A step too far?

March 2014

The evolution of bookkeeping generally falls into two parts – single entry and double entry, with double entry appearing in Italy during the Renaissance. Hence it is also known as Italian bookkeeping. Descriptions of this evolution tend to default to it being an effect of ‘transaction costs savings’ – finding cheaper ways of doing things – or to fraud control. Both these things are effects, however;; the true driver of double entry is the evolution of consciousness consequent on the individuation of humanity. As we pass from being the creatures of gods to becoming their partners, from societies that were theocratic to modern democracy, so the process of finance comes out from behind closed curtains into the light of day, passing from the hands and minds of a few into the consciousness and behaviour of all citizens. Potentially, at any rate.

The effect of money is to free human beings from the matrices of old, but this brings with it, as a necessary counterpart to freedom, the possibility of error;; better put, of acting out of a moral code of one’s own devising. With single entry, mistakes cannot easily be seen, let alone whether they were accidental or intended, benign or malign. With double entry, mistakes are made visible, but so, too, whether they were intentional or accidental.

But the method also brings with it the ability to correct or remedy any mistake, and with it to ‘tidy up’ or ‘make good’ whatever led to the error in the first place. This may well mean correcting malevolence, but it could as easily be a simple matter of up-skilling. As such, double entry bookkeeping is not only the foundation of modern – that is, post Renaissance finance – it is also the foundation of moral behaviour, a guide that is objective because it is universal and so enables the otherwise anarchy of subsequent moral evolution to eventually cohere without any loss of freedom.

These dimensions are usually not in the discussion or explanation of double entry, more’s the pity. Usually, one is taught the technique by rote and without explanation. In part, that is its beauty: it works without our knowing why. But this becomes problematical if explanations of double entry do not capture its wider implications and purposes for humanity, especially as it does, or could, affect the lives of young people.

Though generally not accepted, or at least not discussed, there was a second Renaissance in the time prior to WW1, the extensive and meaning of which was lost in the chaos and cacophony that then unfolded. But at that moment there was a step change. The clue is in the history of art. Just as R1 saw the emergence of perspective – the presence of the painter in the painting – so R2 saw the development of multi-perspective in the one plane, the use of perspective as a medium of conversation, so to speak.

As single entry passes into double entry, a technique arises that enables one to be or see both origin and destination of money and capital, metaphors for the intentions and effects of what one does in life (always for others) and how it is financed (always by others). The illusion of Robinson Crusoe economics and philosophy is thereby also seen through, but in a way that is both pragmatic and ethical.

This development is lost on many commentators. For example, those who describe double entry bookkeeping as a tool of capitalist control. It might also be this, but you cannot blame the axe if it is used to inflict harm rather than chop logs. This narrow view of bookkeeping also tends to think that there should be a further advance, a next step. For example, ‘triple bottom line’ or ‘triple entry bookkeeping’, although these are topics that are not synonymous despite their similar names.

Triple Bottom Line

The argument for triple bottom line is that normal business and normal accounting put finance before people and the planet. They thus distinguish between a social profit and as financial profit, the latter being achieved by externalising to the public balance sheet as many costs as one can get away with. Financial profit is always higher, for example, if one pollutes but does not pay for it, or if one underpays the workforce. The simple solution to this would be to stay with normal accounting, but not to externalise costs. Not to pollute, rather than pollute then pay to have it cleared up;; not to underpay then create a benefits system to add back what has been taken out, not unlike fortified white bread which would have been far healthier had it never been defortified in the first place.

Instead of this simple solution, however, triple bottom line sets out to create accounting concepts for people and the environment, which are not necessary. In the process, in the case of the environment, for example, they create the idea of ‘natural capital’ for which there then has to be a market;; whereas the environment strictly speaking is contextual to the economy, not part of it. You husband a herd of cows for the milk and meat they provide, not keep them ‘in play’ ready to be sold to the highest bidder. Likewise, farms should be farms, not potential golf courses or housing estates.

In this, much of environmental economics is indistinguishable from that of the World Trade Organisation (which in theory it opposes) where nature (and also culture, ideas) are conceived and treated as if they were commodities, things for sale rather than the things that give rise to the things we sell.

Triple Entry Bookkeeping

Triple entry bookkeeping is a very different story. It accepts the evolution from single to double entry, but recognises that in a digital world it might not be enough. A third entry is needed, so that what cannot be escaped in physical life cannot be escaped either in its facsimile or digital version. Hence, its slogan “the receipt is the transaction”. One builds the accounting world on the receipt (in electronic format), rather than the transaction it represents.

This is not really about triple entry or a next step, therefore, but about ensuring that digital finance does not create an illusion. Perhaps a better term is needed, one that is tighter to the process it represents.

