double entry bookkeeping

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Double Entry: How the Merchants of Venice Shaped the Modern World - and How Their Invention Could Make or Break the Planet by Jane Gleeson-White

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Affordable Care Act / Obamacare, Bernie Madoff, Black Swan, British Empire, carbon footprint, corporate governance, credit crunch, double entry bookkeeping, full employment, Gordon Gekko, income inequality, invention of movable type, invention of writing, Islamic Golden Age, Johann Wolfgang von Goethe, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, means of production, Naomi Klein, Ponzi scheme, shareholder value, Silicon Valley, Simon Kuznets, spice trade, spinning jenny, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, traveling salesman, upwardly mobile

It was proposed by a German economist, Werner Sombart (1863–1941), in his six-volume work on capitalism, Der moderne Kapitalismus. In six pages Sombart set out his belief that the emergence of capitalism and the appearance of double-entry bookkeeping in the thirteenth century are causally related. He wrote: ‘It is simply impossible to imagine capitalism without double-entry bookkeeping; they are like form and content.’ In Sombart’s view, capitalism and double entry are so intimately connected it is difficult to tell which was cause and which effect: ‘one may indeed doubt whether capitalism has procured in double-entry book-keeping a tool which activates its forces, or whether double-entry book-keeping has first given rise to capitalism out of its own spirit.’ Sombart defines capitalism as a particular economic system, recognisable as an organisation of trade, consisting invariably of two collaborating sections of the population, the owners of the means of production, who also manage them, and property-less workers, bound to the markets which they serve; which displays the two dominant principles of wealth creation and economic rationalism.

And so, the story goes, the Florentine record-keepers developed a style of account-keeping which allowed them to classify, record and cross-check their accounts—and, most importantly, to calculate their profits, which allowed them to see not just what they owned but also how well their business was doing. This new form of business recording was double-entry bookkeeping. It is also possible, however, given the timing, that the new mathematics and double-entry bookkeeping evolved together in Asia as part of a coherent commercial system developed by the Hindus or Arabs, or both. Research into the possible Islamic or Hindu origins of double-entry bookkeeping has found suggestive but no conclusive evidence. Some researchers have traced the new bookkeeping to Fibonacci’s Liber abaci and to the Islamic universities of Muslim Spain. Others argue that accounting practices in the early Islamic State (founded in 622) were similar to those later used in northern Italy and may have been their source.

The most innovative Dutch writer on bookkeeping was the celebrated mathematician, engineer, inventor and bureaucrat Simon Stevin (1548–1620), who learnt double-entry bookkeeping as an apprentice in Antwerp. Stevin became minister of finances and chief engineer of the Netherlands, as well as the tutor and advisor to its governor Prince Maurice of Orange. At Stevin’s instigation, Prince Maurice introduced double-entry bookkeeping to the administration of every local government in his territory and learnt mathematics and commerce from the two-volume work Stevin wrote for his instruction. The second volume (1605) contains a bookkeeping treatise, Account-keeping for princes after the Italian Manner, which Stevin wrote in the form of questions and answers that actually arose during the arguments Stevin had with the prince while teaching him the often counter-intuitive art of double-entry bookkeeping. (The first volume appeared three years later, in 1608.)


pages: 306 words: 58,984

Mastering Spreadsheet Bookkeeping by Peter Marshall

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accounting loophole / creative accounting, double entry bookkeeping

These require that the personal data shall: • be obtained only for specified and lawful purposes and must not be used in any manner incompatible with such purposes; • be relevant and adequate but not excessive for the purpose for which it has been collected; • be accurate and kept up to date; • not be kept for any longer than necessary for the purpose for which it was collected; • only be processed in accordance with the subject’s rights under the Act; • be protected by appropriate organizational and technical measures against unauthorized and unlawful use, or accidental loss or damage; • not be taken outside of the country to any country where there is not adequate legal protection of the rights and freedom of data subjects in respect of the processing of their personal data. In most businesses today, accounting information will be used for non-accounting purposes, so it is very likely that anyone who controls such data will need to register and comply with the Act. 4 Double entry bookkeeping Let’s just remind ourselves of the essential principle of double entry bookkeeping because we have to keep this in mind as we construct and use our spreadsheet system. Debit and credit Transactions have two sides, a debt and a credit. When a firm sells goods to a customer a debit entry is made in that customer’s ledger account because they have become our debtor (for the sake of simplicity, in this example we’ll assume the sale was VAT exempt).

A check on accuracy There is another important advantage of double entry bookkeeping. If both sides of each transaction have been recorded then, at any time, if the sums have been done correctly the debit entries will equal the credit entries. It provides a check of accuracy. An example is as follows: Assets – liabilities = Capital Having reminded yourself of the crucial importance of maintaining the double entry, keep this in mind as you configure and use your spreadsheet system. Figure 2 An MS Excel spreadsheet page Figure 3 The control section of an Excel page known as the ribbon 5 Configuring spreadsheets within the traditional daybook format This chapter contains guidance for those who are already knowledgeable and skilled in double entry bookkeeping, but not in the use of spreadsheets for the purpose.

A copy of the British Library Cataloguing in Publication Data is available from the British Library ISBN 978-1-84528-501-2 (paperback) ISBN 978-1-84528-556-2 (ebook) Printed and bound in the UK 1 3 5 7 9 10 8 6 4 2 Cover by Simon Levy Contents List of figures Preface Acknowledgements PART ONE An Introduction to Spreadsheet Bookkeeping 1 A period of transition 2 The role and significance of professional associations 3 Data security and the Data Protection Act 1998 4 Double entry bookkeeping 5 Configuring spreadsheets within the traditional daybook format 6 Speeding up traditional ledger posting 7 Depreciation calculations PART TWO Basic Spreadsheet Bookkeeping 8 Recording daily transactions: books of prime entry 9 The purchase daybook 10 The purchase returns daybook 11 The sales daybook 12 The sales returns daybook 13 The cash book 14 Setting up your spreadsheet for recording money paid in 15 The cash book: recording money paid in, step by step 16 The cash book: recording money paid out, step by step 17 Disagreeing with the bank 18 The bank reconciliation 19 The petty cash book 20 The journal 21 The ledger 22 Posting to the ledger from the daybook 23 Posting to the ledger from the cash book 24 Balancing the ledger 25 Discounts 26 Control accounts 27 Preparing control accounts, step by step 28 The trial balance 29 How to extract a trial balance 30 The trial balance: errors 31 Accruals and prepayments 32 Revenue accounts 33 Stock in the final accounts 34 How to compile revenue accounts 35 Configuring a spreadsheet for revenue accounts, step by step 36 Compiling a spreadsheet for revenue accounts, step by step 37 The balance sheet 38 Compiling a balance sheet, step by step 39 Manufacturing accounts 40 Compiling a manufacturing account, step by step 41 Depreciation: the straight line method 42 Depreciation: the diminishing balance method 43 Depreciation, step by step 44 Accounting for bad and doubtful debts 45 Accounting for bad and doubtful debts, step by step 46 Partnerships: appropriation accounts 47 Partnership accounts, step by step 48 Amalgamating sole proprietorships into a partnership 49 How to consolidate two balance sheets 50 Limited companies 51 Format of company accounts PART THREE Advanced Spreadsheet Bookkeeping 52 Fully automated spreadsheet bookkeeping 53 Opening balances spreadsheet 54 Incomings analysis sheet 55 Outgoings analysis sheet 56 Annual incomings summary 57 Annual outgoings summary 58 Automatic completion of the VAT return 59 Compiling the assets summary 60 Compiling the liabilities summary 61 The trial balance 62 The profit and loss account 63 The balance sheet 64 Adding additional columns to the incomings and outgoings analysis sheets 65 Creating an index to the accounts 66 Protecting your spreadsheets PART FOUR Examination Papers, Answers and Associated Material Further Resources Index List of figures 1 www.bookkeepers.org.uk homepage 2 An MS Excel spreadsheet page 3 The control section of an Excel page known as the ribbon 4 Example of a traditional purchase daybook page written up on a spreadsheet 5 Traditional purchase daybook spreadsheet (Figure 4) with the formulae revealed 6 Example of a traditional sales daybook page written up on a spreadsheet 7 Traditional sales daybook spreadsheet (Figure 6) with the formulae revealed 8 Example of a traditional cash book page written up on a spreadsheet 9 Traditional cash book spreadsheet (Figure 8) with the formulae revealed 10 Example of a traditional petty cash book page written up on a spreadsheet 11 Traditional petty cash book spreadsheet (Figure 10) with the formulae revealed 12 Example of a traditional nominal ledger page written up on a spreadsheet 13 Traditional nominal ledger page spreadsheet (Figure 12) with the formulae revealed 14 Spreadsheet configured for journal 15 Extract from A.

Mastering Book-Keeping: A Complete Guide to the Principles and Practice of Business Accounting by Peter Marshall

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accounting loophole / creative accounting, asset allocation, double entry bookkeeping, information retrieval, the market place

An illustration of the flow of documents and the processes which each triggers in a transaction between two businesses. 8 5 What is double entry book-keeping? Debit and credit All transactions have two sides, a debit and a credit. When a firm sells a TV and sends a bill for payment, for example, on the one hand it has made a sale (which is a credit entry). On the other hand it has gained a liability from the customer (debit entry). That customer is liable to the firm for the money. The need for two records Both these transactions need recording separately, because we need: . a total of sales figures for tax computation and management purposes (to make sure the business is working to plan) . a cumulative total of money owed by each customer. A check of accuracy There is another important advantage of double entry book-keeping. If both sides of each transaction have been recorded then, at any time, if the sums have been done correctly the debit entries will equal the credit entries.

