Elgar original reference
Edited by Thomas Aronsson and Karl-Gustaf Löfgren
Chapter 1: An Introduction to the Theory of Social Accounting
Thomas Aronsson and Karl-Gustaf Löfgren 1 BACKGROUND At least since the 1970s, much research effort has been devoted to the use and design of national accounts. One of the basic ideas behind this work has been to provide a coherent framework for measuring national and/or global welfare in a dynamic economy as well as understanding how the current system of national accounts ought to be modified with this particular objective in mind. A suitable name for this research area is ‘social accounting’: according to The New Palgrave Dictionary of Economics, this 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’. Herein lies also the task of measuring the social value of this economic activity, which is where the welfare-economic perspective comes in. More specifically, measuring the social value of economic activity – whether this activity refers to a nation or a supranational community – requires a welfare economic theory of social accounting, and such a theory has gradually evolved (and is still evolving). The purpose of this introductory chapter is to briefly discuss some of the main insights that we believe that this theory has produced.1 We will do so by focusing on three interrelated issues: (i) principles for measuring welfare in a community at a given point in time, (ii) cost–benefit rules for measuring welfare change and (iii) principles for measuring sustainability,...