Nonlinear accounting, concepts and methods: macro-statistics in the digital age

Abstract

National Accounts are a child of the Great Depression and the planned economies of the War Years, 1939-1945. The accounts were designed for the economic management of the trade cycle, a floor on the deflationary cycle, and a ceiling on the inflationary cycle. Their secondary purpose was to monitor the state, and change of state, of the economy. While these accounts served well government economic decision-making and business analysis at the macroeconomic level, the structure of the accounts were unsuitable for analysis of complex systems associated with social, economic and environmental interactive processes. The attempts to broaden the categories of the national accounts to include social matrices, environment and natural resources failed at the level of an integrated system of accounts. This paper proposes a method for integration social, economic and environmental statistics at a higher order structure of social values. We shall examine the concept of 'entropy production' as the numeraire that cuts across social, economic and environmental accounts. The origin of the concept is found in Georgescu-Roegen monumental analysis of the economic process, with a compelling demonstration that "The Entropy Law itself emerges as the most economic of all natural laws. It is in the primary science of matter that the fundamental nonmechanistic nature of the economic process fully reveals itself," (Goergescu-Roegen, 1971: 3). The paper will present methods to map social and economic statistics on ecosystem functions. Entropy, in this context is a measure of 'disorder' in any well-defined complex system. Production is redefined as the neg-entropic process, consumption as the entropic-process, and capital accumulation is the net-value, or surplus realized as a ratio of the rate production over the rate of consumption. This is presented to the conference as 21 Century System of National Accounts -designed to protect the Global Commons and humans from themselves.