Blame the Accountants?

Distinguishing between revenue and income.

It may not be hard, but the way accountants classify the flow of currency is also not in accord with reality. “Revenue,” a French word meaning to “come back,” refers to something (in this case currency) coming back (as taxes) to the Treasury, the place it started from. That is, revenue refers to a process, a change in location, regardless of who or what sets the process in motion. When currency is taken in by some entity other than the Treasury, it is “income” and the law provides that some portion of that be returned to the Treasury for accounting and redistribution purposes. Exempting some entities from this process is an example of favoritism (rewarding failure and punishing success) and manipulation. 

Accountants, assuring accuracy by counting everything twice, have quite inadvertently created a false picture of reality, an unrealistic static model, into which economists have then tried to stuff our communal enterprise by prescribing its behavior. In other words, economists are prescriptive, rather than descriptive (moralistic rather than scientific) and that largely accounts for why their predictions are mostly wrong. They are focused on what should be, rather than what is.

Perhaps the irrationality of finance actually attracts irrational people to dabble in it. Now there’s a thought.