British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978 1 84803 324 5 Produced for How To Books by Deer Park Productions, Tavistock, Devon Typeset by PDQ Typesetting, Newcastle-under-Lyme, Staffordshire Cover design by Baseline Arts Ltd, Oxford NOTE: The material contained in this book is set out in good faith for general guidance and no liability can be accepted for loss or expense incurred as a result of relying in particular circumstances on statements made in the book. The laws and regulations are complex and liable to change, and readers should check the current position with the relevant authorities before making personal arrangements. Contents Preface 1 A period of transition 2 The role and significance of the professional association 3 Data security and the Data Protection Act 1998 4 The flow of documents and processes 5 What is double entry book-keeping? 6 Opening the books of account 7 The day books 8 The purchase day book 9 The purchase returns day book 10 The sales day book 11 The sales returns day book 12 The cash book 13 The cash book: money paid in 14 The cash book: money paid out 15 Disagreeing with the bank 16 The bank reconciliation 17 The petty cash book 18 How to write up the petty cash book 19 The journal 20 How to write up the journal 21 The postage book 22 The ledger 23 Posting to the ledger from the day books 24 Posting to the ledger from the cash book 25 Balancing the ledger 26 Discounts 27 Control accounts 28 Preparing control accounts step by step 29 The trial balance v ix 1 2 3 4 9 11 13 17 19 21 23 25 27 29 31 33 41 43 47 49 51 53 57 59 61 65 69 73 75 Contents 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 How to extract a trial balance The trial balance: errors Accruals and prepayments Revenue accounts Stock in the final accounts How to compile revenue accounts Compiling revenue accounts step by step The balance sheet Compiling a balance sheet step by step Manufacturing accounts Compiling a manufacturing account step by step Depreciation: the straight line method Depreciation: the diminishing balance method Other methods of depreciation Depreciation step by step Accounting for bad and doubtful debts Accounting for bad and doubtful debts step by step Partnership accounts Partnerships: appropriation accounts Partnership accounts step by step Amalgamating sole proprietorships into a partnership How to consolidate two balance sheets Limited companies Limited companies’ books and accounts Format of company accounts Revenue accounts of limited companies Balance sheets of limited companies Going limited Going limited: worked example Club accounts Club accounts: income and expenditure Fixed asset register Asset disposals Asset disposals step by step Correction of errors Correcting errors step by step vi 77 81 83 87 89 91 93 95 99 101 103 105 107 108 111 113 115 116 117 119 121 123 130 133 135 137 145 149 150 151 153 161 163 165 167 169 Contents 66 67 68 69 70 71 72 73 74 75 76 77 78 79 Value Added Tax Accounting for VAT Incomplete records Capital comparison method step by step Bank account analysis step by step Interpreting accounts Interpreting accounts: example Wages: basic principles Coin analysis and wages book Stock records and valuation Encountering deviations from standard methods Using spreadsheet pages New developments in electronic book-keeping More advanced accounting 173 179 186 189 193 197 201 203 205 207 211 213 217 221 Sample examination papers – Level I Model answers – Level I Sample examination papers – Level II Model answers – Level II Sample examination papers – Level III Model answers – Level III More sample examination papers 229 241 248 257 266 275 284 Glossary 316 Index 321 vii This page intentionally left blank Preface This book was inspired as much by educational science as by book-keeping.

If the cheque for £195.50 takes into account a 2½% discount then the discount figure will be £5.01, since if £195.50 = 97.5% then 1% = £195.50 97.5 = £2.00½ and 100% = £2.00½ 6 100 = £200.50, of which 2½% = £5.01 3. It has been regarded as unnecessary to debit the £800 drawn from the bank to cash since it went straight out again in wages; the debit entry has, thus, been made directly to wages account. 28 14 The cash book: money paid out Posting to the credit page Now we need to do our first piece of double entry book-keeping. Since the bank has been debited with the money the cashier paid in, the cashier must be credited with the same amount. Otherwise, the cashier will appear to remain indebted for a sum he/she no longer has. Step by step 1. Enter the date of the paying-in slip in the date column of the right hand (credit page) of the cash book. 2. In the second (name) column, enter the word ‘bank’, since it is the bank which is taking the money from the cashier. 3.


pages: 304 words: 82,395

Big Data: A Revolution That Will Transform How We Live, Work, and Think by Viktor Mayer-Schonberger, Kenneth Cukier

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23andMe, Affordable Care Act / Obamacare, airport security, AltaVista, barriers to entry, Berlin Wall, big data - Walmart - Pop Tarts, Black Swan, book scanning, business intelligence, business process, call centre, cloud computing, computer age, correlation does not imply causation, dark matter, double entry bookkeeping, Eratosthenes, Erik Brynjolfsson, game design, IBM and the Holocaust, index card, informal economy, Internet of things, invention of the printing press, Jeff Bezos, Louis Pasteur, Mark Zuckerberg, Menlo Park, Moneyball by Michael Lewis explains big data, Nate Silver, natural language processing, Netflix Prize, Network effects, obamacare, optical character recognition, PageRank, performance metric, Peter Thiel, Post-materialism, post-materialism, random walk, recommendation engine, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley startup, smart grid, smart meter, social graph, speech recognition, Steve Jobs, Steven Levy, the scientific method, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, Turing test, Watson beat the top human players on Jeopardy!

What finally helped make Arabic numerals a success was the evolution of another tool of datafication: double-entry bookkeeping. Accountants invented script in the third millennium B.C. While bookkeeping evolved over the centuries that followed, by and large it remained a system of recording a particular transaction in one place. What it failed to do was to show easily at any given time what bookkeepers and their merchant employers care about most: whether a particular account or an entire venture was profitable or not. That began to change in the fourteenth century, when accountants in Italy started recording transactions using two entries, one for credits and one for debits, so that overall the accounts are in balance. The beauty of this system was that it made it easy to see profits and losses. And suddenly dull data began to speak. Today double-entry bookkeeping is usually considered only for its consequences for accounting and finance.

It was organized to make a particular type of data query—calculating profits or losses for each account—quick and straightforward. And it provided an audit trail of transactions so that the data was more easily retraceable. Technology geeks can appreciate it today: it had “error correction” built in as a design feature. If one side of the ledger looked amiss, one could check the corresponding entry. Still, like Arabic numerals, double-entry bookkeeping was not an instant success. Two hundred years after this method had first been devised, it would take a mathematician and a merchant family to alter the history of datafication. The mathematician was a Franciscan monk named Luca Pacioli. In 1494 he published a textbook, written for the layperson, on mathematics and its commercial application. The book was a great success and became the de facto mathematics textbook of its time.

Over the following decades the material on bookkeeping was separately published in six languages, and it remained the standard reference on the subject for centuries. As for the merchant family, it was the famous Venetian traders and patrons of the arts, the Medici. In the sixteenth century they became the most influential bankers in Europe, in no small part because they used a superior method of data recording, the double-entry system. Together, Pacioli’s textbook and the Medici’s success in applying it sealed the victory of double-entry bookkeeping—and by extension established the use of Arabic numerals in the West. Parallel to advances in the recording of data, ways of measuring the world—denoting time, distance, area, volume, and weight—continued to gain ever increasing precision. The zeal to understand nature through quantification defined science in the nineteenth century, as scholars invented new tools and units to measure and record electric currents, air pressure, temperature, sound frequency, and the like.


pages: 466 words: 146,982

Venice: A New History by Thomas F. Madden

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big-box store, buy low sell high, centre right, colonial rule, Columbine, Costa Concordia, double entry bookkeeping, facts on the ground, financial innovation, indoor plumbing, invention of movable type, Johann Wolfgang von Goethe, Murano, Venice glass, spice trade, trade route, upwardly mobile, urban planning

However, when there are numerous investors, it is imperative to be able to demonstrate that all are receiving their due. Furthermore, the Venetian government had strict laws regarding what could or could not be shipped, stored, or charged against profits. The need for maintaining clear records of complex transactions led to one of Venice’s most profound financial inventions: double-entry bookkeeping. While it may not seem exciting, the development of double-entry bookkeeping fundamentally changed business in the West. Indeed, without it, the later Industrial Revolution could not have been sustained, and modern corporations would be unthinkable. The technique was first described by Fra Luca Pacioli, a Franciscan mathematician who lived and taught in Venice between 1465 and 1475. Although he is sometimes credited with its invention, Pacioli insisted that he was merely describing a common practice among Venetian merchants.

The foundational concept of this form of record keeping is that all transactions are dual in nature. There is always a credit and always a debit to be recorded, and these two must balance at all times. So, for example, rather than recording a payment received for services rendered, a Venetian merchant would record a movement from cash to revenue. Double-entry bookkeeping may well have developed precisely to deal with the complexities of the multiple-investor colleganza. Because it records both assets and liabilities and the effect of transactions on them, double-entry bookkeeping allowed merchants to easily calculate profit and loss in otherwise complex systems. Just as importantly, it makes the detection of error or fraud much simpler, since everything must balance every day. (Pacioli himself warned that a merchant must not go to sleep before the day’s accounts were fully balanced.)

Thus, when a ship’s captain returned to Venice, his investors and the state need not take his word for how much profit he had obtained. Every penny of every expense or income was accounted for in his ledgers, and auditors were careful to make certain that it all balanced. Even in today’s infinitely more complex corporate systems, embezzlement and theft are still usually detected because the books do not balance. Double-entry bookkeeping was itself a major reason for the adoption in Europe of something that one can find on this very page—Arabic numerals. Originally developed in India, this system of numerical notation was adopted in Persia and then spread into Arab North Africa, from whence it entered medieval Europe in the eleventh century. However, Arabic numerals, like Arabic letters, were foreign and therefore not understood or adopted by most Europeans.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

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In a coordinated system, the position of the last piece is predetermined by the position of all the others. 1 The economic analogue is Walras's law. Walras's law is an economic application ofbookkeeping principles. Double-entry bookkeeping is not as exciting an invention as railroads or the Internet. But double-entry bookkeeping was as important as these innovations to the development of modern market economies. Every expenditure must be matched by a receipt. By keeping track of all entries in a ledger, the activities of a household or business can be regulated and controlled. Double-entry bookkeeping put the discipline in disciplined pluralism. Double-entry bookkeeping is to economic and commercial life what the second law of thermodynamics is to the physical world, and it has the same role in deflating pretensions of dreamers and fantasists.

But that pluralism and experiment extended to economic organization, economic institutions, and new ventures. Markets for risk and for capital developed, and with them the idea that you can trade paper rights to commodities as well as commodities themselves. These are the beginnings of modern securities markets. Businesses develop that are distinguishable from the individuals who run them, such as trading companies and banks. Their records are maintained through double-entry bookkeeping. 7 From the Reformation to the Industrial Revolution ••••••••••••••••••••••••••••••••••••• The Reformation followed the Renaissance: revolts, centered in England and in Germany, rejected the established authority of the Catholic Church. And the focus of economic development in Europe moved north. The architectural legacies ofltaly and Spain are a demon- {56} John Kay stration, in stone, of the difference between the relative economic positions of countries at the time of the Reformation, and today.

