The Illusion of Accounting

Partial accounting is a lie. Complete accounting is impossible. If we never forget those things for a moment, then accounting is of some use.

Not being adverse to calculation, I still find it necessary to explode the illusion that numbers provide the best guide for making decisions about policy, law, and investment. The most important things will be neglected when we rely on numbers, because the most important things can not be measured or quantified with any precision.

In 1976 the "Readers Digest" had an article about "is solar energy practical for your home?" The answer was if you monthly energy bill is less than your mortgage payment for the solar equipment then solar is a bad investment.

How simple! We can forget that the mortgage payments depend on government interest rate policies, and that the price of gas depends on the politics of markets. Why should we expect prices to reflect any "real" costs? The final cost of producing energy is not its price, but it includes the suffering of many future generations and who will live on an overheated planet. No number could ever measure that enduring cost, and then reasonably be compared the artificial and momentary interest cost of one's mortgage loan.

Once the solar loan has been paid the monthly cost would fall to the maintenance cost, but the cost of not using solar would go on forever, and the utility bills would probably increase. So to avoid paying more for the temporary mortgage than for the unending utilities we have the solution offered by numbers and accounting. If we follow the standard group-think we will chose to do the wrong thing. We will overheat the planet for millennia, and commit ourselves to endless utility payments.

In trying to account for everything it is considered smart to calculate the pay-back time for an investment. If one wishes to forget planning for the future then it is possible to abandon any projects that have a low rate of return, because the pay-back time is too long. The possibility of low interest loans to make long-term projects "practical" is not often mentioned. That would be seen as bad "innovation."

If we use business logic/accounting, like the "Reader's Digest" article does, then long-term planning seems impractical, but what is really impractical is planning based on numbers. Good judgment requires much more than flawed accounting.