An Alternative Type of Exchange Rate Mechanism

I was recently reading an article in the Economist about regulation in the US (http://www.economist.com/node/17961890?story_id=17961890). The basic conclusion was that Obama was defending new regulation by saying that although regulation did incur a cost, if the benefits were high enough, then the regulation was worth implementing. A worthy view indeed, although my experience when doing business cases has taught me the difficulty of establishing and agreeing benefits (costs by contrast are very easy to establish and communicate – everyone understands dollars, even, or especially, the Chinese). The fundamental problem I believe is that benefits are subjective, often hard to measure, and that people (especially in a business context) are cautious about admitting to or signing up to them. I believe that the problem of measurement is particularly acute. Not only do we not live in a perfectly competitive world and as such traditional price mechanisms can only be a rough guide at best, we also have no exchange rate of benefits – I know a weekend show jumping will cost me 200 euros but how do I compare the benefits I extract from a clear round with Pich to the benefit Sandie would take from spending the 200 euros on something else (no doubt in a much more considered and sensible way)? Whereas the logic of an exchange rate is simple, the devil is most definitely in the detail as three years of Economics at Oxford taught me (the unholy trinity of the Mundell-Fleming model of Exchange Rates was a particular bête noire of mine); and it seems like changing currency for utility doesn’t make things any easier. Maybe it’s not as easy to be the leader of the free world as you might think....