unfortunately, the
current economic model does contain loop holes under which such a
manufacturer may exist and operate with impunity, especially in the
underdeveloped and developing countries. Even within so-called first-world
economies, loopholes may still exist for such type of companies to exist. A
perfect example, of this are the so-called ‘black economies’ (black markets)
that often subsist within the local economy of the developed economy and
which some authorities often turn a blind eye to for all sorts of reasons best
known to them. Companies of this kind are usually responsible for
manufacturing and flooding the developed and non-developed economies
alike with counterfeit goods usually blamed for causing more health,
environmental and economic problems than they solve. Sustainable
economy has all the components with which to eliminate this type of
problem from the society.
The third manufacturer is undisputedly the ideal type of company that any
sustainable-economic minded individual would like to embrace. In fact, any
right-thinking human being who cares about sustainable living would
embrace the practice of this third type of company. There is no doubt that
this third car manufacturer is to an extent acting sustainably, but there is
more work to be done to make the company fully sustainably. Sustainably, it
has fulfilled both (1) the design aspect and (2) the valued-added aspect of it
(intrinsic and extrinsic combined) but there is (3) the progressive aspect to
fulfil to make the thinking and action of this company fully sustainable.
What constitutes this progressive aspect? It is the price. This third company
tends to get the whole concept of sustainability all wrong. The owner and
shareholders of this third company are labouring under the gross
misconception that when the value-added aspect of design are fixed which as
you can see pushes the price of it up that’s is OK. Well, the price increase
wrecks the sustainability value of all what the company had far achieved
because the improvement of the appearance and the functionality to the
highest level such that the price tag is pushed beyond the level of
affordability decreases the number of people in the population that may very
well benefit from it, which in essence turns the car into a luxury item for the
elites only. This in actual fact and overall outcome diminishes the
sustainable value of the improved physical appearance and functionality
when finally calculated.
Is the Sustainable Value of a design measured by:
1. How functionally safe the design is?
2. How many people actually benefit from the improved design?
3. How pretty is the car in outward physical appearance?
Although we reluctantly acknowledged and included (3) above, the
improvement in the physical appearance of the design as part of the valued-
added aspect of it, nevertheless, from the point of view of sustainability, we
are naturally advised and bound to discount it from the overall sustainable
value of the whole project. For it seems that it is only the functionality
improvement that counts or has significant value, at least from the point of
view of the overall human safety. In fact, philosophers of all ages are deeply
suspicious of the exact role of extrinsic value in the overall design of things
from the point of view of sustainability and human safety, and they have
questioned this for thousands of years. One of the questions they raised, and
is still being discussed till this day, is the exact role that extrinsic value, such
as physical appearance, plays in the overall structure and function of things.
For example, in the above case, what role, if any, will the improved visual
appearance of the car play during say a fatal motor accident? We know that
the car has been structurally and functionally improved to a safety level of
98% with an almost negligible marginal error of 2%, but if this same car is
involved in a very bad accident, what role can the improved physical
appearance of the design play from the point of view of the overall safety of
all the passengers involved? Will the improved appearance contribute to the
overall safety of the passengers in the car during the accidents? Well, that is
the question.
Yes, improved functionality, which alone is responsible for the overall safety
of the passengers during an accident, does add justifiable value to the car
design but what is currently scientifically unclear, let alone philosophically
so, is whether the improved physical appearance of it adds any justifiable
value at all, let alone any quantifiable contribution to safety during a major
motor accident. When the manufacturer of the car with 98% safety record
used both the improved functionality and the improved appearance as an
excuse to increase the price, or justify the price increase, do you think this
action is compatible with sustainability principles?
The sustainability principle says that 100% qualitative value of a design with
regards to functionality must yield 100% quantitative value with regards
usage for it to qualify as being sustainable. In this very case SV must on a
head-to-head count yield the highest percentage value from P for the car to be
declared as being fully sustainable. If not, then the manufacturer of the car in
the third example must explain to the wider world why they created a car
that is almost 100% safe but whose benefit was not passed on to be enjoyed by
everyone in the society or the whole population.
For example, after the car has been brought to the market with full
knowledge of the population, let say that after the count B = 100,000
beneficiaries and P = 300,000 people in the population, then the calculation
should yield the following result:
SV = 100,000
---------- x 100%
300,000
= 33.33%
The result definitely yields a negative value. The Manufacturer must explain
why a car with 98% sustainable value (qualitative) yields only 33.33%
sustainable value (quantitative), or should we call it unsustainable value,
which is also its overall utility value. This seems to me and perhaps to any
other onlooker as well, to be of no value whatsoever to the rest of the society.
You cannot create safety of this type and not share it with the rest of
humanity in a way that makes you the hero of that society. Why pursue
value of this magnitude that cannot spread to the rest of humanity? Let’s
move on from here.
Let B = Beneficiaries
Let P = Population
SV = B
——- x 100%
The sustainability principle says that 100% qualitative intrinsic value of a design with
regards to functionality must yield 100% quantitative value with regards usage for it to
qualify as being sustainable.
For example, after the car has been brought to the market with the full knowledge of the
population, let say that after the count B = 100,000 beneficiaries and P = 300,000 people
in the population with driving ability and transportation needs, then the calculation should
yield the following result:
SV = 100,000
———100%
300,000
= 33.33%
μ= Sustainable Value for the Car's performance: λ= Sustainable Value for the
beneficiaries.
μ=100: λ=33.33: n = 2
= 66.67%
The negative value of 33.33% has written off or discounted a substantial value from the
consolidated result. The manufacturer, if they genuinely want this 100% life-saving car to be
fully sustainable, should apply sustainable methodologies to bring the price down and
increase usage. The same will be true of a drug company that finds a miracle cure for any
type of disease and manufactures the drug but only 20% of all the sufferers from that disease
can afford the drug. Or a sweet manufacturer that manufactures a special pack of tasty sweets
to help relief the busy population of hunger but which at the same time is costing the nation's
health service billions of pounds in obesity and dentistry bills. In the first example, the
negative value generated by the overpriced drug with 20% low usage will write off
substantial part of the positive value of the drug from the consolidated result. Equally, if
relieving the busy population's hunger with a pack of tasty sweet is going to land the health
service with a budget-busting obesity and dentistry bills, then the negative value generated
by this will discount the positive value from their calculated and consolidated sustainable
values. Both manufacturers (drug and sweet) should consider applying sustainable economic
principles to rectify these dilemmas.
NOTE: Some things or events or systems that were designed to solve a specific type
of problem while in their normal functioning states may create a completely different
type of problem or a set of problems without people involved knowing this. The take
home lesson from this is that people should think of things and systems in a holistic
way, especially at the design and implementation stages, for you may end up creating
a thing or a system that causes more problems than it solves. If you do, then you are
naturally obliged to quantify and consolidate the sustainable values of all aspects of
the thing or system in the manner just demonstrated. The result is SV/SPI of the
system.