The evolution of bookkeeping generally falls into two parts – single entry and double entry, with double entry appearing in Italy during the Renaissance. Hence it is also known as Italian bookkeeping. Descriptions of this evolution tend to default to it being an effect of ‘transaction costs savings’ – finding cheaper ways of doing things – or to fraud control. Both these things are effects, however;; the true driver of double entry is the evolution of consciousness consequent on the individuation of humanity. As we pass from being the creatures of gods to becoming their partners, from societies that were theocratic to modern democracy, so the process of finance comes out from behind closed curtains into the light of day, passing from the hands and minds of a few into the consciousness and behaviour of all citizens. Potentially, at any rate.

The effect of money is to free human beings from the matrices of old, but this brings with it, as a necessary counterpart to freedom, the possibility of error;; better put, of acting out of a moral code of one’s own devising. With single entry, mistakes cannot easily be seen, let alone whether they were accidental or intended, benign or malign. With double entry, mistakes are made visible, but so, too, whether they were intentional or accidental.

But the method also brings with it the ability to correct or remedy any mistake, and with it to ‘tidy up’ or ‘make good’ whatever led to the error in the first place. This may well mean correcting malevolence, but it could as easily be a simple matter of up-skilling. As such, double entry bookkeeping is not only the foundation of modern – that is, post Renaissance finance – it is also the foundation of moral behaviour, a guide that is objective because it is universal and so enables the otherwise anarchy of subsequent moral evolution to eventually cohere without any loss of freedom.

These dimensions are usually not in the discussion or explanation of double entry, more’s the pity. Usually, one is taught the technique by rote and without explanation. In part, that is its beauty: it works without our knowing why. But this becomes problematical if explanations of double entry do not capture its wider implications and purposes for humanity, especially as it does, or could, affect the lives of young people.

Though generally not accepted, or at least not discussed, there was a second Renaissance in the time prior to WW1, the extensive and meaning of which was lost in the chaos and cacophony that then unfolded. But at that moment there was a step change. The clue is in the history of art. Just as R1 saw the emergence of perspective – the presence of the painter in the painting – so R2 saw the development of multi-perspective in the one plane, the use of perspective as a medium of conversation, so to speak.

As single entry passes into double entry, a technique arises that enables one to be or see both origin and destination of money and capital, metaphors for the intentions and effects of what one does in life (always for others) and how it is financed (always by others). The illusion of Robinson Crusoe economics and philosophy is thereby also seen through, but in a way that is both pragmatic and ethical.

This development is lost on many commentators. For example, those who describe double entry bookkeeping as a tool of capitalist control. It might also be this, but you cannot blame the axe if it is used to inflict harm rather than chop logs. This narrow view of bookkeeping also tends to think that there should be a further advance, a next step. For example, ‘triple bottom line’ or ‘triple entry bookkeeping’, although these are topics that are not synonymous despite their similar names.

Triple Bottom Line

The argument for triple bottom line is that normal business and normal accounting put finance before people and the planet. They thus distinguish between a social profit and as financial profit, the latter being achieved by externalising to the public balance sheet as many costs as one can get away with. Financial profit is always higher, for example, if one pollutes but does not pay for it, or if one underpays the workforce. The simple solution to this would be to stay with normal accounting, but not to externalise costs. Not to pollute, rather than pollute then pay to have it cleared up;; not to underpay then create a benefits system to add back what has been taken out, not unlike fortified white bread which would have been far healthier had it never been defortified in the first place.

Instead of this simple solution, however, triple bottom line sets out to create accounting concepts for people and the environment, which are not necessary. In the process, in the case of the environment, for example, they create the idea of ‘natural capital’ for which there then has to be a market;; whereas the environment strictly speaking is contextual to the economy, not part of it. You husband a herd of cows for the milk and meat they provide, not keep them ‘in play’ ready to be sold to the highest bidder. Likewise, farms should be farms, not potential golf courses or housing estates.

In this, much of environmental economics is indistinguishable from that of the World Trade Organisation (which in theory it opposes) where nature (and also culture, ideas) are conceived and treated as if they were commodities, things for sale rather than the things that give rise to the things we sell.

Triple Entry Bookkeeping

Triple entry bookkeeping is a very different story. It accepts the evolution from single to double entry, but recognises that in a digital world it might not be enough. A third entry is needed, so that what cannot be escaped in physical life cannot be escaped either in its facsimile or digital version. Hence, its slogan “the receipt is the transaction”. One builds the accounting world on the receipt (in electronic format), rather than the transaction it represents.

This is not really about triple entry or a next step, therefore, but about ensuring that digital finance does not create an illusion. Perhaps a better term is needed, one that is tighter to the process it represents.