The goal of "true cost accounting" is perhaps overly ambitious while still worthy. I say this because we could certainly ask for better cost accounting by asking that firms include the costs of production as well as disposal as has been done in Germany. And, to pick another example, we could ask that the cost of storage of nuclear wastes be included in calculations of nuclear power production. But "true cost accounting?" I doubt it.
Cost accounting depends upon decisions made within each organization and within society as to how to allocate costs. For reading on this I would suggest starting with J.M. Clark's 1923 classic, Studies in the Economics of Overhead Costs. For more recent studies I would suggest consulting the literature on German experiments with inclusion of disposal costs. Sorry, but I do not have references to hand. Others on this list probably do.
From: AFEEMAIL Discussion List <[log in to unmask]> on behalf of Natarajan, Tara <[log in to unmask]>
Sent: Wednesday, September 27, 2017 1:14 PM
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Subject: [AFEEMAIL] Query From An Undergraduate Student
One of our seniors is looking for some help with an idea she has for a thesis topic (senior capstone requirement in Economics in our program).
The students name is Anika Bieg and I am hoping those who are a lot more familiar with this topic, might be willing to write to her/me and/ or copy me.
This is a nascent idea that she has just shared and certainly needs refining. But with some readings, perhaps ideas to help her hone the framework, Anika will be able to produce a well- developed research question/ proposal. I appreciate all your help greatly in helping this student who is committed to a systems based approach to problem solving.
I am attaching this below also as a word document for your convenience.
Thesis Idea & students questions
Organizations are formed with the one main goal that is rooted in their company/ firms values. This study focusses on, for-profit organizations. The goal of any for-profit company is to earn revenue for the owners. How a company make its profit, is dependent on their business model. In a business model different aspects of the company are highlighted based on the business’s values.
Additionally organizations may also choose to focus their impact on positive ecological, economic, or social change initiatives. In recent years organizations have worked to make their net footprint, the total impact a particular activity, has on their environment, positive. Positive net footprints show an organization’s primary goal and are an indicator of which part of the socio economic system they value.
Large corporations have increasingly grown to control our economic system. An economic method is needed create a balance of the varied positive net footprint as a form of true cost accounting. True cost accounting is the real cost of a product with consideration to the cost of all external costs factored out of the production cost. This form of accounting traces direct costs and allocates indirect costs of production to show ecological, economics and social costs and benefits. A method of true cost account trade would allow for organizations with different values to benefit the larger institutional economic system.
Example of the above: Imagine three businesses, each one has an individual positive net footprint in ecological, economic, and social initiatives that work with one another as to have an aggregate (balanced) true cost account. The positive ecological footprint of a green corporation, say a solar farm, covers the negative ecological footprints of the other two businesses. The positive economic footprint of the economic corporation, say a bank, covers the negative economic footprint of the other two businesses. The positive social footprint of a socially minded business, say a B Corporation, covers the negative social footprint of the other two businesses. It is important to note that in this true cost trade model each institution has other values of lesser importance. That is to say that while the green corporation focuses its efforts on ecological impact, it doesn’t disregard economic or social impacts. What is important is that the three corporations be able to balance each other’s net footprints out through the model. Thus a method is created where institutions make progressive strides, the implementation of social change, towards a true cost account statement.
1. Are their cases where people have attempted to solve this problem before? Were they successful?
2. If so can you please make suggestions for readings?
3. Is there empirical work or case studies done in this area?
4. If not, can you think of a relevant case study?
Cheers and Many Thanks
Professor of Economics
Formal Methods for Integrated Socioeconomic Analysis, Special Issue Editor, Forum for Social Economics, Taylor and Francis 2015
Natarajan.T, W. Elsner and S. Fullwiler Edts. Institutional Analysis and Praxis: The Social Fabric Matrix Approach Springer 2009