See supply and demand democracy accountability in, 114,314 central planning in, 110-11, 114 as rich state factor, 51, 69, 322 dependencytheor~60,284-86 derivatives, 160-61, 237 design, order without, 125-26, 129 development economics, 277-88, 355 Diamond,Jared, 76 diamond market, 150 disciplined pluralism, 18-19,21,56, 120-24, 199,306,308,345-46 dividends, 170, 171 division oflabor, 1, 18, 19, 82, 84, 92, 198, 355 as competitive advantage, 88-89 and complexity, 181 coordination of, 126 as gainful exchange, 85-87 specialization as, 19, 85-86, 181 in teams, 252,291,293,301,302-10 divorce insurance, 238-40 DIY (do-it-yourself) economics, 21, 176-78, 346-47 DNA structure, 83, 267 dot.com bubble, 78, 123-24, 175,218, 243-44,348 double-entry bookkeeping, 55 application to whole economy, 175-78 Douglas, Roger, 61 Duhem-Quine problem, 326-27 Dunlap, Al, 315 Dworkin, Ronald, 190 Easterly, William, 212, 213 Eastern Europe, 29, 51,287-88, 335 econometrics, 357 economic development/growth, 54-69,277-88 dependencytheory,60,284-86 and division oflabor, 85-89 factors in, 25, 26, 52, 55-57, 60, 66-68, 283,285 and GOP movements, 39 United States (1990s), 10 See also Asia; Eastern Europe; statistics economic lives, 3-8, 22-30 dimensions of, 37-41,44-49 GOP as measure of, 42-45 and happiness, 51,286-87 transactions/rules, 73-82 and "veil of ignorance," 202 See also income/wealth distribution economic models, 15-16, 325, 330-33, 339 economic rent, 145,230-31,273,290-301 definition of, 292, 295 { 413} distribution of, 290-91,303-5,309-10 rentseeking,295-96,307,346-47 See also teams economics, 323-39 branches of, 323-24 constraints of, 175-76 definitions of, 83, 324 DIY, 21, 176-78,346-47 mathematical tools, 174-75, 179 methodology, 84, 325-27 popular understanding of, 21, 323 See also neoclassical economics economic systems, 73-134 choices between, 103-4 constraints of, 175-78 effectiveness measures, 84 evolution of, 54-69 and living standards, 28-30 and welfare economics, 197-202 See also central planning; embedded market; market economy Economic Value Added, 273 economies of scale, 118,181,182-83 economists, 329, 334-35, 342 images of, 323, 324, 326-27, 334 influential (twentieth-century), 178-79 male-female disparity, 337 rationality emphasis, 210-13,218-19 Eddystone lighthouse, 248-49 Edgeworth, F.


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The Invention of Science: A New History of the Scientific Revolution by David Wootton

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The errors, then, lie not in the abstractness or concreteness, not in geometry or physics, but in a calculator who does not know how to make a true accounting.3 Double-entry bookkeeping thus represents an attempt to make the real world, the world of bolts of silk, bales of wool and bags of sugar, mathematically legible. The process of abstraction it teaches is an essential precondition for the new science. § 2 Another source of income for mathematicians in Galileo’s day was teaching the geometrical principles of perspective representation.4 Galileo’s own mathematics teacher, Ostilio Ricci, taught perspective to painters. Perspective painting was a more recent invention than double-entry bookkeeping. It began sometime between 1401 and 1413 when Filippo Brunelleschi produced a most peculiar work of art.5 The object itself no longer survives; we last hear of it in 1494, when it is listed among the effects of Lorenzo the Magnificent, the Medici ruler of Florence, on his death.6 Our only half-decent description of it was written in the 1480s, by Antonio Manetti, who was twenty-three years old when Brunelleschi died.7 Manetti’s account is puzzling and unsatisfactory, but it is all we have.

The second chapter, Chapter 6, looks at the impact of telescopes and microscopes on people’s sense of scale: human beings suddenly came to seem insignificant in the vast spaces which the telescope opened up, while the microscope exposed a world in which complexity seemed to reach right down to the smallest imaginable creatures, so that it became commonplace to imagine that fleas might have fleas, and so on, ad infinitum. 5 The Mathematization of the World Philosophy is written in this very great book which always lies open before our eyes (I mean the universe), but one cannot understand it unless one first learns to understand the language and recognize the characters in which it is written. It is written in mathematical language and the characters are triangles, circles and other geometrical figures; without these means it is humanly impossible to understand a word of it; without these there is only clueless scrabbling around in a dark labyrinth. – Galileo, The Assayer (1623)1 § 1 Double-entry bookkeeping goes back at least to the thirteenth century. The principle of double entry is simple: every transaction is entered twice, as a credit and as a debit. So if I buy a bar of gold worth £500, I debit £500 from my current account, and I credit £500 to my list of assets. If I borrow £500, then £500 is a credit to my current account, and a debit to my list of liabilities. In the Renaissance the standard system involved three books.

He was not himself an artist, but On Divine Proportion discusses the golden section, the principles of architecture and the design of typefaces. Pacioli is now known primarily for the fat book on which the dodecahedron sits: A Compendium of Arithmetic, Geometry, Proportions and Proportionality (1494). This was a textbook of applied mathematics, and included within it was the first published account of double-entry bookkeeping – double entry was not new, but printing was, so Pacioli was taking advantage of an obvious opportunity.33 § 4 Perspective painting generally involves a peculiar form of abstraction: the construction of a vanishing point. It is worth noting that the term itself is relatively modern: in English it dates to 1715. Alberti calls it the centric point (il punto del centro), and in many early texts it is simply referred to as the horizon.34 But Alberti is perfectly clear that the image in a one-point-perspective painting extends ‘to an almost infinite distance’.35 This, to a Renaissance intellectual, is a deeply puzzling concept.

The End of Accounting and the Path Forward for Investors and Managers (Wiley Finance) by Feng Gu

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Affordable Care Act / Obamacare, barriers to entry, business process, Claude Shannon: information theory, Clayton Christensen, conceptual framework, corporate governance, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, double entry bookkeeping, Exxon Valdez, financial innovation, fixed income, hydraulic fracturing, index fund, inventory management, Joseph Schumpeter, knowledge economy, moral hazard, new economy, obamacare, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, race to the bottom, risk/return, Robert Shiller, Robert Shiller, shareholder value, Steve Jobs, The Great Moderation, value at risk

Similarly, the profound changes over the past 110 years in the demand for financial information have not been met with commensurate improvements in the financial reports released by public companies to their shareholders.5 This is the case, despite investors’ sophistication (primarily hedge funds and private equity, in recent decades), vast improvement in communication technologies (XBRL, Internet chat rooms), increases in the extent of competition among investors, and in the number of alternative investments available to them worldwide. The consequence of this disclosure ossification, as we will demonstrate empirically in the following chapters, is the inevitably fast and continuous deterioration in the usefulness of financial information to investors. A DEVIL’S ADVOCATE Perhaps, you may say, this is inevitable. Corporate financial reporting reached its technological apogee 110 years ago, as did double-entry bookkeeping 550 years ago, and cannot be further improved, like the QWERTY keyboard layout introduced in 1878 in the Remington No. 2 typewriter and still on keyboards today. Absurd as this sounds, it would have made some sense if suggestions for accounting change were seriously tried and found to fail. But there wasn’t any serious trial and error in accounting structure over the past century. Even worthwhile suggestions for structural change, like the one by a leading accounting thinker, Yuji Ijiri, a now retired Carnegie Mellon professor, who proposed in 1989 the triple entry bookkeeping, which, to the best of our knowledge, was never seriously discussed by accounting regulators.6 In essence, Ijiri suggested that, in addition to the balance sheet (a static report of assets and liabilities), and the income statement (a report on the “distance” the firm traveled from beginning to end of period), there should be a third report, akin to acceleration or momentum of operations, informing on the pace of change over the period in sales, expenses, and earnings.

But why do accountants recognize some business events while ignoring others? Excuse the brief tutorial below. ACCOUNTING AND NONACCOUNTING EVENTS With all the shortcomings of the accounting system, and there are quite a few as we point out throughout the book, there is one thing accounting excels in—the meticulous recording of business transactions. In fact, Luca Pacioli (1445–1517), the Renaissance mathematician who formalized and promulgated “double-entry bookkeeping” to the general public in his classic book (1494) Summa de Arithmetica, Geometria, Proportioni, et Proportionalita, warned readers that nothing could be omitted from the accounting records and that comprehensive recording of transactions is essential to successful business operations and corporate governance.1 But the business events captured so meticulously by the accounting system, and subsequently summarized in corporate financial reports, are primarily transactions with third parties: purchases from suppliers and sales to customers; payments of wages, rent, and interest; stocks and bond issues; as well as investments in long-term assets and securities.

There is no shortage of criticism of the accounting model and the financial information derived from it, and a whole host of proposed remedies: disclosure of nonfinancial variables (key performance indicators, or KPIs); reporting on the impact of firms’ operations on people and the planet, in addition to profits (the “triple bottom line, or the three Ps”); or reporting on the intellectual capital of companies (intellectual capital reports), to name a few. While gathering a limited following, none of these criticisms and proposals had a noticeable effect on corporate reporting worldwide, and definitely not in the United States. The fact is, as shown vividly in Chapter 1, corporate reports today are practically identical to those published a century ago, mirroring the 600-year survival of double-entry bookkeeping. Accounting seems resistant to change. The reason for the limited success of previous reform proposals is not lack of effort (some change proposals are vigorously pushed by worldwide organizations) or the absence of good ideas—there are definitely some useful suggestions in these proposals. It’s, we believe, the lack of a compelling case for change, and the scarcity of workable change proposals that satisfy investors’ needs.


pages: 823 words: 220,581

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

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accounting loophole / creative accounting, banking crisis, banks create money, barriers to entry, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, Fractional reserve banking, full employment, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, invisible hand, iterative process, John von Neumann, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, open economy, place-making, Ponzi scheme, profit maximization, quantitative easing, RAND corporation, random walk, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave

But again, the qualitative similarity between the model and the empirical data is striking – see Figure 14.20. 14.19 Debt and GDP in the model 14.20 Debt and GDP during the Great Depression Making monetary modeling accessible: QED I originally developed the models in this chapter using differential equations, and I found it very difficult to extend them, or explain them to other economists who weren’t familiar with this approach to mathematics. Then a chance challenge to the accuracy of my models – Scott Fullwiler asserted that there must be errors in my models from the point of view of double-entry bookkeeping – inspired me to see whether I could in fact explain my models using double-entry bookkeeping. Not only did that prove possible, it also transpired that a double-entry bookkeeping layout of financial flows could be used to generate the models in the first place. This overcame a major problem that I had with using system dynamics programs like Vissim (www.vissim.com) and Simulink (www.mathworks.com/products/simulink/) to build models of the financial sector. While these technologies were brilliant for designing engineering products like cars, computers and airplanes, they were poorly suited to modeling financial flows.

.: 4; emphasis in original). 14.2 The nature of exchange in the real world This simple but profound perspective on what is the essence of a monetary capitalist economy yielded two essential requirements for a model of capitalism: • all transactions involve transfer of funds between bank accounts; • the minimum number of classes5 in a model of capitalism is three: capitalists, workers and bankers. It also implied that the best structure for modeling the financial side of capitalism is a double-entry system of bank accounts. This led me to develop a means to derive dynamic monetary models of capitalism from a system of double-entry bookkeeping accounts (Keen 2008, 2009b, 2010, 2011), and a remarkable amount of the Marx-Schumpeter-Keynes-Minsky perspective on capitalism arose naturally out of this approach. I’ll outline the simplest possible version of this model before expanding it to provide a monetary version of the Minsky model outlined in Chapter 13. A ‘pure credit’ economy Our modern monetary economy is a system of such complexity that it makes the outrageous contraptions of Rube Goldberg, Heath Robinson and Bruce Petty appear trite by comparison: the Bank of International Settlements, central banks, commercial banks; merchant banks, hedge funds, superannuation funds, building societies; fiat money, credit money, multiple measures of money (base money, M0, M1, M2, M3, broad money); reserve ratios, Taylor Rules, Basel Rules … Many of these components were instituted to try to control bank lending after the catastrophe of the Great Depression; many others were responses by the financial system to evade the intentions of these controls.

