Accounting for Missing Capitals: Approaches to Valuation

Diane Coyle and Julia Wdowin

Discussion Papers from Economic Statistics Centre of Excellence

Abstract: Economists increasingly make the case for the measurement of missing capitals for better welfare, wealth, sustainability and productivity measures. Shadow prices represent the value of missing capital assets in economic welfare terms. This paper reviews the value concepts underlying shadow prices and the choice of estimation in practice. Four missing capital types are explored here: natural, cultural and heritage, human, and intangible capitals. We discuss the distinction between the concepts of exchange values and shadow prices intended to capture the social welfare value of assets when these differ from exchange values for reasons such as the presence of externalities. Exchange value estimates are consistent with SNA principles, while shadow prices seek to internalise the value of non-market elements such as externalities. We first clarify the distinction and also the relation of consumer surplus to shadow prices. In addressing the question of how to value non-market benefits and costs and, thus, how to estimate shadow prices, we also provide a mapping from missing capital asset categories to valuation methods and the theory of value they embed. Finally, we discuss issues relating to asset category overlaps as well as complementarities between categories in generating welfare, presenting some key unresolved questions.

Keywords: welfare; shadow prices; inclusive wealth; exchange values; natural capital; cultural and heritage capital; human capital; intangible capital; economic measurement (search for similar items in EconPapers)
JEL-codes: A13 D62 E01 E22 I30 Q51 Q57 (search for similar items in EconPapers)
Date: 2025-05-19
New Economics Papers: this item is included in nep-mac
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