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Accounting: Good or Evil?

Entry 1057, on 2009-07-20 at 21:06:35 (Rating 3, Comments)

In a recent podcast I heard some interesting comments from a political commentator talking about how the American health system could be improved. He said that the correct approach was to decide what needs to be done, ignore the accountants and economist, get the project established, and then leave them to figure out how to pay for it.

This might sound rather radical but I think he is essentially correct. Accountants seem to have the primary role of telling people why they can't do certain things, usually because the money's just not there. But if we listened to them we would get almost nothing worthwhile done because there's always a reason not to proceed with a project: if the economy's bad we need to economise and if its good we need to curb spending to avoid inflation!

I'm not saying accountants are idiots and I'm not saying they aren't valuable members of society. Wait a minute. Actually I am saying they aren't valuable members of society, although I'm not saying they are useless either. The thing to remember is that we shouldn't take too much notice of them because they rarely see the big picture because accounting seems to be more a profession obsessed with tiny (usually irrelevant) details.

If a project needs to happen for various reasons then the decision should be made to proceed and the funding should be allocated based on what's needed to get the job done. The people who decide which projects should go ahead should be experts in the relevant area: scientists, engineers, doctors, and ultimately politicians in many cases.

Should we trust politicians more than accountants though? Generally they have an even lower trust rating than other professions such as lawyers and accountants which aren't necessarily exactly at the top of the trust scale themselves! I think we should trust them because they have a wider perspective and they are more accountable (ironic word there) to the public.

So the accountants are consigned to the background where they can do what they are good at: keeping track of the financial aspects of a project without having any real input into the bigger process.

Accounting is neither good nor evil. It is a function which often isn't used appropriately and its the politicians and managers who misuse it who are really to blame.

Comment 1 (2265) by SBFL on 2009-07-22 at 10:02:23:

"He said that the correct approach was to decide what needs to be done, ignore the accountants and economist, get the project established, and then leave them to figure out how to pay for it...This might sound rather radical but I think he is essentially correct."

Excellent! Lets not worry about how it is to be paid for. But it's okay, just do it anyway and we'll worry about that later. Not sure how, a problem not for today. And yet the left wonder how the sub-prime crisis came about!!

OJB - you should try and explain this brilliant theory to all those who have lost their homes, and see how far you get. Please don't become a home budget advisor! The stupidity of the left never ceases to amaze!!

Comment 2 (2266) by OJB on 2009-07-22 at 18:15:39:

I'm only suggesting this approach for things that really matter like universal healthcare, critical research projects, etc. If we start with the mindset that something has to happen no matter what the financial consequences then its surprising how often it turns out that the overall outcome is positive, even from a financial perspective.

For example, can you ever imagine the Apollo project even getting started if accountants had been given the final say on whether it was worth it? Can you imagine any truly worthwhile project getting started? Me neither!

Comment 3 (2269) by SBFL on 2009-07-23 at 06:55:21:

Re first para: In the immortal words of Darryl Kerrigan: "Tell him he's dreamin'!". Universal healthcare still has to be paid for. As Key cheekily told Goff a few days back, there's no pixies printing money.

Re 2nd paragraph: a fair point you make there but surely the exception to the rule, hardly enough to make it the norm for more mundane day to day matters. Where humankind has a tangible opportunity to make a great leap forward, the value is hard to quantify, even for an accountant. But these cases must remain in their context. It's not a license to borrow and spend.

Comment 4 (2273) by OJB on 2009-07-23 at 19:24:09:

Compromised systems, like the one in the US, have been created to try to save money and have ended up doing the exact opposite. A major reason for this is the greed of the private sector but if a decent system had been created to start with, free from artificial financial constraints, the problem might never have arisen.

Comment 5 (2276) by SBFL on 2009-07-23 at 20:08:52:

Whatever your philosophy or idealogy, there's always the same question though..."how will it be paid for"? Not that there isn't an answer available but my point is that any sensible person/govt would answer this question before charging ahead. You advocate otherwise. That's being irresponsbile, to put it mildly.

Comment 6 (2277) by OJB on 2009-07-24 at 08:21:52:

Its not quite like that. We know things can always be paid for if they are considered important enough. Look at the war in Iraq and the bank bail-out. It was decided they needed to be done and they happened. There was never any consideration of not doing them because of price. I'm saying let's extend that to things that actually matter: universal health care, hydrogen fusion research, etc.

