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The Natural Distinction betweenhe Natural Distinction between Intrinsic Value and Extrinsic Valuentrinsic Value and Extrinsic Value========<>=================<>=========
Author:uthor:Abraham Philocratbraham PhilocratPublisher:ublisher:SworldTV – Sustainability Resource CentreworldTV – Sustainability Resource CentrePublicationublicationDate:ate:August 28, 2008August 28, 2008Source:ource:http://philocrat.com/sworldtvttp://philocrat.com/sworldtv
Abstract:
 
This document is published separately for download by visitors to theSWorldTV website. As the source document for the whole website, it is currently themost visited and viewed page on the website by visitors and search engines. We had nointention of separating this document from the website, but due to popular demand, wehave come to a decision to do so. We hope that it helps people, institutions and vestedinterest groups grasp at least a meagre aspect of the extremely difficult concepts ofintrinsic and extrinsic values and how they interplay and shape our value allocationand decision systems. If you wish to comment on this document please visit thewebsite to do soSWorldTV - Sustainability Resource Centre.
The need to distinguish between Intrinsic Value (IV) and Extrinsic Value(EV) is very important and it is required in order to evaluate and understandsuch notions as Quality, Efficiency, Growth in Value, Structural andFunctional Progress, and ultimately Perfection. From the point of view of Sustainability, these are extremely difficult notions to define, let aloneunderstand.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 theconsumers’ decisions and the decision system of the wider economy. Becauseeconomic mathematics does not capture a single psychological componentinherent in the human decision system, it seems that no one knows howvalue-added entities within the current economic model fluctuate betweenintrinsic value-added mode and extrinsic value-added mode which is what isneeded to capture the performance value or the sustainability value of suchvalue-added entities (assets, commodities, and services). All that this meansis that, both intrinsic value-added and extrinsic value-added modes can anddo influence consumers’ decisions in a wide range of ways, and sometimeswith devastating consequences on both the local and global economies.So, what is the natural distinction between intrinsic value and extrinsic valueand 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 withtheir effects right after.
Intrinsic Value
is derived from anything or action that was designed to solvea specific human problem, preferably to 100% degree of accuracy orsatisfaction. Of course we know that in the real ideal world this is not alwaysthe case, for it seems that most value-added entities or events that we designnever solve our problems to 100% degree of human satisfaction without suchcaveats as accidents, wear and tear, unexpected errors, miscalculations,sabotage, and a wide range of other natural constraints. Because of theseinherent problems, the only next sensible thing for human beings to do is tostart improving all the value-added entities and events that they design withthe hope that one day these designs will finally attain their peaks of structural and functional quality and accuracy in problems resolution. Theywill finally solve the specific human problems to the level of satisfaction thatwe 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 ontime. The intrinsic value of a car, therefore, is the structural and functionalability to convey a passenger from position A to Position B safely and ontime, that is, without any damage to the passenger. The physical state of thepassenger at position A must be identical to the physical state of the samepassenger at position B on arrival without any incident and this must be donewithin a reasonable pre-set time period. Hence, when pricing the car andconveyance event, the prices of both must capture only the intrinsiccomponents of this and nothing more. No arbitrary or strayed values otherthan the safety component of the car design and time component of thetransportation event should be featured or be factored in.
Extrinsic Value
on the other hand is any value that can be added to anyentity or event design for whatever reasons best known to the designer andthat can be completely removed from it or done away with without affectingits original underlying intrinsic value. Consider for example, three carmanufacturers, one is appearance-focused, the second is functionality-focused and the third is both-focused (takes advantage of both). Theappearance-focused manufacturer pays little or no attention to functionalitybut continues to improve only the appearance of one model of its severalmodels. 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 marketthe only noticed improvement to it was the appearance. The improvedappearance each time pushed not only the price of the model up to themanufacturer’s delight but also it increased the sale of the model. Yet theaccidents rate still stood at 50% percent much to the ignorance of both itscustomers and the motor and road safety authority. From the point of viewof 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 intothe same market with little or no attention paid to appearance but with ahigh 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% andafter about six bouts of improvement and reissue, the accident rate reduced toonly 3% with a whopping 97% safety record. Yes, superior engineering of thecar’s functionality radically improved that car’s safety to such high level, butunder the current economic model where consumers seem to be influencedfar more by appearance (which is the extrinsic value of the product) the carsales suffered greatly because this manufacturer paid little or no attention tothe improvement of the appearance as the time, the functionality and thesafety levels are improved.The third manufacturer embraced both the functionality and the appearanceaspects of the design and introduced a similar car model into the samemarket. The appearance of the car improved proportionately with thefunctionality 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 improvedproportionately because they were able to market both the physical and thefunctional improvements in a value-added manner, such that not only didthese two types of improvement pushed the price of the model up each timebut also they were able to market it successfully. So, this third manufactureris laughing to the bank, but from the point of view of sustainability under thepresent economic model, this has created and introduced a wide range of problems of monumental scale into the economy in a highly unsuspectingway as systematically explained below.Firstly, the first car manufacturer is not supposed to exist all. Undersustainable economy, sustainability principles and safeguards would notpermit this type of manufacturer to exist, let alone to participate in theproduction and marketing of function-critical, value-added entities to thedetriment of the unsuspecting consumers as so explained. Unfortunately, thecurrent economic model does contain loop holes under which such amanufacturer may exist and operate with impunity, especially in theunderdeveloped and developing countries. Even within so-called first-worldeconomies, loopholes may still exist for such type of companies to exist. Aperfect example, of this are the so-called ‘black economies’ (black markets)that often subsist within the local economy of the developed economy andwhich some authorities often turn a blind eye to for all sorts of reasons bestknown to them. Companies of this kind are usually responsible for
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