Accountants and the Price System: The Problem of Social Costs

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In The Engineers and the Price System, Thorstein Veblen wrote about the rising discontentment of engineers with the inefficiencies of the system of business enterprise. As has been argued elsewhere, Veblen was responding to the actions of a group of reform-minded engineers who were speculating on how they might eliminate those inefficiencies [Layton 1962; Stabile 19881. Although drawn on a smaller scale, this article is presented in the same spirit as a response to the ideas of a group of reform-minded accountants who are concerned with an important aspect of business-the treatment of social costs. As J. Ron Stanfield and Alvin Toffler have noted, in the 1970s, accountants began seeking changes in the way social costs were accounted for on the corporate books; both writers were hopeful that social cost accountants could change the way business looks at social costs [Stanfield 1979, 53-54; Toffler 1981, 240-431. The movement for social cost accounting has not provided useful concepts for examining social costs, however. To explain why social cost accounting has failed, this article will place the ideas of social cost accounting in an institutionalist context, using the perspective on social costs set forth by J. M. Clark and K. William Kapp. It will be argued that Clark and Kapp offered their contributions to the theory of social cost as part of a framework that