At the end of the Second World War Stone left the CSO and returned to Cambridge where, with Keynes’s support, he was appointed the first director of the then newly-established Department of Applied Economics (DAE). In 1955 he gave up this position to become P.D. Leake Professor of Finance and Accounting at Cambridge University, a post he held until he retired in 1980.
Stone’s many offices and honours included the presidencies of the Econometric Society in 1955 and the Royal Economic Society from 1978 to 1980; he was knighted in 1978. In 1984, Stone was awarded the Nobel Memorial Prize in Economics ‘for having made fundamental contributions to the development of systems of national accounts and hence greatly improved the basis for empirical economic analysis’ (Nobel Foundation, 2004).
Stone is best known for his pioneering contributions to national income accounting. His work on the measurement of national income began in the early 1940s and resulted in two notable early publications with James Meade (Meade and Stone, 1941; 1944). However it was after the Second World War that he truly established his international reputation as a pioneer in the development of national accounts. His report, ‘Definition and Measurement of the National Income and Related Tools’ (Stone, 1947), provided the foundation for subsequent work on national accounts. From 1949 to 1951 he directed the National Accounts Research Unit of the Organization for European Economic Cooperation (OEEC). The unit, based in Cambridge, produced a number of reports on international standardised systems of national accounts which were published by the OEEC. In 1952 he chaired a committee of experts drawn together by the United Nations Statistical Office to establish a standard system of national accounts. Their report, A System of National Accounts and Supporting Tables (SNA), was published in 1953 by the United Nations. In 1968, following revisions to the 1953 SNA, the United Nations published A System of National Accounts, the first four chapters of which were written by Stone. Today the SNA forms the basis on which national accounts are compiled worldwide and international comparisons are made.
As should be clear from this brief overview, Stone’s contributions to the development of national income accounting have been profound. While he was not the first economist to produce estimates of national income (see, for example, the entry on Simon Kuznets in this volume), he was a pioneer in developing a system of national and social accounts. Viewing the national income as a system of interlocking accounts, his double-entry bookkeeping method – where every income item on one side of an account has to be matched by an opposite expenditure item on another account – provided an important means to check the consistency and reliability of the data and has become the universally accepted way of organising national income statistics among both developed and developing countries.
In addition to his work on national income accounting, Stone also made important contributions to consumer behaviour and the Cambridge Growth Project. Before commenting on this work, mention should be made of one of his earliest publications (Stone and Stone, 1938) in which, with his first wife Winifred Mary Stone, he sought to estimate the marginal propensity to consume and the multiplier – two key concepts introduced by Keynes in his groundbreaking 1936 book The General Theory of Employment, Interest and Money. His first major contribution to the empirical analysis of consumer behaviour was his Royal Statistical Society paper on ‘The Analysis of Market Demand’ (Stone, 1945). However, of much greater significance were his monumental empirical studies, written in collaboration with Deryck Rowe and others, which appeared in two volumes: The Measurement of Consumers’ Expenditure and Behaviour in the United Kingdom, 1920–1938 (Stone et al., 1954; Stone and Rowe, 1966). Again working largely in collaboration with Rowe, he also undertook work on the consumption of durable goods (for example, Stone and Rowe, 1957) and aggregate private savings (for example, Stone and Rowe, 1962a; Stone, 1964).
In the early 1960s Stone, together with Alan Brown (a colleague from the DAE), started the Cambridge Growth Project to look at the ways in which economic policy affected the British rate of economic growth. The main impetus for the project was the widespread concern over the relatively poor international growth experience of the UK economy in the postwar period. Over the period from 1962 to 1974, 12 books were published in the series A Programme for Growth. The first of these written by Stone and Brown, A Computable Model of Economic Growth (Stone and Brown, 1962b), described the first version of the disaggregated model and its uses. The model made an important contribution to the development of large-scale disaggregated macroeconometric models and acted as a catalyst for much subsequent research in this area.
In the later part of his career Stone also had work published on demographic and social accounting (for example, Stone, 1971; 1985 – his 1984 Nobel Memorial Lecture). However, it is not this work or that on consumer behaviour or the Cambridge Growth Project for which he will be most remembered, rather it is for his ‘pioneering work in the development of systems of national accounts’ (Nobel Foundation, 2004).
Main Published Works
(1938), ‘The Marginal Propensity to Consume and the Multiplier’ (with W.M. Stone), Review of Economic Studies, 6, October, pp. 1–24.
(1941), ‘The Construction of Tables of National Income, Expenditure, Savings and Investment’ (with J.E. Meade), Economic Journal, 51, June–September, pp. 216–31.
(1944), National Income and Expenditure (with J.E. Meade), London: Oxford University Press.
(1945), ‘The Analysis of Market Demand’, Journal of the Royal Statistical Society, 108 (3 and 4), pp. 1–98.
(1947), ‘Definition and Measurement of the National Income and Related Tools’, appendix to Measurement of National Income and Construction of Social Accounts, Geneva: United Nations.
(1954), The Measurement of Consumers’ Expenditure and Behaviour in the United Kingdom, 1920– 1938, vol. 1 (with D.A. Rowe, W.J. Corlett, R. Hurstfield and M. Potter), Cambridge: Cambridge University Press.
(1957), ‘The Market Demand for Durable Goods’ (with D.A. Rowe), Econometrica, 25 (3), pp. 423–43.
(1962a), ‘A Post-War Expenditure Function’ (with D.A. Rowe), Manchester School of Economic and Social Studies, 30 (2), pp. 187–201.
(1962b), A Computable Model of Economic Growth (with A. Brown), London: Chapman & Hall.
(1964), ‘Private Saving in Britain, Past, Present and Future’, Manchester School of Economic
and Social Studies, 32 (2), pp. 79–112.
(1966), The Measurement of Consumers’ Expenditure and Behaviour in the United Kingdom, 1920–
1938, vol. 2 (with D.A. Rowe), Cambridge: Cambridge University Press.
(1971), Demographic Accounting and Model Building, Paris: OECD.
(1985), ‘The Accounts of Society’, in Les Prix Nobel 1984, Stockholm: Almquist & Wicksell; reprinted in Journal of Applied Econometrics, 1, January, pp. 5–28, 1986.