A British economist who worked for the famed John Maynard Keynes during World War II was awarded the 1984 Nobel Prize in economics yesterday for devising the basic way in which most nations keep track of their total income and expenditures.
Richard Stone, 71, who retired as a Cambridge University professor in 1980, became the fourth Briton to receive the Nobel economics award. He was cited for developing accounting systems that help governments allocate their financial resources.
This system is also used by international financial organizations, such as the International Monetary Fund and the World Bank, to judge the performance of developing nations.
Stone was cited by the Royal Swedish Academy of Sciences for his "epoch-making innovation" of creating systems for national accounts, which "provides a basis for national economic policy."
The academy said he had helped create a way of summarizing "billions of billions of transactions between purchasers and sellers" into a concise picture of "a nation as an economic unit."
In essence, Nobel committee members said Stone's pioneering work, building on earlier research, has made possible standard international economic comparisons, as well as regional development evaluations, and provided the accounting basis that officials rely on for making economic policy in most countries.
George Jaszi, director of the Commerce Department's Bureau of Economic Analysis, said in a telephone interview that Stone's was a "major achievement" that led to the standardization of national accounting procedures.
"He not only is a sophisticated economist, but he knows a lot about mathematics, statistics and econometrics," Jaszi said.
The national income and product accounts, according to Jaszi, explain "how things are produced, what production is, how the production is distributed, what part is saved, and what part is consumed." These accounts produce the big picture, of which gross national product is only one part.
Stone is not widely known in this country, although his research in putting together all of a nation's economic activity into a single model that balances income and outgo is well known to technicians and statisticians. Jaszi said that Stone also had pioneered in developing input-output analyses and "flow of funds" data.
Erik Lundberg, a member of the Swedish Nobel awards committee, said that Stone did his basic research while working under Keynes at the British War Cabinet Office. The impetus for his work was the need to keep track of Britain's wartime economy.
"Stone did the dirty, heavy work," Lundberg said. "He developed it under the pressure of an urgent problem and with the great stimulation of Keynes." Brookings Institution economist Edward Dennison, who also knew Stone during that period, said Stone had helped coordinate economic statistics for the United States, Canada and Britain.
Dennison, who along with Jaszi, Simon Kuznets and others helped develop American national income statistics, said that Stone's work "was a practical achievement" for the British, because Stone and his colleagues were able to measure the sources and uses of demand for the war, and then estimate against that total what the needs for personal consumption would be, and the tax levels necessary to finance total demands.
Stone's work was later standardized and adopted as an official system by the United Nations.
Assar Lindbeck, chairman of the Swedish academy's selection committee, said that Stone's ideas are used by all major international organizations and by more than 100 countries. He added that the World Bank often conditions a loan on use of Stone's accounting system.
"You could say Stone's system could be a vaccination against wishful thinking on the part of developing governments," Lindbeck said.
"It has been standardized so that within the framework of international organizations it can be used for all countries except those with socialist systems," he said. The system is not adaptable to socialist countries because they do not count services as part of their national output.
"I am absolutely overwhelmed," Stone, 71, said from his home in Cambridge, England. "One is always surprised that things like this happen to oneself."
Britain's previous laureates shared the economics prizes with others in 1972, 1974 and 1977. Stone's award marked only the fourth time that American economists did not win or share the prize since it was established in 1969.
Academy officials described Stone, who was knighted in 1978, as "a very silent man."
He was born Aug. 30, 1913. After his War Cabinet service, he became head of Cambridge's Department of Applied Economics in 1945. From 1955 until retiring in 1980, he was Leake professor of finance and accounting at Cambridge.