These programs use ‘wires’ to link one variable to another, and this is fine for physical processes where, for example, a wire from the fuel injector module to the cylinder module indicates a flow of gas from one point to another, and only one such link exists per cylinder. However, in a model of financial flows, the same term could turn up as often as three times in one diagram: once for the source account for some monetary transfer, once for its destination, and once to record it on a ledger. This resulted in almost incomprehensible models, and made ‘wiring up’ such a model extremely tedious. I now use my double-entry bookkeeping methodology to develop models like the one in this chapter, and a simulation tool has also been developed for me to showcase this method. It’s free, fairly easy to use, and you can both simulate the models I’ve shown in this chapter and build your own using it. It’s called QED – which stands for Quesnay Economic Dynamics – and can be downloaded from my blog at www.debtdeflation.com/blogs/qed/.


pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

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23andMe, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon footprint, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, Flynn Effect, food miles, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, knowledge worker, Kula ring, Mark Zuckerberg, meta analysis, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, Plutocrats, plutocrats, Ponzi scheme, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, wage slave, working poor, working-age population, Y2K, Yogi Berra

Tools are in effect a measure of the extent of the division of labour and, as Adam Smith argued, the division of labour is limited by the extent of the market. The Tasmanian market was too small to sustain many specialised skills. Imagine if 4,000 people from your home town were plonked on an island and left in total isolation for ten millennia. How many skills and tools do you think they could preserve? Wireless telephony? Double-entry book-keeping? Suppose one of the people in your town was an accountant. He could teach double-entry book-keeping to a youth, but would the youth or the youth’s youth pass it on – for ever? On other Australian islands much the same thing happened as on Tasmania. On Kangaroo Island and Flinders Island, human occupation petered out, probably by extinction, a few thousand years after isolation. Flinders is a fertile island that should be a paradise. But the hundred or so people it could support were far too small a human population to sustain the technology of hunter-gathering.

Ironically, the plague may have been one of the sparks that lit the Renaissance, because the shortage of labour shifted income from rents to wages as landlords struggled to find both tenants and employees. With rising wages, some of the surviving peasantry could once more just afford the oriental luxuries and fine cloth that Lombard and Hanseatic merchants supplied. There was a rash of financial innovation: bills of credit to solve the problem of how to pay for goods without transporting silver through bandit country, double-entry book-keeping, insurance. Italian bankers began to appear all across the continent, financing kings and their wars, sometimes at a profit, sometimes at a disastrous loss. The wealth that the Italian trading towns had generated soon found its way into scholarship, art or science, or in the case of Leonardo da Vinci, all three. Per capita income in England was probably higher in 1450 than it would be again before 1820.

Although the human race as a whole has experienced incessant change, individual peoples saw a much more intermittent flickering progress because the pace and place of that change was itself always changing. Innovation is like a bush fire that burns brightly for a short time, then dies down before flaring up somewhere else. At 50,000 years ago, the hottest hot-spot was west Asia (ovens, bows-and-arrows), at 10,000 the Fertile Crescent (farming, pottery), at 5,000 Mesopotamia (metal, cities), at 2,000 India (textiles, zero), at 1,000 China (porcelain, printing), at 500 Italy (double-entry book-keeping, Leonardo), at 400 the Low Countries (the Amsterdam Exchange Bank), at 300 France (Canal du Midi), at 200 England (steam), at 100 Germany (fertiliser); at 75 America (mass production), at 50 California (credit card), at 25 Japan (Walkman). No country remains for long the leader in knowledge creation. At first blush, this is surprising, especially if increasing returns to innovation are possible.


pages: 470 words: 144,455

Secrets and Lies: Digital Security in a Networked World by Bruce Schneier

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Ayatollah Khomeini, barriers to entry, business process, butterfly effect, cashless society, Columbine, defense in depth, double entry bookkeeping, fault tolerance, game design, IFF: identification friend or foe, John von Neumann, knapsack problem, mutually assured destruction, pez dispenser, pirate software, profit motive, Richard Feynman, Richard Feynman, risk tolerance, Silicon Valley, Simon Singh, slashdot, statistical model, Steve Ballmer, Steven Levy, the payments system, Y2K, Yogi Berra

Cons this involved were popular around the time of the Depression; for all I know it’s still done today. The mark is taken because he can’t imagine that what he’s seeing—the rooms, the people, the noise, the action—is really only a performance enacted solely for his benefit. On the Net, this is easy to do. In a world without physical cues, people need some new way to verify the integrity of what they see. AUDIT Double-entry bookkeeping was codified by 1497 by Luca Pacioli of Borgo San Sepolcro, although the concept is as much as 200 years older. The basic idea is that every transaction will affect two or more accounts. One account is debited by an amount exactly equal to what the other is credited. Thus, all transactions are always transfers between two accounts, and since they always appear with a plus sign in one account and a minus sign in the other, the total over all accounts will always be zero.

This balancing process was an audit: If one clerk tried to commit fraud—or simply made a mistake—it would be caught in the balancing process, because someone other than the clerk would be checking the work. Additionally, there would be outside audits, where accountants would come in and check the books over again ... just to make sure. Audit is vital wherever security is taken seriously. Double-entry bookkeeping is just the beginning; banks have complex and comprehensive audit requirements. So do prisons, nuclear missile silos, and grocery stores. A prison might keep a record of everyone who goes in and out the doors, and balance the record regularly to make sure that no one unexpectedly left (or unexpectedly stayed). A missile silo might go even further and audit every box and package that enters and leaves, comparing shipping and receiving records with another record of what was expected.

(Well, there are some attacks: blocking the writing, simulating running out of ink, disabling the writing for a single transaction, forging an entire tape, and so forth.) On the other hand, computer files can easily be erased or modified; this makes the job of verifying audit records more difficult. And most system designers don’t think about audit when building their systems. Recall the built-in audit property of double-entry bookkeeping. That auditability fails when both books are stored on the same computer system, with the same person having access to both. But this is exactly how all computer bookkeeping programs work. ELECTRONIC CURRENCY Back in the old days (1995 or so), everyone thought that we would have to develop new forms of money to deal with electronic commerce. Many companies died, trying to redefine money.


pages: 159 words: 45,073

GDP: A Brief but Affectionate History by Diane Coyle

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Asian financial crisis, Berlin Wall, big-box store, Bretton Woods, BRICs, clean water, computer age, conceptual framework, crowdsourcing, Diane Coyle, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, falling living standards, financial intermediation, global supply chain, happiness index / gross national happiness, income inequality, income per capita, informal economy, John von Neumann, Kevin Kelly, Long Term Capital Management, mutually assured destruction, Nathan Meyer Rothschild: antibiotics, new economy, Occupy movement, purchasing power parity, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thorstein Veblen, University of East Anglia, working-age population

Petty wanted to prove not only that the country could bear a higher burden of taxes but also that it was capable of taking on its powerful neighbors, Holland and France.1 There was no need for it to win more land or increase the size of the population to ensure victory, because the available land and capital and labor could be used to better effect. This was a significant economic insight. Also significant was Petty’s introduction of the tool of double-entry bookkeeping to keep records for the nation as a whole. Another early set of estimates, by Charles Davenant in 1695, had the title An Essay upon the Ways and Means of Supplying the War, making his aim perfectly clear. The word statistics has the same origin as state, and originally referred to the collection of figures concerning the state, specifically taxes. It proved to be a major advantage for England to have consolidated national income statistics, enabling calculations about the scope for increased output and tax revenues, when its larger and seemingly more powerful neighbor France lacked such information.

Abramowitz, Moses, 113 Africa, 31–33, 72, 93, 138 Anders, William, 68 art, 127–28, 132 assets, contributing to sustainability, 134–35, 137 austerity measures, 23 Australia, 73, 109, 118 automation, 128–29 Bangladesh, 53 base year, in GDP calculations, 31, 33–34 Baumol, William, 127 Benford’s Law, 3, 143n3 Berners-Lee, Tim, 81 Bhalla, Surjit, 53 Bhutan, 112 Bos, Frits, 47–48 Boskin Commission, 35, 88 Brazil, 94, 125 Bretton Woods system, 48 BRIC economies, 94, 96 Brynjolfsson, Erik, 128–30 Burundi, 73 business, purpose of, 95 Campaign for Happiness, 112 Canada, 73, 89, 109 capabilities, 72–73, 134 capital consumption, 131 capitalism: 1970s crisis of, 59–75; 2008 crisis of, 93–118; achievements of, 5–6; innovation as hallmark of, 91; investment and depreciation, 131–33 capital widening, 132 Carson, Rachel, Silent Spring, 69 centrally planned economies, 46–47, 56, 60, 66–68 Central Statistical Office (United Kingdom), 18 Chad, 73 chain-weighted price indexes, 33–34 China: economic growth of, 94, 96–97; economic limitations of, 96–97; GDP of, 51–53, 96, 97; living standards in, 51, 57, 96; manufacturing and exporting in, 82, 97, 125; U.S. relations with, 97 Christophers, Brett, 104, 105 circular flow, 26–27, 27f, 57, 63 Clark, Colin, 12, 13, 17, 50, 84 Clean Water Act (1972), 69 Clegg, Nick, 110 Cobb, John, 116 Cold War, 46–47, 60, 66 communications technology, 81–82 communism, 46–47, 60, 66–68, 96 compound arithmetic, 64, 83, 130–31 comprehensive wealth, 133, 135 computers, 80–82, 87–88 conspicuous consumption, 112 consumerism, 45, 112 consumer spending (C), 27–28, 45 consumer surplus, 130 customization, of goods and services, 123–25 Cuyahoga River, 69 Daly, Herman, 116 Darling, Alastair, 102 dashboard approach, 118, 136 data collection, 33, 37, 51–53, 137–38 Data Resources, Incorporated (DRI), 21 Davenant, Charles, 8 David, Paul, 79 Defense Advanced Research Projects Agency (DARPA), 81 defense spending, 14–16 deferred stock options, 37 deflators, 31 Defoe, Daniel, 9 DeLong, Brad, 86, 117 Democratic Republic of Congo, 54, 73 Deng Xiao Ping, 96 depreciation, 25, 30, 131–33 developed/high-income countries: GDP of, 72, 93; informal economy in, 107 developing/low-income countries: economic growth/stagnation in, 61, 71–72; GDP of, 32–33, 51, 71–72; informal economy in, 107, 109; and PPP, 50–53 development aid, 72, 74 digital products and services, 129–31 disasters, GDP growth after, 43 Domar, Evsey, 55 double-entry bookkeeping, 8 Easterlin, Richard, 111 Eckstein, Otto, 21 econometric models, 20–21, 23 economic growth: critiques of, 60; in eighteenth and nineteenth centuries, 12; lack of, in developing countries, 61; meanings and measures of, 15; meanings of, 123; potential rate of, 82–83; problems arising from, 63–64; real, 30–31; significance of, 135–36; sustainable, 71, 116, 137; theories/models of, 55–57, 78–81; virtuous circle of, 57, 59, 64, 73, 79; well-being and welfare aided by, 135 economics, challenges to conventional, 59–61 economic welfare.


