Output Losses

Effectual value can decline for a second reason: output losses. These occur when outputs are destroyed, degraded, or left unconsumed. That is, although an output is successfully created at the point of production, it either does not reach the consumer at all, or not in its original state.

As with satiation, this will cause the effectual value curve to decline. Unlike satiation, output losses cannot cause the curve to become negative.

For an instructive example of an output loss, consider the fact that in the United States approximately 1,400 calories worth of food are discarded per person every day. This constitutes about 40 percent of all the food produced there.

Food is wasted on this scale even though the number of underfed Americans rose from 4.7 million to 6.7 million in 2007, and despite the fact that there are about a billion underfed people on the globe. In some cases an output loss is just a minor leakage, but in cases such as this it is a human catastrophe.1

The following list cites the main reasons for output losses, along with some typical examples:

  • Outputs disappear — A cargo ship sinks, taking its containers of goods to the bottom of the ocean; a pleasure craft sinks in a lake.
  • Outputs are spoiled — Perishable goods mold during transportation from farms; food rots while being stored by consumers.
  • Outputs are discarded — A working television, computer, or cell phone is tossed out to make way for a new model; an individual, restaurant, bakery, or grocery store discards unsold items.
  • Outputs are unused or underutilized — A piano or exercise machine is purchased but rarely touched; houses stand empty before they are sold; habitable houses are abandoned for financial reasons.
  • Outputs are destroyed — A warehouse burns due to arson or accident; roads and bridges are bombed in a war; an earthquake or hurricane flattens houses, office buildings, and hospitals; rats eat inadequately protected food.

In some of these examples the output loss occurs during transportation or storage by producers, before the outputs reach the consumption sphere. Because such losses occur in the production sphere, it decreases potential value rather than effectual value.

ENL thus distinguishes between initial potential value, which results from the production process itself, and delivered potential value, which is what stores, shops, and other outlets receive from producers, after transportation and related losses have been accounted for.

There is a connection between satiation and output loss. In the example of winter coats above, satiation is reached with one coat. Although a person may want to own more than one coat for reasons for style and variety, only one is required for warmth and health. For this reason, the second coat will not be used, which is tantamount to destroying its potential value. (If the coats are worn on alternate days, there will still be a coat in the closet half the time, so nothing has substantially changed.)

Thus, satiation will in many cases lead to output loss, particularly with durable items that are utilized rather than ingested.

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