Who Was Richard Stone?

(John) Richard Stone (1913–1991) was a Keynesian economist and econometrician who adapted the method of double-entry accounting for national income. He was awarded the 1984 Nobel Memorial Prize in Economic Sciences for his work.

Key Takeaways

  • Richard Stone was a Keynesian economist and econometrician who made major contributions to economic measurement and applied economic statistics.
  • Stone spent most of his career at Cambridge University, where he worked on developing systems of national accounting and constructing econometric models. 
  • He was awarded the Nobel Prize in 1984 for his development of the (now) standard method of national accounts based on double-entry accounting.

Understanding Richard Stone

Richard Stone was raised during the Great Depression, which fueled his interest in studying economics. While a student at Cambridge, Stone learned statistics from Colin Clarke, a professor who greatly influenced Stone and brought his attention to the subject of national accounts, which would one day earn him the Nobel Prize. Following his graduation from Cambridge in 1935, Stone began working for Lloyd's of London until World War II. During the war, Stone worked as an economist for the British government and assistant to John Maynard Keynes, whom he had previously studied under at Cambridge. The government was interested in better understanding the national economy in terms of available wartime resources. This work led to the U.K.'s first national accounting of a variety of important economic statistics.

National accounts in the U.K. measure the sum of income, consumption, and other wealth factors in providing an overall picture of the economy's health. Much of this analysis involves an in-depth understanding of statistics. Stone's work during World War II in the area of national accounts led to him being called "the father of national income accounting" later in life.

Following the war, Stone pursued an academic career at Cambridge, where he focused his research interests on economic theory using statistical methodology. Many notable students attended Cambridge while Stone was there, including Alan Prest, whose work in the field of demand analysis made lasting contributions. He started the Cambridge Growth Project with J.A.C. Brown. Together they developed the Cambridge Multisectoral Dynamic Model of the British Economy (MDM) and Social Accounting Matrices (SAM), both of which were precursors to work subsequently advanced with the advent of computational statistics.

In 1970, Stone received the appointment of chairman of the Faculty Board of Economics and Politics at Cambridge. He retired in 1980 after also serving as president of the Royal Economic Society from 1978 to 1980.

Contributions

Stone's contributions to economics revolve around the generation and application of economic statistics and econometrics.

Double-Entry Accounting

Stone was the first economist working in his field to make use of double-entry accounting. Double-entry accounting requires every income item on a balance sheet to be offset by a corresponding expenditure. This is widely known in modern times as balancing the books. Stone's usage of double-entry accounting in the national accounts was especially important as the global economy expanded, due to the accounting uniformity it brought to international business.

Econometric Modeling

With Alan Brown, he developed a comprehensive macroeconometric model of the British economy. In 1962, they published the book, A Computable Model of Economic Growth, which would become the foundation of the Cambridge Growth Project. This model produced static projections of major economic variables for the next five years into the future. 

Consumer Behavior

Concurrent with his work on national income accounting, he also did some early work in estimating consumer behavior. He used data on consumer expenditures, incomes, and prices to model consumer demand and utility functions.