Full-Cost Accounting

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By Doina Petrescu et al. :

"A whole subfield of environmental and ecological economics, for instance, argues for “full cost accounting.” Calculating the full costs of any project involves considering the life cycle of a project and cost effects along the entirety of the supply chain and waste streams (Epstein et al., 2011). Epstein et al. (2011), for example, have produced a full cost accounting of coal mining in Appalachia that includes producing both conservative, average, and high cost estimates for land disturbance, public health problems, climate damage, excess mental retardation for those living near coal production sites, acid precipitation, local water contamination, and so on.

By the same token full benefit accounting would involve estimating the social value produced by any project beyond the creation of paid employment or improvements in individual wellbeing. Determining full benefit requires identifying improvements in household, community and ecological health, social and psychological well‐being, as well as improvements in civic involvement and participatory democracy. A more comprehensive method of full cost–benefit analysis attaches a price to as many of these external and indirect effects as possible, but in so doing, brings into relief a constitutive contradiction: that which is excluded by conventional financial accounting (as indirect or external) is actually internal to the analysis, not external. Discomfort with conventional accounting has led many to seek going beyond GDP, such as the Index of Sustainable Economic Welfare (England, 1998), with Bandura (2008) listing 178 different indices that actually subtract measures that reduce well‐being such as pollution, disaster recovery, etc. And despite this proliferation of academic interest in measuring well‐being more broadly and sustainably, there has been little take‐up of these indices when making municipal or national level fiscal decisions." (https://onlinelibrary.wiley.com/doi/full/10.1002/eet.1890)