Sunday, July 28, 2013

Late July Updates

I have been working on this website's theses.  Although you might not guess that because there have been no new posts for almost three weeks.  Nonetheless, a careful follower might have detected a number of updates on the bibliography page, as well as additions on the full-thesis page.  Here I will give a few notes about what is going on.

I was quite charmed by double entry bookkeeping, when I was introduced to accounting as taught to MBA students almost 40 years ago.  Because of that, and because I have a sense that I do not have an adequate definition of wealth, I wanted to review my accounting textbook to see where new wealth appears in the accounts of a business.  I guessed this might give a helpful view of wealth.

Now I have found my first answer.  When a sale is made to a customer, the cash received will normally be more than the cost of the goods sold, so a balancing entry is made to increase the owner's equity in the firm. I believe that shows new wealth.  I do not know if I have learned anything important in that.  I wonder about the larger economy surrounding a profiting firm.

So I want to carry the examination further: to a model economy with only two or three firms.  If the economy is prospering (each firm profiting) and each firm keeping double-entry books, will the creation of wealth require an expansion of the money supply?  Or how will the added wealth appear in the books? and will the added wealth necessarily reflect an inflow of physical resources from the environment?

My interest in checking the effects in double-entry bookkeeping may grow from my curiosity about where we (in present wealthy society) have our wealth stored up.  Could the balancing entries made, as we accumulate our wealth, suggest where we have our wealth stored?

No comments:

Post a Comment