More on FRoI

Use cases

FRoI above past RoI is like arbitrage, except markets have largely competed arbitrage away for services (and disservices) recognized and valued in GAAP. Hence, the working hypothesis should be higher future profits or Gross Operating Surplus accrue to society's productive base beyond Property Assets (PA). In practice, the shadow gain ends when GAAP adjusts its boundary between consumption and investment outlays to recognize--and then value--additional pieces of society's productive base as PA. Case studies are computer software and R&D outlays, and key economists seeking expansions.

FRoI differs from conventional shadow pricing by booking changes in a standard, double-entry, accounting schema. The neglected stream of services is treated as an unrequited transfer from the local society to the consumer, matching an increase in that consumer's outlays. It is an instantiation of residual rights. Reclassification as PA is then a move to less imperfect contracts. That either formalizes or modifies the Q behind the unrequited transfer. It certainly formalized the P, which may lead to holding gains or losses relative to what FRoI expected.

It matters whether a neglected stream of services is an added attribute of something recognized in GAAP. When it is, something akin to broken cross-rates arises between consumers who do and don't value that stream. A case study is water between and within classes of value signals or prices (natural, transfer, and market). In short, we posit persistent disequilibrium and imperfect contracts; not The goal of better resource allocation decisions can still be to aim for convergence and LOP.