Comment 7 (2278) by SBFL on 2009-07-25 at 04:11:46:

And I disagree that either of your examples should have had any taxpayers money spent on them (which you potentially may disagree with as well). But that only emphasises my point - this approach is foolish and irresponsible. As it is also to things that you probably find "important enough". I doubt the majority of public know what hydrogen fusion research is, so clearly the danger of going ahead with pet projects like this only means that your support of this approach is a recipe to send a nation into bankruptcy (and then once this hits everyone, funnily enough priorities of importance suddenly change!)

Comment 8 (2282) by OJB on 2009-07-25 at 09:19:10:

Very little worthwhile ever arose through the fundamental aim of making money or pursuing a fiscally responsible path. We need to get away from this idea of money being the ultimate aim and most critical factor in everything we do.

Look back at history. The people who made the real difference weren't accountants and very few were motivated by money. The big advances are made by people looking much further ahead than the pathetically narrow perspective of the accountants, economists, and managers of this world.

Until we get back to a philosophy of risk-taking, exploration and adventure our civilisation will continue to decline under the weight of fiscal responsibility, physical and social safety, and fake commercial entrepreneurship.

Comment 9 (2283) by SBFL on 2009-07-25 at 10:19:47:

Re Para 1: You know I was thinking of clarifying that point, but gave you enough credit to assume I didn't need to. Seems I was wrong. Anyway, as I pointed out in comment 3, there are genuine exceptions to the rule of having to have financial payback. In fact the dole in itself probably fails in the cost-benefit analysis (CBA). But an assessment of "how will it be funded" still needs to be made. What a responsible government doesn't want to do is bankrupt the country, but let me make it clear that finding funding doesn't mean that any idea or initiative must have a positive CBA. Value can also be measure in qualitative terms . Our social welfare safety net is a good example of this. The vast vast majority of middle income Kiwis are willing to assist the genuinely less well off people that struggle to make ends meet. Aside from genuine social welfare, advance science is another area where we - as a society - can contribute for long term benefits (as I said, hard to quantify).

Re 2nd para: This is covered by my comment above.

Re 3rd para: So lets not put our country in long term debt, thereby putting innovation aside in favour of what is critical today. If we give some thought to how any initiative will be funded - whether is be putting right a past wrong, or embracing innovation with some risk - then some headway may me made. Silly nilly-willy spending will only have long term detrimental affects on scientific innovation, and I am sure neither of us want that.

Comment 10 (2286) by OJB on 2009-07-25 at 11:07:53:

Has a country ever been "bankrupted" (whatever that means) by pursuing the sort of ventures I have outlined? Can you imagine the ultimate outcome of this failure of imagination: the human race is wiped out by an asteroid impact (or other globally disaster) because they listened to small minded people like accountants instead of pursuing a realistic space program. That's the sort of "big picture" I'm talking about!

Comment 11 (2287) by SBFL on 2009-07-25 at 11:50:19:

Hmmm, so you don't know what bankruptcy means..: ""bankrupted"(whatever that means)" I am not even going to bother to link. Look it up on the "internet". - I assume you know what that is.

"Can you imagine the ultimate outcome of this failure of imagination: ". You really should have listened to me before commenting. I'll give you a 2nd chance. - but if you want to resort to childish extremes...

Comment 12 (2288) by OJB on 2009-07-25 at 14:31:38:

I was pointing out that the term "bankruptcy" doesn't really apply to a country in the same way it does to a private business. Was I being too subtle?

Maybe we agree without knowing it. How often does that happen? Do we agree that some projects are too important to be constrained by mere financial issues?

Comment 13 (2290) by SBFL on 2009-07-27 at 02:14:34:

Yes, very much so. Other than technical aspects (like a country must continue to exist even if just a shadow of its former self), I fail to see any realistic differences. Zimbabwe is the obvious case in point.

In this case I know where I agree with you, but as is often the case, you prefer to continue down a line of argument. This is why I had to refer you to something I already said. Sometimes people don't fit pigeon-holes, and just because I disagree with one aspect doesn't mean I agree with others on the same issue.

And on your final question, the answer is 'no'. What I said is that some projects don't need to have a financial payback, that their benefits are qualitative, too difficult to quantify. But at the end of the day the money must be found to fund them (whether from loans, cutting spending, increasing taxes etc.). And this should be done up front so the ramifications so the project can be assessed honestly and upfront by the decisionmakers and ultimately the people, those who are financing it, either today or tomorrow.

