Professional Valuation at the Cross-Roads: The Policy of Methodology
Andrey Igorevich Artemenkov
The Russian Society of Appraisers; State University of Management
December 10, 2009
This set of ppt slides presented by the author at the Republican Valuation Seminar of the Russian Society of Appraisers "Methodological perspectives in valuation practice" (Saransk city, 5 Feb. 2010) describes the present state of valuation methodology. It demonstrates current achievements and drawbacks in modifying valuation thinking as set off against the desirable macroeconomic objectives of valuation policy.
The main features of valuation methodology which impede its evolution in line with the macroeconomic interest of the state policy are identified as follows: 1. The manifest positivist orientation of valuation methodology, which equates market values with prices and espouses ‘market fundamentalism’ as the dominant shaping force in practical applications (e.g. valuations tend for the most part to rely on market prices, even if there is evidence about the speculative unsustainable nature of the markets, such as the property market in Moscow). On the policy plane, market fundamentalism of valuation methodology translates into a restricted professional mandate to sanctify and reinforce with the authority of valuation profession only the prevailing market prices, no matter how off-the-wall they appear. 2. On the other hand, in those quarters of valuation practice less affected by market fundamentalism, we detect a distinct pro-rent orientation of valuation methodology (e.g. when monopoly and socially-suboptimal rents of enterprises are capitalized into a plethora of "intangible assets"). We notice that there are two major drivers of valuation methodology: 1) tradition, whereby that practice is considered sound which has been widely used before, and 2) exogenous public policy prescription for valuation methodology, which is gaining focus at the moment as the government comes to increased realization that the institution of professional valuation is capable of becoming a flexible tool, on par with monetary policy, for guiding capital distribution activities and servicing the accumulation of industrial capital according to the signals of public policy.
Valuation has been traditionally considered a Science with the ingrained elements of Art. While it is built around some logically rigorous trains of analytic thought (and seasoned with liberalities of the art of judgment where the alternatives of choice are possible), we argue it is neither. Rather, it is one of the socially acknowledged institutions through which the society justifies and legalizes the economic exchange proportions for real and financial capital. So, needless to say, behind any (even self-consciously ‘objective’ or ‘scientific’) valuation methodology or school of thought there lies some broader policy and some social interest which it serves. This is the reason the government in Russia chooses to oversee and regulate the valuation profession (and oversee the education of its cadres) - albeit in the framework which at the moment can still be characterized only as the ‘dormant control’. But these prerogatives of control can spring alive from the state of their dormancy and become pro-active. There are cogent motives and signs of this already happening. The slides explain the reason why and how.
Note: Downloadable document is in Russian.
Number of Pages in PDF File: 10
Keywords: Methodology of Professional Valuation (modern features of), Valuation Profession in Russia, Macroeconomic valuation policy
JEL Classification: D30, D46, E61, G18working papers series
Date posted: December 14, 2009 ; Last revised: February 8, 2010
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