National Income Accounting
Creating National Accounts
The range and diversity of these efforts have combined with the increasing specialisation of academics to help cloud the accounting contributions of the Faculty. This was brought home to me recently when we invited a distinguished overseas professor of accounting to give the Richard Stone Accounting Lecture in Cambridge. Of course, it was for accounting that Stone— PD. Leake Professor of Accounting in the Cambridge Faculty—won his Nobel Prize: the 1984 Nobel Prize in Economics recognised his ‘fundamental contributions to the development of national accounts’ that ‘greatly improved the basis for empirical economic analysis’ (Nobel citation). Yet the distinguished overseas accounting professor admitted that when invited to give the Stone Lecture he had had to enquire: ‘Who on earth was Richard Stone?’ Deaton (1993) explains Stone’s accounting contribution:
What Stone (along with Meade, whose original vision Stone developed and made his own) should be credited with is the construction of an interlocking system of balanced national accounts, and the implementation of that system on a worldwide basis. Stone’s system of national accounts, the SNA, published by the United Nations Statistical Office in 1953 with subsequent revisions, is not simply a set of tables containing the national income magnitudes, but a set of interlocking accounts in which the principles of double-entry bookkeeping are scrupulously maintained ... The credibility and usefulness of each of the numbers hinges on the systematic framework in which they are set. It was Richard Stone, first with James Meade in the Cabinet Office in London, and later on the world stage at the UN and the OECD, who was largely responsible for the way in which national accounts are today collected and presented throughout the world (Stone 1947; OEEC 1952).
In his Nobel Lecture (Stone 1985), Stone explains the links between his contribution and that of others in the Cambridge Faculty, and especially his debt to Colin Clark, who lectured on statistics to economists at Cambridge from 1931 to 1938, and was described by Keynes—with Keynes’s characteristic diffidence—as ‘a bit of a genius: almost the only economic statistician I have ever met who seems to me quite first-class’ (Keynes quoted in Patinkin 1976: 1,098, fn. 9).[1] Marshall, then Pigou (1920), had explored many of the conceptual issues in measuring the ‘National Dividend’; Clark tackled actual measurement. Stone writes:
Colin Clark.in 1937, in his National Income and Outlay brought together estimates of income, output, consumers’ expenditure, government revenue and expenditure, capital formation, saving, foreign trade and the balance of payments. Although he did not set his figures in an accounting framework it is clear that they came fairly close to consistency. Clark was my teacher at Cambridge and his work was the main source of inspiration for mine. Early in the second world war his estimates were updated by Erwin Rothbarth for Keynes, who used them as the statistical framework of How to Pay for the War.
In 1941, estimates of British national income and expenditure, which James Meade and I had worked on as civil servants in the War Cabinet Office, were published at the instigation of Keynes in a White Paper entitled An Analysis of the Sources of War Finance and an Estimate of the National Income and
Expenditure in 1938 and 1940 which was issued at the time of the budget
(Stone 1985: 121; UK Treasury 1941).
The structure of the national accounts reflected the preoccupations of the new macroeconomic theory famously developed at Cambridge, from Kahn’s multiplier onwards, and the consequent policy prescriptions: the accounts ‘provided the means to design interventions and to monitor them in pursuit of prosperity and full employment’ (Offer 2008).
- [1] For an account of Clark, see Peters (2001).
