6. Stocks and Flows of Economic Value

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.