pages: 204 words: 60,319

Finding Zero: A Mathematician's Odyssey to Uncover the Origins of Numbers by Amir D. Aczel

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colonial rule, double entry bookkeeping, Georg Cantor, offshore financial centre, Y2K

During the Han Dynasty in China (206 BCE to 220 CE), a mathematical work titled Nine Chapters on the Mathematical Art appeared, employing both positive numbers, colored red, and negative ones, colored black. And in Egypt of the third century, a leading Greek mathematician named Diophantus obtained negative answers to some of his equations but immediately dismissed them as unrealistic. So the idea for negative numbers is quite old, but people did not understand such numbers. The double-entry bookkeeping system used in accounting today was developed in Europe in the thirteenth century in part to avoid using negative numbers. To define negative numbers requires the concept of zero. Negative numbers are, in a sense, a reflection across zero of the positive numbers. You can see this if you draw the number line, starting at zero and going to the right to 1, 2, 3, and so on; and then extending the numbers to the left of zero to –1, –2, –3, and onward.

., 43–4 çaka (dynasty), 95–7, 209–10, 214 Cambodia Cambodian National Museum, 102, 128–9, 165, 203–4, 218–19 Khmer Rouge, 98–9, 107–8, 125, 129, 150, 163, 166, 173, 176, 200, 202–3, 210, 219, 222 See also Angkor (Cambodian empire); Phnom Penh (Cambodian capital); Sambor on Mekong, Cambodia; Siem Reap, Cambodia Cantor, Georg (mathematician), 145–8 Cantor, Moritz, 74–5, 77 cargo ships, 18–19 Carnac stones, 22 Cartier, Pierre, 59 Casselman, Bill, 83, 186–8, 191, 197 catuskoti (four corners/possibilities, also tetralemma), 57, 60–1, 105–6, 137, 139–42, 148, 152 Chamroeun Chhan, 116–17, 166, 171–2, 189 Chandra (Hindu god), 103 Chao Phraya River, 113–15, 164 Chatur-bhuja temple, 78, 210 Chenla (ancient region, later Burma and Myanmar), 91–3, 205 China Chou Ta-kuan, 101–2 Cultural Revolution, 98 Fu Nan kingdom, 91–3, 205 Han Dynasty, 23 Nine Chapters on the Mathematical Art, 23 three-by-three squares, 48 Chou Ta-kuan (also Zhou Daguan), 101–2 Cœdès, Georges (archaeologist), 83–4, 100, 102, 106–8, 124, 150, 187, 204 Angkor, 92 birth and education, 85–9 career and life, 114–15, 117, 119–20, 128, 150, 156, 176 death and final years, 108, 216–17 on Khmer number system, 214–15 translation of K-127, 93–7, 107, 166, 176, 207–8, 210 Communism, 98, 118, 120, 131, 216 Khmer Rouge, 98–9, 107–8, 125, 129, 150, 163, 166, 173, 176, 200, 202–3, 210, 222 Copernicus, 194 counting, 20–2, 137, 216 cruise ships, 1–2, 7, 10, 15, 18, 52 Cultural Revolution, 98 Cunningham, Alexander (archaeologist), 45–6 Dalida (French-Italian singer), 3–4 decimals nonrepeating, 146 number systems, 23, 63, 212, 215 Dedekind, Richard (mathematician), 146 Descartes, René, 194–5 Devi (Hindu god), 102 Dieu, Eric, 115–16, 189–93 digamma (archaic Greek letter), 14 Diophantus (mathematician), 23 double-entry bookkeeping, 23 Dreyfus trial, 86 Dürer, Albrecht (artist), 49–50 Durga (Hindu goddess, also Parvati), 35, 45 École Française d’Extrême-Orient (EFEO), 118–19 École Pratique des Hautes Études, 87–8 Egypt, 63, 66, 103 Egyptian numbers, 25, 209, 213 Etruscan numbers, 82–3 Euclid (mathematician), 39, 56, 69 Evans, Arthur (archaeologist), 183–4, 186 Fermat’s Last Theorem, 83 Fibonacci sequence, 13, 19 Ford, Harrison, 179 fractions, 25, 147 French Colonial architecture, 115 French colonialism, 87, 114, 119, 133, 216 Fu Nan, Chinese Kingdom of, 91–3, 205 Galileo, 36, 194 Ganesha (Hindu god), 103 Garuda (mythical bird), 102, 139 Ghosh, B.

Payback: Debt and the Shadow Side of Wealth by Margaret Atwood

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carbon footprint, delayed gratification, double entry bookkeeping, epigenetics, financial independence, illegal immigration, Jane Jacobs, Plutocrats, plutocrats, trickle-down economics, wage slave

LET’S EXAMINE THE case for the latter. In order for a mental construct such as “debt” to exist — you owe me something that will balance the books once it is transferred to me — there are some preconditions. One of them, as I’ve said, is the notion of fairness. Attached to that is the notion of equivalent values: what does it take to make both sides of the mental score sheet or grudge tally or double-entry bookkeeping program we’re all constantly running add up to the same thing? If Johnny has three apples and Suzie has a pencil, is one apple for one pencil an acceptable exchange, or will there be an apple or a pencil remaining to be paid? That all depends on what values Johnny and Suzie place on their respective trading items, which in turn depend on how hungry and/or in need of communication devices they may be.

We might start by investigating Flaubert’s 1857 novel, Madame Bovary, the story of a provincial wife who takes to romantic love, extramarital sex, and overspending as an escape from boredom, but then poisons herself when her double life catches up with her and her unpaid creditor threatens to expose her. This book was put on trial for obscenity, and Flaubert defended it by brandishing Emma’s hideous-looking corpse as an example of the book’s inherent morality — the wages of sexual sin is arsenic, and not only does it kill you, it wrecks your looks — but that’s a red herring. Emma isn’t really punished for sex but for shopaholicism. Had she but learned double-entry bookkeeping and drawn up a budget, she could easily have gone on with her hobby of adultery forever — or at least until she got saggy — though she’d have done it in a more frugal manner. Or perhaps we should cross the Atlantic and trace the pitiful career of Lily Bart in Edith Wharton’s House of Mirth, who, had she known more about debt management, need not have ended up similarly selfpoisoned. Rash Lily had not thought deeply enough about the principles of tit-for-tat: if a man lends you money and charges no interest, he’s going to want payment of some other kind.


pages: 275 words: 82,640

Money Mischief: Episodes in Monetary History by Milton Friedman

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Bretton Woods, British Empire, currency peg, double entry bookkeeping, fiat currency, financial innovation, floating exchange rates, full employment, German hyperinflation, income per capita, law of one price, oil shock, price anchoring, price stability, transaction costs

In current usage, the item has come to be interpreted as referring to purchases of final goods and services only, and the notation has been changed accordingly, T being replaced by y, as corresponding to real income. As written, the equation is an identity, a truism. Every purchase can be viewed in two ways: the amount of money spent and the quantity of a good or service purchased multiplied by the price paid. Entering the amount of money on the left side and quantity times price on the right, and adding up those sums for all purchases, we have a standard case of double-entry bookkeeping. As in double-entry bookkeeping in general, the truism is highly useful. Consider once more our original question: What determines how much you can buy with the greenbacked five-dollar bill we started with? Nothing can affect P except as it changes one or more of the other items in the equation. Will a boom in the stock market, for example, change how much you can buy with a five-dollar bill? It will reduce the amount you can buy (raise P) only if it leads the Fed to create more money (increases M), or induces people to hold lower real cash balances, perhaps because they think the alternatives have become more attractive (raises V), or reduces the quantity of goods and services available for purchase, perhaps because workers are paying less attention to their work and more to the stock ticker (lowers T).


pages: 295 words: 66,824

A Mathematician Plays the Stock Market by John Allen Paulos

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Benoit Mandelbrot, Black-Scholes formula, Brownian motion, business climate, butterfly effect, capital asset pricing model, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, diversified portfolio, Donald Trump, double entry bookkeeping, Elliott wave, endowment effect, Erdős number, Eugene Fama: efficient market hypothesis, four colour theorem, George Gilder, global village, greed is good, index fund, invisible hand, Isaac Newton, John Nash: game theory, Long Term Capital Management, loss aversion, Louis Bachelier, mandelbrot fractal, margin call, mental accounting, Nash equilibrium, Network effects, passive investing, Paul Erdős, Ponzi scheme, price anchoring, Ralph Nelson Elliott, random walk, Richard Thaler, Robert Shiller, Robert Shiller, short selling, six sigma, Stephen Hawking, transaction costs, ultimatum game, Vanguard fund, Yogi Berra

The situation is analogous to that in applied mathematics where the appropriateness of a mathematical model is always vulnerable to criticism. Is this model the right one for this situation? Are these assumptions warranted? Once the assumptions are made and the model is adopted, however, the numbers and organizational clarity that result have an irresistible appeal. Responding to this appeal two hundred years ago, the German poet Goethe rapturously described accounting this way: “Double entry bookkeeping is one of the most beautiful discoveries of the human spirit.” Focusing only on the bookkeeping and the numerical output, however, and refusing to examine the legitimacy of the assumptions made, can be disastrous, both in mathematics and accounting. Recall the tribe of bear hunters who became extinct once they became expert in the complex calculations of vector analysis. Before they encountered mathematics, the tribesmen killed, with their bows and arrows, all the bears they could eat.

