In this and the following sections I shall examine the problems of definition, measurement and collection that arise in the field of national income and expenditure or, as I think it is better called, social accounting. As I mentioned in Section iv the characteristics of an economic system met with in this branch of economic inquiry provide a good example of the problems involved in handling empirical constructs. I shall also hope to show that the elements of a social accounting system are of special interest since they clearly exhibit a formal structure and are not simply a set of isolated concepts. For this reason they exemplify the necessity for economic and statistical design about which I have already spoken.

Social accounting, which will be familiar to most of you from the national income White Papers, is intended to classify, measure and present the transactions which take place over a period in an economic system in such a way that as far as possible they will accord with economic definitions and distinctions and as a result will be useful for economic analysis especially as it relates to practical economic policy. The definitions we adopt, the facts we need to collect and the classification which we impose on them are not by any means given in nature but at the same time they cannot, if they are to be usable, be developed regardless of the nature of the actual world.

Thus under the general heading of economic design I shall look at the problems of social accounting first from an economic point of view and second from an accounting point of view. The first will direct us on to the question of what we are trying to do while the second will force us to attend carefully to questions of consistency and of practical methods of doing it.