Welfare Measurement in Imperfect Markets

Welfare Measurement in Imperfect Markets

A Growth Theoretical Approach

New Horizons in Environmental Economics series

Thomas Aronsson, Karl-Gustaf Löfgren and Kenneth Backlund

This book cleverly integrates the research on welfare measurement and social accounting in imperfect market economies. In their previously acclaimed volume, Welfare Measurement, Sustainability and Green National Accounting, the authors focused on the external effects associated with environmental damage and analysed their role in the context of social accounting. This book adopts a much broader perspective by analysing a wide spectrum of resource allocation problems of real-world market economies.

Chapter 1: Introduction

Thomas Aronsson, Karl-Gustaf Löfgren and Kenneth Backlund

Subjects: economics and finance, environmental economics, valuation, environment, environmental economics, valuation

Extract

BACKGROUND For several decades, a considerable amount of research has been devoted to issues surrounding the use and design of the national accounts. One of the basic ideas behind this research has been to provide a coherent framework for measuring national well-being. This idea is closely related to the concept of social accounting. According to The New Palgrave Dictionary of Economics, ‘social accounting’ refers to ‘the body of data that portrays a nation’s economic activity in terms of output produced and incomes created, the stocks of capital goods and other inputs required, and the financial pathways and instruments used’. In accordance with this definition, as well as with a broader perspective that includes many nations in a global economy, a welfare economic theory of social accounting has been developed. This book addresses the theory of social accounting, with particular emphasis on valuation problems facing imperfectly competitive market economies. One of the basic issues in the theory of social accounting is the idea of associating a comprehensive measure of net national product (NNP) with the welfare of a dynamic economy. It is easy to argue that this idea has practical appeal. If it were possible to measure welfare solely by means of a static and (in principle) observable indicator, welfare comparisons would become manageable in practice. Meanwhile, it is quite clear that the conventional NNP does not constitute such an indicator. The only type of consumption included in the conventional NNP refers to goods and services, whereas the concept of...