Value Cycle

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= Value cycle refers to the processes of how value is created, exchange, distribution and accumulated in the economic system. [1]


Discussion

Yassir Siddiqui:

"There are three major problems within the current industrial era based value cycle that would need to be addressed within the internet era. First, reserves (accumulation) process becomes value creation process by the principles of interests (money makes money); this makes money the de-facto currency. Second, only money is used for motivation during the value creation process by influencing the value distribution process, even though, research shows that money is a negative motivator (hygiene factor) - that is, without money people still work but with money people may or may not work. Third, value creation process can involve thousands of people (for example, open-source projects) but exchange value (including reward and money) can only be distributed to a small subset of participants in the value creation process. This phenomenon is observed because accounting during the value creation process and valuation during the value distribution process are optimized for the industrial era by reliance on extreme human intervention and not for internet era.

The key idea behind value equation is to reformulate the value distribution problem to a matching problem and disconnect money (or exchange value) from the process of value distribution. Even though, money could be the reward to be distributed, it is not the only basis of the accounting. In this way, value equation and accounting can provide a solution to the matching problem of value distribution in the internet era. The value equation, however, does not solve the value exchange or accumulation problem; although, the ideas in this blog could be extended to those problem sets." (http://sensoricablog.blogspot.ca/2014/02/placement-based-approach-to-value.html)

More Information

- Open Value Accounting