Comment 14 (2292) by OJB on 2009-07-27 at 05:23:00:

I think we mostly agree then. You just suffer from a failure of imagination where you can't see past this insane artificial financial system we have built for ourselves which has given exactly the wrong people all the power and is stopping the whole human race from reaching anything near its full potential.

Comment 15 (2294) by SBFL on 2009-07-27 at 06:50:47: Spoken like a true ideologue!!

Comment 16 (2295) by OJB on 2009-07-27 at 08:40:04:

Things will never get better unless we realise that what we are doing now is not the best way of doing things. We have a world financial system which can put more into marketing sugar water (Coke, etc) than into cancer research, we have greedy ignoramuses running most of the world's big corporations and the people with real talent being told what to do, we spend a trillion on a war to protect oil when investing the same in fusion would solve our oil problems forever. Need I go on? Sorry if I sound like an idealist!

Comment 17 (2296) by SBFL on 2009-07-29 at 06:59:44:

Oh boo hoo! So just spending money we don't have will fix all that? Pot. Kettle. Black.

Comment 18 (2298) by OJB on 2009-07-29 at 09:07:00:

Boo hoo? So you don't think we should try to do better I presume. Its not necessarily about spending more money (although it could be) as much as just spending what we have more productively. Not sure what the pot kettle thing has to do with it. I'd have to say this is one of your less cogent posts!

Comment 19 (2300) by SBFL on 2009-07-30 at 05:39:30:

The brevity of comments 15 & 18 are in response to the ideological claptrap you are subjecting me to ;-) The 'pot calling the kettle black' comment referred to the fact that you pointed out instances where much money was spent for probably little return, yet you have all along advocated spending money on pet projects without even knowing where it will come from - potentially burdening future generations with govt debt, and as a result stifling innovation and worthy initiatives that may not have direct quantitative benefits.

Comment 20 (2305) by OJB on 2009-07-30 at 09:18:34:

The thing is that there is actually very little true innovation from the private sector. The real fundamental discoveries usually come from publicly funded institutions like universities. The private companies just take these and commercialise them. Without greater investment in real innovation our whole technology will stall.

Comment 21 (2308) by SBFL on 2009-07-30 at 09:53:39:

So now we are moving from the big govt programmes to 'green' university ideas. In case you hadn't noticed this is where the private sector complements universities. They are the ones who realise ideas borne from the fertile intellectual ground that comes from universities, they are investors who are willing to to take risks and try to make the ideas happen. If you want to go through all the red tape and try to make your idea a government initiative, then good luck with that. I think Microsoft and Apple were born from uni graduates if I recall rightly.

Anyway this is a far cry from the issue previously debated, but have no problem moving on, if that is what you want. Don't forget that commercialising ideas = making ideas much bigger, for good or evil.

Comment 22 (2311) by OJB on 2009-07-30 at 14:51:48:

Big government programs, big university projects, whatever. What is a "green" university idea exactly? You seem to have some odd ideas about universities, or maybe I'm just misinterpreting what you are trying to say.

I agree that a competitive private sector often develops the big ideas into real products fairly well but we have to get more of those big ideas coming by getting more money into the sector which creates them: universities and other public institutions.

Commercialising ideas doesn't really make them bigger, it usually makes them smaller but more accessible. I'm happy to keep the commercial model until something better becomes apparent.

Comment 23 (2315) by SBFL on 2009-08-01 at 05:30:46:

Heh, yeah it's not green as in envious, nor green as in enviornmental. In this context I meant green as in fresh, unripe, sort of like 'greenfield'.

Re 2nd paragraph. I agree, and those funds need to be found. Is it just my imaginations are your tending to support PPP's here...?

Well 'bigger' may have not been the best word but you get my drift, they can make them go 'mainstream', if you like.

Comment 24 (2318) by OJB on 2009-08-01 at 10:00:41:

OK, so we are reaching some agreement here...

Yes, universities are good places to pursue new and original ideas, especially when they have no obvious quick commercial payoff (even though there is often a commercial use in the future). So, agreed.

I think that since we do have an economic system built around private enterprise we should make use of it in the most productive way and let the private sector commercialise and popularise the more theoretical discoveries of research institutions. We should remember though that its those institutions which are doing the real work and they need to be funded appropriately. So I guess we're basically agreed there too.

And OK, "mainstream" I agree with.

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