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The Forum > Article Comments > Double Entry - a good account > Comments

Double Entry - a good account : Comments

By Bryan Kavanagh, published 6/1/2012

It's a six hundred year old system that keeps our civilisation running along.

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The points you make should be warrant much more public discussion Bryan. Those who seek money and power do so directly or indirectly by exploiting the natural resources of the planet, from using fuel and causing carbon pollution to direct extraction of minerals.

The notion in the 60's and 70's that those who 'did well' did so by hard work is long dead. The question now is how to bring the "shysters who continue their wanton destruction of the planet" into line?

I think the carbon price was a good start. Then abolish fossil fuel subsidies, negative gearing on residential properties, upper middle class welfare (e.g tax breaks on superannuation for the rich). Then bring in some form of wealth taxes and limit the remuneration of directors/ executives of corporations. But that would be socialism - horror of horrors!
Posted by Roses1, Friday, 6 January 2012 11:50:46 AM
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Bryan,

I'm a retired accountant (and halfway through Gleeson-White's book) I already know the great contribution the profession has made to civilization. Of course we will continue to be 'future eaters, until economists and accountants include eco-systems and external costs in national and corporate accounts.

The book should be compulsory reading at High School.
Posted by mac, Friday, 6 January 2012 1:04:53 PM
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Bryan, mac, Roses1
Perhaps you could start by telling us what's the "real value" of a tree?

Roses idea that putting things in common ownership, makes society richer or is better for the environment only shows invincible ignorance. Underlying it is the nutty idea that capital makes society poorer. Presumably we'd all be better off living hand-to-mouth? As all the measures he advocates have the effect of consuming capital, all of them have the effect of moving society back to that stage of primitivism. Oh that's right, human beings are a plague aren't, they? "The environment" [translation: anything but human life] has higher value.

Of course while ever natural resources are in common ownership and therefore have no market price, the failure to include their value in economic calculation is a failure of socialism, not capitalism.

And while ever socialists indulge in their *single-entry* methodology - of counting the benefits of forced redistributions, but never the cost, we will continue to see the persistence of this essentially irrational, destructive, and infantile belief system.

All profits are a direct result of the behaviour of the masses in voluntary preferring the service which the entrepreneur has provided, over all possible alternative uses of them. Profits are the means by which the great mass of society direct the means of production to be used to satisfy their most urgent and important wants, as decided *voluntarily* by them. Those who criticise this means of decision-making, in favour of decision-making by the most violent party - the state - have no ground to criticise the either the power-lust or the environmental wastefulness of others. Abolish profit, and the destruction of human life and the environment would reduce us to the level of beasts in a wasteland. Partial abolition merely moves us part way down the path of destructionism.
Posted by Peter Hume, Friday, 6 January 2012 4:27:02 PM
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Peter Hume,

Altough you appear to be 'Off Topic' by discussing the relative virtues of socialism and capitalism, I'll answer the question.

The appropriate question is not 'the value of a tree' but the value of the eco-system of which the tree is a component. Some examples--

(1) mangroves are a nursery for many economically valuable fish species, compare the value of timber in the mangroves(negligible) to the economic benefit of a functioning mangrove eco-system.

(2) What are the cost/benefits of converting rainforest into farmland.

Ownership of the means of production is totally irrelevant to both double entry bookkeeping and the valuation of natural assets.

"All profits are a direct result of the behaviour of the masses in voluntary preferring the service which the entrepreneur has provided, over all possible alternative uses of them."

That is pure ideology(like much of economic theory) and has no basis in fact, as it relies on consumers possessing perfect knowledge of goods and services which of course, is complete nonsense. In fact industry attempts, through advertising, to restrict the information available to consumers. Recently, psychologists, not economists, have provided experimental data on how the average consumer really makes his/her choices.

I don't intend to get into an OT argument as to the relative merits of economic systems
Posted by mac, Friday, 6 January 2012 5:23:32 PM
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mac
“Ownership of the means of production is totally irrelevant to both double entry bookkeeping and the valuation of natural assets.”

No it’s not. Double entry book-keeping is a system of accounting for capital. It’s basic data are money prices, which in turn are market phenomena. The fundamental purpose of capital accounting is the determination of profit and loss. It has no application to values which are not exchanged against money.

Since the whole purpose of common ownership and control of a particular natural asset, is so that its value will *not* be accounted for on the basis of profit and loss, therefore the value of a “natural asset” held in common cannot be accounted for in terms of money prices and cannot meaningfully enter into double-entry book-keeping. To the extent that natural assets are exchanged against money, the externalities involved in their use can and do enter into account. It is only to the extent that they are not exchanged against money that they are “externalities” i.e. their value is external to economic calculation, and this applies to all goods held in common.

Therefore ownership of the means of production is quintessentially relevant to both double entry bookkeeping and the valuation of natural assets.

“I don't intend to get into an OT argument as to the relative merits of economic systems”

It is you who have opened such an argument by your claim that “we will continue to be future eaters, until economists and accountants include eco-systems and external costs in national and corporate accounts”.

You have not understood that that project can only be realized through the private ownership of the means of production.

Your implication is that we value present satisfactions too highly compared to future satisfactions. But
a) what makes you think your valuations are more valid than other people’s?, and
b) such a view is in any event only possible on the basis of greater capital accumulation.

I saw a documentary a while ago about a woman in Vietnam, poor with no relatives, who makes a living as a day-labourer for other farmers….
(cont.)
Posted by Peter Hume, Friday, 6 January 2012 6:54:23 PM
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She is getting too old to do the work, but worries that she has no other way to support herself.

So you can imagine how worried she is about her carbon footprint, can’t you?

The only thing that makes us capable of worrying about a longer period of production, is accumulated capital to keep us alive over that period. Yet common ownership is not a superior method of *accumulating* capital, but only of *consuming* it. Throwing humans back to *less* productive methods is worse both for human beings and the environment.

“The appropriate question is not 'the value of a tree' but the value of the eco-system ….”

Okay. So tell us. What is the “real value” of it?

Please show how you have taken into account the present versus the future valuations of all prospective users and non-users of it.

“That is pure ideology …”

That is pure name-calling. The question is whether it’s true or false, not “ideology”.

“…and has no basis in fact, as it relies on consumers possessing perfect knowledge of goods and services which of course, is complete nonsense.”

No it doesn’t rely on perfect knowledge. Its basis in fact is only that it relies on each consumer preferring one good to another.

It’s true that one’s knowledge is imperfect, but that is no argument for substituting a much much more imperfect knowledge set. Common ownership has all the same knowledge limitations *and* lacks the ability to rationally calculate how best to use resources so as to avoid waste and maximize satisfaction. It is your theory that has no basis in fact or logic.

“In fact industry attempts, through advertising, to restrict the information available to consumers.”

Politicians are not liable for misleading and deceptive conduct in their official capacities, so you still can’t justify your assumption that politics provides any better solution to the original problem.

“Recently, psychologists, not economists, have provided experimental data on how the average consumer really makes his/her choices.”

Contingent experiments do not beat logic.

Please see “Depletion of Natural Resources” at p.499 starting “One of the…”
http://mises.org/books/mespm.pdf
Posted by Peter Hume, Friday, 6 January 2012 6:57:58 PM
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