Double not Triple Entry

April 2013

The step from single entry to double entry bookkeeping was made at the time of the Renaissance. It is the equivalent in the money world to perspective in painting, both having been 'invented' by Luca Pacioli. With the Renaissance, humanity was cast into the sense world, leaving our earlier sacred, godly, religious consciousness behind us. Double entry in accounting, perspective in art and no doubt their equivalent in music – they enable us to find our bearings in that new world, independently of any externally expressed world conception. That is to say, as raw, even spiritual, experience.

In this sense, double entry bookkeeping is a threshold phenomenon; it requires one to see both sides of a transaction, for example. Such precepts, born of accounting’s deeper nature, serve as a guide to the will, which is what is needed above all else today. To the free will of the free market should be added the responsibility of association, so that we all make it our 'business' to undertake our destinies with economic and financial awareness both as regards motivation and effects.

There is no further development of double entry, for example to triple entry. Double entry does not change with time. What changes or should change is that everyone becomes familiar with it and uses it to speak to one another through their accounts. It is like multi-perspective in the early 1920s or jazz. If this were understood one could not have externalities and so the whole world of environmental abuse would be stopped, and the invention of such things as environmental accounting made unnecessary. For example, if a polluter were billed for his pollution by the town whose river he pollutes he would have a lower profit and would change his behaviour to pollute less.

There is no improvement needed or possible for double entry bookkeeping except for it to become a generalised tool in an economics that has overcome its dependency on mathematics and statistics. Moreover, accounting has the great merit of being a non-man's land as regards ideology. It is also a great way to get 'moralic acid' out of our thinking.

Two sides, one coin

Double entry entails and implies interaction. That is its very point: it requires an interaction between me and the rest of the world, between the individual and the world he is doing business in. It is a method for one to become aware, in the silence of one’s own soul, of the world in which one is taking part. It is in that sense 'private'.

No set of accounts can exist unto itself; it is nothing but one side of the situation it describes. It records my sales; but the other side, the expenses of my trading partners, are in their accounts. So the only 'improvement' possible is that the two traders compare their accounts. This is the missing interaction, but this also relies on double entry. 

Double entry comes into its own, not when done by accountants, but when done by entrepreneurs, and done by them to their own accounts. Then it becomes an instrument not only of perception, but of perception of the will, and of training the will. Training it to cohere with the world, not stand over against it.

In this sense Max Weber’s oft-cited critique to the effect that double entry is a tool of capitalism, ought to be modified to say it is a tool of capital economy.

Three kinds of money

For these things to become operational, however, there has to be a single world economy and three kinds of money – purchase, loan and gift money – for which, luckily, income and expenditure accounts, balance sheets and closing entries provide us with an analogy at the ‘micro’ level.

In macro-economic terms, the best way to understand the three kinds of money is to see that when there is only one economy, there cannot be more than one currency (hence no foreign exchange market!) and there cannot be balance of payments or the gold standard (or any derivative of it). Indeed, per Rudolf Steiner, the three kinds of money come into being precisely as a metamorphosis of balance of payments.
But this means that if one imagines three kinds of money existing within the panoply of such things as more than one currency, central banks, the gold standard, and balance of payments, then one can know for certain that one is not in fact speaking about three kinds of money, however much one may think or say otherwise. We cannot have our cake and eat it!

An important corollary

An important corollary of this approach is that money should not be created by the state or by the banks, but by people (a) as the counterpart for the goods they produce (purchase money or money in normal terms) and (b) as the counterpart for their capacities (loan money or capital). It is also not a solution to return to 100% reserves. We need to go forwards, replacing reserves (of the past) with expectations (from the future). The only way to do this is through accounting, which is independent of any currency.

But it is also independent of political ideology and thus of ‘the government of the day’. As it is also of market theory, which would not deign to defy the logic of accounting if it were to come to the fore in our economic considerations.