Brian auditors Aumann, Robert availability error average values compared with distribution of incomes risk as variance from averages average return compared with median return average value compared with distribution of incomes buy-sell rules and outguessing average guess risk as variance from average value averaging down Bachelier, Louis Bak, Per Barabasi, Albert-Lazló Bartiromo, Maria bear markets investor self-descriptions and shorting and distorting strategy in Benford, Frank Benford’s Law applying to corporate fraud background of frequent occurrence of numbers governed by Bernoulli, Daniel Beta (B) values causes of variations in comparing market against individual stocks or funds strengths and weaknesses of technique for finding volatility and Big Bang billiards, as example of nonlinear system binary system biorhythm theory Black, Fischer Black-Scholes option formula blackjack strategies Blackledge, Todd “blow up,” investor blue chip companies, P/E ratio of Bogle, John bonds Greenspan’s impact on bond market history of stocks outperforming will not necessarily continue to be outperformed by stocks Bonds, Barry bookkeeping. see accounting practices bottom-line investing Brock, William brokers. see stock brokers Buffett, Warren bull markets investor self-descriptions and pump and dump strategy in Butterfly Economics (Ormerod) “butterfly effect,” of nonlinear systems buy-sell rules buying on the margin. see also margin investments calendar effects call options. see also stock options covering how they work selling strategies valuation tools campaign contributions Capital Asset Pricing Model capital gains vs. dividends Central Limit Theorem CEOs arrogance of benefits in manipulating stock prices remuneration compared with that of average employee volatility due to malfeasance of chain letters Chaitin, Gregory chance. see also whim trading strategies and as undeniable factor in market chaos theory. see also nonlinear systems charity Clayman, Michelle cognitive illusions availability error confirmation bias heuristics rules of thumb for saving time mental accounts status quo bias Cohen, Abby Joseph coin flipping common knowledge accounting scandals and definition and importance to investors dynamic with private knowledge insider trading and parable illustrating private information becoming companies/corporations adjusting results to meet expectations applying Benford’s Law to corporate fraud comparing corporate and personal accounting financial health and P/E ratio of blue chips competition vs. cooperation, prisoner’s dilemma complexity changing over time horizon of sequences (mathematics) of trading strategies compound interest as basis of wealth doubling time and formulas for future value and present value and confirmation bias definition of investments reflecting stock-picking and connectedness. see also networks European market causing reaction on Wall Street interactions based on whim interactions between technical traders and value traders irrational interactions between traders Wolfram model of interactions between traders Consumer Confidence Index (CCI) contrarian investing dogs of the Dow measures of excellence and rate of return and cooperation vs. competition, prisoner’s dilemma correlation coefficient. see also statistical correlations counter-intuitive investment counterproductive behavior, psychology of covariance calculation of portfolio diversification based on portfolio volatility and stock selection and Cramer, James crowd following or not herd-like nature of price movements dart throwing, stock-picking contest in the Wall Street Journal data mining illustrated by online chatrooms moving averages and survivorship bias and trading strategies and DeBondt, Werner Deciding What’s News (Gans) decimalization reforms decision making minimizing regret selling WCOM depression of derivatives trading, Enron despair and guilt over market losses deviation from the mean. see also mean value covariance standard deviation (d) variance dice, probability and Digex discounting process, present value of future money distribution of incomes distribution of wealth dynamic of concentration UN report on diversified portfolios. see stock portfolios, diversifying dividends earnings and proposals benefitting returns from Dodd, David dogs of the Dow strategy “dominance” principle, game theory dot com IPOs, as a pyramid scheme double-bottom trend reversal “double-dip” recession double entry bookkeeping doubling time, compound interest and Dow dogs of the Dow strategy percentages of gains and losses e (exponential growth) compound interest and higher mathematics and earnings anchoring effect and complications with determination of inflating (WCOM) P/E ratio and stock valuation and East, Steven H. Ebbers, Bernie acquisition appetite of arrogance of author emails offer of help Digex purchase down-home style of forced to sell WCOM stock fraud by pump and dump strategy and purchase of WorldCom stock by economics, human behavior and The Education of a Speculator (Niederhoffer) “efficient frontier” of portfolios (Markowitz) Efficient Market Hypothesis background of impact of accounting scandals on increased efficiency results in decreased predictability investors beliefs impacting moving averages and paradoxes of randomness and rationale for resistance and support levels and versions of Elliott, Ralph Nelson Ellison, Larry employee remuneration vs.


pages: 369 words: 80,355

Too Big to Know: Rethinking Knowledge Now That the Facts Aren't the Facts, Experts Are Everywhere, and the Smartest Person in the Room Is the Room by David Weinberger

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airport security, Alfred Russel Wallace, Amazon Mechanical Turk, Berlin Wall, Black Swan, book scanning, Cass Sunstein, corporate social responsibility, crowdsourcing, Danny Hillis, David Brooks, Debian, double entry bookkeeping, double helix, en.wikipedia.org, Exxon Valdez, Fall of the Berlin Wall, future of journalism, Galaxy Zoo, Hacker Ethic, Haight Ashbury, hive mind, Howard Rheingold, invention of the telegraph, jimmy wales, John Harrison: Longitude, Kevin Kelly, linked data, Netflix Prize, New Journalism, Nicholas Carr, Norbert Wiener, openstreetmap, P = NP, Pluto: dwarf planet, profit motive, Ralph Waldo Emerson, RAND corporation, Ray Kurzweil, Republic of Letters, RFID, Richard Feynman, Richard Feynman, Ronald Reagan, semantic web, slashdot, social graph, Steven Pinker, Stewart Brand, technological singularity, Ted Nelson, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Whole Earth Catalog, X Prize

Whereas perception sees individual items (this berry, that cat), knowledge discerns what this cat has in common with all other cats that makes it into a cat; knowledge sees its essence as a cat. For our ancestors, knowledge was of universals—not of facts about this or that cat. The idea that knowledge was a slew of facts about particulars would have struck them as a misuse of our God-given instrument. So what happened in the nineteenth century to make facts the bedrock of knowledge? The path is twisty. Mary Poovey cites the invention in Italy of double-entry bookkeeping, which in the sixteenth century provided a process by which ledger entries could be proved accurate to anyone who, regardless of status, followed the proper procedure. 11 But most historians look to the seventeenth century, when the philosopher and statesman Francis Bacon, seeking to put knowledge on a more certain basis, invented the scientific method. Like Aristotle, he sought knowledge of universals.12 But he proposed getting to them through careful experiments on particulars.

See Science at Creative Commons Crick, Francis Crisis of knowledge CrisisCommons.org Crowds Crowdsourcing information amateur scientists British Parliamentarians’ use of expertise and leadership effectiveness Netflix contest open-notebook science Culture, information overload and Cybercascades Cyberchiefs: Autonomy and Authority in Online Tribes (O’Neil) Darnton, Robert DARPA (Defense Advanced Research Projects Agency) Darwin, Charles amateur scientists’ contributions barnacle studies Hunch.com and insight and leap of thought long-form thinking science and publishing Data accuracy of published data crowdsourcing scientific and medical information data commons evaluating metadata information and overaccumulation of scientific data scientific knowledge Data.gov Data-information-knowledge-wisdom (DIKW) hierarchy Davis, John Debian Decision-making advantages of networked corporate and government networked decision-making Debian community Dickover’s social solutions facing reality Wikipedia policy Defaults Democracy echo chambers hiding knowledge and increasing group polarization reason, truth, and knowledge Denney, Reuel Deolalikar, Vinay Derrida, Jacques Descartes, René Dialogue, exploring diversity through Dickens, Charles Dickover, Noel Diderot, Denis The Difference (Page) Discourses Diversity appropriate scoping decreasing intelligence echo chambers forking moderating negative effects of of expertise race and gender respectful conversations over DNA Dr. Strangelove, Or How I Learned to Stop Worrying and Love the Bomb (film) Doctorow, Cory Dogger Bank Incident The Double Helix (Watson) Double-entry bookkeeping Dublin Core standard Dwarf planets eBird.org E-books Echo chambers Edge.org Ehrlich, Paul Einstein@Home Eliot, T.S. Embodied thought Emerson, Ralph Waldo Enders, John Engadget Environmental niche modeling Environmental Protection Agency (EPA) Eureqa computer program Evolutionary science Experiments, scientific method and Expert Labs Expertise Challenger investigation crowdsourcing diversity in networking knowledge networks outperforming individuals professionalization of scaling knowledge and networking sub-networks Extremism: group polarization Exxon Valdez oil disaster Facebook Fact-based knowledge as foundation of knowledge British backlash against British chimney sweep reform Darwin’s work on barnacles Hunch.com international dispute settlement See also Data Fact-finding missions Facts Linked Data standard Malthusian theory of population growth networked Failed science Fear, information overload and Federal Advisory Committees (FACs) Federal Highway Administration Feminism Filters information overload as filter failure knowledge management FoldIt Food, extending shelf life of Foodies Ford Motors Forking Forscher, Bernard K.


pages: 284 words: 79,265

The Half-Life of Facts: Why Everything We Know Has an Expiration Date by Samuel Arbesman

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Albert Einstein, Alfred Russel Wallace, Amazon Mechanical Turk, Andrew Wiles, bioinformatics, British Empire, Chelsea Manning, Clayton Christensen, cognitive bias, cognitive dissonance, conceptual framework, David Brooks, demographic transition, double entry bookkeeping, double helix, Galaxy Zoo, guest worker program, Gödel, Escher, Bach, Ignaz Semmelweis: hand washing, index fund, invention of movable type, Isaac Newton, John Harrison: Longitude, Kevin Kelly, life extension, meta analysis, meta-analysis, Milgram experiment, Nicholas Carr, p-value, Paul Erdős, Pluto: dwarf planet, randomized controlled trial, Richard Feynman, Richard Feynman, Rodney Brooks, social graph, social web, text mining, the scientific method, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Tyler Cowen: Great Stagnation

While focusing on algebra and other aspects of math, there also was a significant section on accounting. Pacioli chronicled double-entry bookkeeping—entering each entry twice, both as a debit and a credit, in order to reduce errors—which was the first time this method had been codified in print. This error-checking methodology, which was being used by Italian merchants, finally could be spread far and wide. Mary Poovey, an English professor at New York University and the author of the monograph History of the Modern Fact, has argued that the modern conception of the fact, with its notion of objective reality that often goes hand in hand with a certain quantifiable quality, was first seen during the Middle Ages. Specifically, Poovey identified the “invention” of the fact with the advent of double-entry bookkeeping. Only with the introduction of this methodology in the fifteenth century or so, Poovey argued, did humans become accustomed to thinking in terms of bits of information in quite this way.


pages: 415 words: 125,089

Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein

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Albert Einstein, Andrew Wiles, Antoine Gombaud: Chevalier de Méré, Big bang: deregulation of the City of London, Bretton Woods, buttonwood tree, capital asset pricing model, cognitive dissonance, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Lloyd's coffeehouse, endowment effect, experimental economics, fear of failure, Fellow of the Royal Society, Fermat's Last Theorem, financial deregulation, financial innovation, full employment, index fund, invention of movable type, Isaac Newton, John Nash: game theory, John von Neumann, linear programming, loss aversion, Louis Bachelier, mental accounting, moral hazard, Nash equilibrium, probability theory / Blaise Pascal / Pierre de Fermat, random walk, Richard Thaler, Robert Shiller, Robert Shiller, spectrum auction, statistical model, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, trade route, transaction costs, tulip mania, Vanguard fund

Written in praise of the "very great abstraction and subtlety of mathematics," the Summa acknowledges Paccioli's debt to Fibonacci's Liber Abaci, written nearly three hundred years earlier. The Summa sets out the basic principles of algebra and contains multiplication tables all the way up to 60 x 60-a useful feature at a time when printing was spreading the use of the new numbering system. One of the book's most durable contributions was its presentation of double-entry bookkeeping. This was not Paccioli's invention, though his treatment of it was the most extensive to date. The notion of double-entry bookkeeping was apparent in Fibonacci's Liber Abaci and had shown up in a book published about 1305 by the London branch of an Italian firm. Whatever its source, this revolutionary innovation in accounting methods had significant economic consequences, comparable to the discovery of the steam engine three hundred years later. While in Milan, Paccioli met Leonardo da Vinci, who became a close friend.

