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Thanks for your comments (I received one by email - hopefully the member will post it on here so you can benefit from his contribution). I was just saying to Michael that we could learn more about how to measure subjective interpretations by looking at the growing trend in SRI, particularly with regard to investment from Scandinavian countries. Indeed, NAPF even signalled its support of SRI in its 2005 Paper on CSR/SRI and now that quoted companies have to report on ESG in their business review there is a growing need to calculate the value of subjective interpretations. A CSR 'value' is attributed to companies worthy of SRI through their inclusion within CSR indices (ie FTSE 4Good series), various CSR initiatives and the application of conversion factors and a motivation to make improvements on environmental impact (Defra have various conversion tools where companies can benchmark and improve on their environmental standards by converting units of consumption into a measurement of the greenhouse gases used using conversion factors such as kWh, distance travelled by vehicles etc). A value can be assigned to such activities both objectively and subjectively. I suppose the objective measurement would be the savings/sustainability benefits and perhaps reduced risk. The subjective element may be the impression this has on the stakeholders of a company. Coming from a business perspective this subjective value could be measured by improved reputation (increased sales perhaps) and reduced cost of capital (increase in investment interest). Cause and effect permitting, the value could be fairly accurately calculated (BP springs to mind). I suppose CSR initiatives allow for some form of subjective value to be calculated to fit an economists view of value in this way by taking common value indicators such as the inclusion in an index and calculating the value that it generates. I wonder if anyone has any comments/ideas on how we can learn more about the value of subjective interpretations in other areas? Another thought: a social and economic value is generated when companies donate profits to charity. In terms of tax savings the economic value of creating social value increases when companies cross the higher rate of corporation tax threshold. It makes sense to create social value in this respect by making tax-deductible donations to charity to gain value economically by having a lower corporation tax bill.

John, I agree with your observations.I fear that current regulatory innovation has the "unforeseen" consequence of reducing the availability of risk capital. As per another of my blogs, the financial system is on an enforced "crash diet" to make it fitter and generate less risk for the future.That will undoubtedly constrain the pace at which Western hemisphere economies can re-engender economic growth.That is the grim reality. The Politicians who are vainly trying to show leadership on the issue of economic recovery " cannot have it both ways."

An excellent and thought provoking piece. The sentence about banks how banks focussed "on their ESG responsibilities but ignored the fact that they also have wider ECONOMIC responsibilities?" raised a wry smile from me. Whilst I admire the excellent progress which has been made in this field by some remarkable pioneers over the last decade, I think that a focus on ESG has yet to penetrate very deeply within the industry as a whole. I was taking a nostalgic look at the London Principles project the other day (I think it unlikely that DEFRA will get their mojo working in time to repeat the exercise for Rio+20) and was struck by how current they still look (take a bow Forum for the Future). Here is a poser for the london Accord community do you think it is worth revisiting these principles? the link to the report is here- http://server-uk.imrworldwide.com/cgi-bin/b?cg=downloads&ci=cityoflondon&tu=http://217.154.230.218/NR/rdonlyres/13F2434D-2209-4836-AEE3-D5C2E6A5F75E/0/SUS_financingfuture.pdf

I disagree with Bob's comment towards the end of his final paragraph that "Skill now has to be applied to successful economic contraction, contraction that does not permanently destroy the key ingredients for growth ..." I argue that any contraction should be from the public sector, not from the productive economy which already has in place those key ingredients for growth and wealth creation. From the perspective of the UK economy, productivity and generating surplus we were badly served by the last government which employed over one million additional, and unnecessary, public sector workers - people who expected a job for life and a generous pension, and so took on significant commitments; people who will be hurt badly if the public sector contracts and yet that is, surely, what must happen - and as quickly as possible. If the public sector was to shrink by one million people it would still be larger than in it was 2005, even allowing for inflation of numbers to cope with Brussels. And the impact of this number of additional people on the public purse is of the order of £30bn per annum - just about enough to pay our interest on the sovereign debt. And then there's tax avoidance etc ... etc ... Losing these numbers of people would force a reduction in both bureaucracy and the additional red tape that was created to keep people busy and appearing to be productive which, in turn, reduced the effectiveness and competitiveness of commercial private enterprise. The trap I fear is that politics and the media might lead us to employ more people in the public sector - and what do we pay them with? Why taxes of course; and where do the extra taxes come from - the additional people newly appointed to the public sector who will need to be paid from taxation! and so more people will need to be employed to generate those additional taxes - a Ponzi Scheme if ever there was. Or, have I misunderstood the context in which Bob has used the word 'economic'? Steve Mullins