Abstract
To quantify financial activities and interdependencies within an economy, economists account for flows of economic value among sectors of the economy. In this chapter, we utilize the prevailing subjective theory of value to develop a framework for value accounting that is consistent with the materials, energy, and embodied energy accounting frameworks presented in prior chapters. We note that important and essential material exchanges between the economy and the biosphere (including energy extraction from the biosphere and waste assimilation by the biosphere) take place outside of the market, and, as such, they are not included in national accounts and have no economic value. We point to the UN System of Environmental Economic Accounts (SEEA) or the US Integrated Environmental Economic Satellite Accounts (IEESA) as the way forward to including some of these essential extra-market transactions in national accounting. Similar to previous chapters, a series of increasingly-disaggregated model economies is used to develop our value accounting framework. Value flows for the US auto industry are presented, and concerns are raised about recent changes to include intangible assets, such as software and intellectual property, as capital stock.
We try to measure what we value. We come to value what we measure. [1, p. 2]
—Donella Meadows
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- 1.
Following the ecological economics literature, we use the term intrinsic in the sense of “objective.” Costanza [4] notes that a better term would be objective, thereby avoiding moral overtones associated with the term intrinsic.
- 2.
This line of inquiry has yielded some interesting analysis of the amount of solar energy required to run the economy. See Chap. 5 for further discussion of the concept of emergy.
- 3.
As of this printing, the System of Environmental-Economic Accounting (SEEA) [6] is in its third edition, having been thoroughly reviewed and revised by a global consultation process. The SEEA contains internationally agreed-upon standards for quantifying the value of flows of material and energy between the economy and the biosphere. The SEEA is a system that is designed to work hand in hand with the System of National Accounts (SNA), the international standard for measuring economic value creation consistently across nations, and several OECD member states currently use the SEEA alongside their national accounting.
- 4.
As described in the Prologue, the US BEA developed its analogous methodology in the early 1990s, the Integrated Environmental Economic System of Accounts (IEESA), but has been politically hamstrung for over 20 years from publishing the data.
- 5.
Because the currency lines clutter the diagram, we will omit currency flows from all following diagrams in this chapter.
- 6.
A primer on using the US BEA industry data can be found on the BEA website [10].
- 7.
KLEMS is an acronym for capital (K), Labor, Energy, Materials, and Services.
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Heun, M., Carbajales-Dale, M., Haney, B. (2015). Stocks and Flows of Economic Value. In: Beyond GDP. Lecture Notes in Energy, vol 26. Springer, Cham. https://doi.org/10.1007/978-3-319-12820-7_6
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DOI: https://doi.org/10.1007/978-3-319-12820-7_6
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