In 1654, a time when the Renaissance was in full flower, the Chevalier de Mere, a French nobleman with a taste for both gambling and mathematics, challenged the famed French mathematician Blaise Pascal to solve a puzzle. The question was how to divide the stakes of an unfinished game of chance between two players when one of them is ahead. The puzzle had confounded mathematicians since it was posed some two hundred years earlier by the monk Luca Paccioli. This was the man who brought double-entry bookkeeping to the attention of the business managers of his day-and tutored Leonardo da Vinci in the multiplication tables. Pascal turned for help to Pierre de Fermat, a lawyer who was also a brilliant mathematician. The outcome of their collaboration was intellectual dynamite. What might appear to have been a seventeenth-century version of the game of Trivial Pursuit led to the discovery of the theory of probability, the mathematical heart of the concept of risk.


pages: 695 words: 194,693

Money Changes Everything: How Finance Made Civilization Possible by William N. Goetzmann

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Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, banking crisis, Benoit Mandelbrot, Black Swan, Black-Scholes formula, Bretton Woods, Brownian motion, capital asset pricing model, Cass Sunstein, collective bargaining, colonial exploitation, compound rate of return, conceptual framework, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, delayed gratification, Detroit bankruptcy, disintermediation, diversified portfolio, double entry bookkeeping, Edmond Halley, en.wikipedia.org, equity premium, financial independence, financial innovation, financial intermediation, fixed income, frictionless, frictionless market, full employment, high net worth, income inequality, index fund, invention of the steam engine, invention of writing, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, laissez-faire capitalism, Louis Bachelier, mandelbrot fractal, market bubble, means of production, money: store of value / unit of account / medium of exchange, moral hazard, new economy, passive investing, Paul Lévy, Ponzi scheme, price stability, principal–agent problem, profit maximization, profit motive, quantitative trading / quantitative finance, random walk, Richard Thaler, Robert Shiller, Robert Shiller, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, spice trade, stochastic process, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, time value of money, too big to fail, trade liberalization, trade route, transatlantic slave trade, transatlantic slave trade, tulip mania, wage slave

An Italian monk, friend of Leonardo da Vinci, mathematician, and the “father” of accounting, Lucca Pacioli published his most famous work of mathematics in 1494. Although much of the book was devoted to geometry, one section described the “Italian” technique of double-entry bookkeeping—a seemingly prosaic topic compared to the other subjects in his treatise. Yet this section immortalized Pacioli. Pacioli based his bookkeeping method on a journal, a documentary record through time of the monetary inflows and outflows of the business. Each transaction is captured by two entries—a debit from one account and a credit to another. Debits and credits thus track the progress of the business through time, and they must balance each other when the accounts are periodically settled up—or else a mistake has been made. The genius of double-entry bookkeeping is that it was a means to reduce errors in documentation. But it also has a subtle effect. Once you begin to use it, you start to think of the world in terms of accounts.

The following illustrations are from the author’s private collection: PARTS I and IV CHAPTERS 7, 8, 11, 12, 21, and 23 FIGURES 2, 14, 15, 17, 19, and 22 INDEX abacus, 83, 248 abacus schools, 246, 248. See also Liber Abaci (Fibonacci) abstract thought, monetization leading to, 95 abstract (intangible) wealth: in ancient Greece, 81, 82, 90; in second-millennium Ur, 51 accounting: in ancient Near East, 27–28; Chinese tools for, 199, 200, 201, 272; double-entry bookkeeping in, 246–47; by Templars, 211; Zhouli on, 173 Adams, Samuel: father of, 387, 388 Aeschylus, 87 agency problem, 167, 169; Chinese Legalism and, 170; incentives and, 171–72, 174; modern economic theory on, 171–72, 188; monitoring and, 167, 169, 171, 172–74; with publicly owned corporation, 303 agricultural societies: of ancient Near East, 21, 27, 30, 69; idea of interest in, 44 Aida (Verdi), 419, 420 Akkadian, 46, 49 Alexander the Great, 69–70 al-Khwārizmi, 241 Allen, Robert, 198 alternative use of capital: money fief and, 243; return on investment and, 237 American Bond & Mortgage Company, 478 American Revolution: Chinese revolution of 1911 and, 437; Dutch and French investors in financing of, 386, 390; land-backed certificates for veterans of, 394; land speculation and, 388–90, 399 Amiet, Pierre, 25 Amsterdam: The Great Mirror of Folly printed in, 375; insurance business in, 365, 366; negotiatie of 1774 floated in, 384–85 Amsterdam Exchange, 317–18 Anatolia: Mesopotamian trade with, 59, 60, 61, 64; Roman taxes imposed on, 123 Andersson, J.

See also mutual funds dividend futures, of Casa di San Giorgio, 292 dividends: of Casa di San Giorgio, 291–92; of China Merchants Steamship Navigation Company, 431, 432; of Dutch East India Company, 317, 318; of Honor del Bazacle, 297, 298, 299; in Marxist analysis, 408; from Smith’s investment funds, 473; of South Sea Company, 339, 340 divination, Chinese, 146–47, 271 Dodd, David, 473, 489–90, 507 double-entry bookkeeping, 246–47 Dow, Charles Henry, 486 Dow Theory, 486–88 Drehem tablet, 37–40, 44, 70, 71 Drew, Daniel, 470 Dunhuang, 177 Dutch canal and dike system, 249–52 Dutch East India Company (VOC), 305, 316–19, 331; Rotterdam and, 363; stock prices in 1720, 369; tradable shares of, 316, 317–18 Dutch finance. See Netherlands Dutch invasion of England in 1688, 320, 322 Dutch mutual funds, 382–86, 390, 398–99 Dutch plantation loans, 384, 386, 393, 399 Dutch West India Company (WIC), 331, 335, 369, 372, 376 Easterly, William, 459–60 East India Company.


pages: 476 words: 132,042

What Technology Wants by Kevin Kelly

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Albert Einstein, Alfred Russel Wallace, Buckminster Fuller, c2.com, carbon-based life, Cass Sunstein, charter city, Clayton Christensen, cloud computing, computer vision, Danny Hillis, dematerialisation, demographic transition, double entry bookkeeping, en.wikipedia.org, Exxon Valdez, George Gilder, gravity well, hive mind, Howard Rheingold, interchangeable parts, invention of air conditioning, invention of writing, Isaac Newton, Jaron Lanier, John Conway, John von Neumann, Kevin Kelly, knowledge economy, Lao Tzu, life extension, Louis Daguerre, Marshall McLuhan, megacity, meta analysis, meta-analysis, new economy, out of africa, performance metric, personalized medicine, phenotype, Picturephone, planetary scale, RAND corporation, random walk, Ray Kurzweil, recommendation engine, refrigerator car, Richard Florida, Silicon Valley, silicon-based life, Skype, speech recognition, Stephen Hawking, Steve Jobs, Stewart Brand, Ted Kaczynski, the built environment, the scientific method, Thomas Malthus, Vernor Vinge, Whole Earth Catalog, Y2K

In White’s view, the adoption of the lowly foot stirrup for horse saddles enabled riders to use weapons on horseback, which gave an advantage to the cavalry over infantry and to the lords who could afford horses, and so nurtured the rise of aristocratic feudalism in Europe. The stirrup is not the only technology that has been blamed for feudalism. As Karl Marx famously claimed, “The hand-mill gives you society with the feudal lord; the steam-mill, society with the industrial capitalist.” Double-entry bookkeeping, invented in 1494 by a Franciscan monk, enabled companies to monitor their cash flow and for the first time to steer complex business. Double-entry accounting unleashed the banking industry in Venice and launched a global economy. The invention of moveable-type printing in Europe encouraged Christians to read their religion’s founding text themselves and make their own interpretations, and that launched the very idea of “protest” within and against religion.

clocks clothing cloud computing coal power coevolution Cole, John Colonial America compass, magnetic complex adaptive systems complexity future scenarios of as long-term trend specialization and computer chips transistors in see also Moore’s Law computers digital storage in DNA increased software complexity of invention of multiple functions of obsolete specialty computer simulations computer viruses contingency choices in in convergent inventions convergence see also inventions, convergence of “Convergent Evolution” (McGhee) conviviality Conway, John Cooke, William corals Bryozoa cornets Correns, Karl Erich crafts Crichton, Michael Cro-Magnons, see Sapiens crossbows cryptochromes customization, personal Daguerre, Louis Darwin, Charles Davies, Paul Davis, Mike Dawkins, Richard DDT Dean, Bashford decentralization de Duve, Christian deforestation demographic transition Dennett, Daniel Denton, Michael desert environments de Vries, Hugo Diamond, Jared Didion, Joan dinosaurs convergent lineages of diversity cultural differences in of ethnic and social preferences excessive choices offered by fringe of intelligence as long-term trend uniformity in DNA invented alternatives to mutation rate in mysterious origins of self-organization of synthesis of DNA sequencing Dobe tribe dolphins intelligence of domestication animal crop independent inventions of double-entry bookkeeping du Chaillu, Paul Dunn, Mark Dyson, Freeman Earth First! Journal Earth Summit (1992) Easterbrook, Gregg Easterlin, Richard Economist economy consumer spending in dematerialization of free market global Moore’s Law and nongrowth population growth and and prohibited technology of slums ecosystems ecumenopolis Edison, Thomas Edison’s Electric Light: Biography of an Invention (Friedel, Israel, and Finn) education efficiency Egypt, ancient Eigen, Manfred Einstein, Albert relativity theories of Einstein: His Life and Universe (Isaacson) Eisely, Loren Eldredge, Niles electric incandescent lightbulb electricity Amish and electric motors Ellington, A.


pages: 422 words: 131,666

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff

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affirmative action, Amazon Mechanical Turk, banks create money, big-box store, Bretton Woods, car-free, colonial exploitation, Community Supported Agriculture, complexity theory, computer age, corporate governance, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, death of newspapers, don't be evil, Donald Trump, double entry bookkeeping, easy for humans, difficult for computers, financial innovation, Firefox, full employment, global village, Google Earth, greed is good, Howard Rheingold, income per capita, invention of the printing press, invisible hand, Jane Jacobs, John Nash: game theory, joint-stock company, Kevin Kelly, laissez-faire capitalism, loss aversion, market bubble, market design, Marshall McLuhan, Milgram experiment, moral hazard, mutually assured destruction, Naomi Klein, new economy, New Urbanism, Norbert Wiener, peak oil, place-making, placebo effect, Ponzi scheme, price mechanism, price stability, principal–agent problem, private military company, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, RFID, road to serfdom, Ronald Reagan, short selling, Silicon Valley, Simon Kuznets, social software, Steve Jobs, Telecommunications Act of 1996, telemarketer, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade route, trickle-down economics, union organizing, urban decay, urban planning, urban renewal, Vannevar Bush, Victor Gruen, white flight, working poor, Works Progress Administration, Y2K, young professional

The more such corporations came to dominate business and finance, the more that legal and social systems evolved to serve them. Most of the business and finance innovations of the early corporate era—inventions we still look on fondly today—were really just ways of preserving and extending the reach of this new business entity. The health of a corporation was understood purely in terms of money, as measured by the new accounting technique of double-entry bookkeeping. Any transaction resulted in the debiting of one account and the crediting of another. This made achieving a favorable balance of trade the highest priority, and fostered a zero-sum-game mentality among all participants. International trade became a fierce competition between states for positive balances, which led to wars unlike any seen before. Where armies and navies had for most countries consisted of temporary forces raised to wage a specific conflict, the emergence of corporations with long-term agendas now necessitated full-time professional armed forces.

In both historical cases, central currency was a means of control, taxation, and centralization of authority during expansive dictatorships. And, in both cases, after a few hundred years, the continual debasement of currency led to the fall of the empire. We’re fast approaching the limits of our own currency system, instated to benefit corporate interests and adjusted over time to do it ever more efficiently and automatically. If double-entry bookkeeping can be thought of as the spreadsheet software on which businesses learned to reconcile their debits and credits, central currency was the operating system on which this accounting took place. Like any operating system, it has faded into the background now that a program is running, and it is seemingly uninvolved in whatever is taking place. In reality, it defines what can happen and what can’t.


pages: 196 words: 57,974

Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

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affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Corn Laws, corporate governance, corporate social responsibility, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight

Given that the punishment for bankruptcy could be imprisonment or even servitude, it was vital that all the members of the organization should trust each other absolutely. The word compagnia is a compound of two Latin words (cum and panis) meaning “breaking bread together.” Like their Venetian equivalents, the compagnie became more sophisticated as time went by, trying to attract investment from outside the family circle. Perhaps as early as 1340, they introduced double-entry bookkeeping, largely to keep their foreign offices honest. A Genoese merchant would record money sent to his agent in Bruges as “paid” in his accounts, while the latter put down the amount as “received.” And rather than sending coins, the bigger merchants began to trust each other with letters of exchange—a business that Italian banks would dominate. Indeed, the compagnie were closely intertwined with the banchi (named after the banco, or bench, behind which Italian money lenders used to sit).


pages: 273 words: 83,186

The botany of desire: a plant's-eye view of the world by Michael Pollan

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back-to-the-land, clean water, David Attenborough, double entry bookkeeping, double helix, Francisco Pizarro, invention of agriculture, Joseph Schumpeter, Maui Hawaii, means of production, paper trading, Ralph Waldo Emerson, Steven Pinker

The memes that prove themselves best adapted to their “environment”—that is, the ones that are most helpful for people to keep in their brains—are the ones most likely to survive and replicate and become widely regarded as good, true, or beautiful. Culture at any given moment is the “meme pool” in which we all swim—or rather, that swims through us. Cultural change occurs whenever a new meme is introduced and catches on. It might be romanticism or double-entry bookkeeping, chaos theory or Pokémon. (Or the notion of memes itself, which seems to be catching on today.) So where in the world do new memes come from? Sometimes they spring full-blown from the brains of artists or scientists, advertising copywriters or teenagers. Often a process of mutation is involved in the creation of a new meme, in much the same way that mutations in the natural environment can lead to useful new genetic traits.


pages: 298 words: 81,200

Where Good Ideas Come from: The Natural History of Innovation by Steven Johnson

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Ada Lovelace, Albert Einstein, Alfred Russel Wallace, carbon-based life, Cass Sunstein, cleantech, complexity theory, conceptual framework, cosmic microwave background, crowdsourcing, data acquisition, digital Maoism, discovery of DNA, Dmitri Mendeleev, double entry bookkeeping, double helix, Douglas Engelbart, Drosophila, Edmond Halley, Edward Lloyd's coffeehouse, Ernest Rutherford, Geoffrey West, Santa Fe Institute, greed is good, Hans Lippershey, Henri Poincaré, hive mind, Howard Rheingold, hypertext link, invention of air conditioning, invention of movable type, invention of the printing press, invention of the telephone, Isaac Newton, Islamic Golden Age, Jacquard loom, James Hargreaves, James Watt: steam engine, Jane Jacobs, Jaron Lanier, John Snow's cholera map, Joseph Schumpeter, Joseph-Marie Jacquard, Kevin Kelly, lone genius, Louis Daguerre, Louis Pasteur, Mason jar, Mercator projection, On the Revolutions of the Heavenly Spheres, online collectivism, packet switching, PageRank, patent troll, pattern recognition, price mechanism, profit motive, Ray Oldenburg, Richard Florida, Richard Thaler, Ronald Reagan, side project, Silicon Valley, silicon-based life, six sigma, Solar eclipse in 1919, spinning jenny, Steve Jobs, Steve Wozniak, Stewart Brand, The Death and Life of Great American Cities, The Great Good Place, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, transaction costs, urban planning

Not surprisingly, this period marks the birth of the modern notion of the inventive genius, the rogue visionary who somehow sees beyond the horizon that limits his contemporaries—da Vinci, Copernicus, Galileo. Some of those solo artists (Galileo most famously) worked outside of broader groups because their research posed a significant security threat to the established powers of the day. The few innovations that did emerge out of networks—the portable, spring-loaded watches that first appeared in Nuremberg in 1480, the double-entry bookkeeping system developed by Italian merchants—have their geographic origins in cities, where information networks were more robust. First-quadrant solo entrepreneurs, crafting their products in secret to ensure their eventual payday, turn out to be practically nonexistent. Gutenberg was the exception, not the rule. 1600-1800 Scanning the next two centuries, we see that the pattern changes dramatically (see page 229).


pages: 222 words: 74,587

Paper Machines: About Cards & Catalogs, 1548-1929 by Markus Krajewski, Peter Krapp

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business process, double entry bookkeeping, Frederick Winslow Taylor, Gödel, Escher, Bach, index card, Index librorum prohibitorum, information retrieval, invention of movable type, invention of the printing press, Jacques de Vaucanson, Johann Wolfgang von Goethe, Joseph-Marie Jacquard, knowledge worker, means of production, new economy, paper trading, Turing machine

Complemented by copying procedures that transfer card entries into ledgers and thereby prevent errors, the permanent accounting book comes to dominate bookkeeping, subverting the law by means of widespread practical application.59 “The chamber has agreed to the admissibility of loose-leaf bookkeeping under the condition of the preservation of the principle of order and completeness,” reads a commentary in perfect Nominalstil in the journal Rationelle Betriebsführung.60 By 1929, it becomes clear that the use of permanent accounting books and consequently of index card registers will have no legal consequences. Already by the following year, Büroorganisation trumpets in anticipation of a possible storage area for discarded accounting media: “Bound accounting books for double entry bookkeeping will be relegated to book museums and accounting museums. They shall be replaced by loose sheets of paper in folders, index cards and index card books, etc.”61 The tacitly subverted law grants a fragmented, distributed, and highly adaptable space to the basic accounting technique, whereby the psychotechnically optimized organization of the universal card index machine can rule. “Today no field of application can be imagined for which the use of a card index would not be of assistance.”62 Thus, although the German term denotes sheer disarray, business literally and comprehensively becomes a Zettelwirtschaft, a “paper slip economy.”


pages: 322 words: 77,341

I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

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asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, George Akerlof, greed is good, hindsight bias, housing crisis, Hyman Minsky, interest rate swap, invisible hand, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, laissez-faire capitalism, liquidity trap, Long Term Capital Management, loss aversion, Martin Wolf, mortgage debt, mortgage tax deduction, mutually assured destruction, new economy, Nick Leeson, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, tulip mania, value at risk

But we do know who wrote down the method behind them and in the process invented modern accounting, which relies on four financial statements to provide a full picture of any given business: the balance sheet, the income statement, the cash flow statement, and the statement of retained earnings. The man who wrote down the method for gathering and recording the relevant information was Luca Pacioli, a Franciscan monk and friend of both Piero della Francesca and Leonardo da Vinci, whose assistant he was for many years. Pacioli wrote Summa de Arithmetica, the book which laid out the method of double-entry bookkeeping which is still in use in more or less every business in the world. (He also wrote about magic, in the sense of conjuring. I’d like to think he would have enjoyed the old joke about accountants: “What’s two plus two?” “What would you like it to be?”) There’s something amazing about the fact that a method used in Venice in the thirteenth century and written down in Tuscany in the fifteenth should still be in daily use in every financial enterprise in the developed world.


pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

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Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamonds, borderless world, BRICs, British Empire, call centre, carbon footprint, charter city, clean water, cleantech, cloud computing, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, facts on the ground, failed state, friendly fire, global village, Google Earth, high net worth, index fund, informal economy, invisible hand, labour mobility, laissez-faire capitalism, Masdar, megacity, microcredit, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, oil shock, open economy, out of africa, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

Even as his Oration on the Dignity of Man was taken as a secular manifesto, in fact his true effort was to reconcile the church with classical strains of logic such as Aristotle’s. His lesson for today’s age is that our fruitless debates between the West and Islam should instead become a more inclusive discourse on achieving spiritually and morally informed governance. Similarly, the Renaissance witnessed innovations such as double-entry bookkeeping and large-scale credit, bringing new commercial opportunities to Europeans whose geographic and cultural horizons were gradually opening as Crusaders returned home. The manner in which the current economic turbulence has shaken up our financial architecture could do the same. Chastened bankers from Lehman Brothers are actually leading an effort to revise models of financial analytics to emphasize value creation, not just wealth creation.

The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

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air freight, airline deregulation, Albert Einstein, asset-backed security, bank run, Berlin Wall, Bretton Woods, business process, call centre, capital controls, central bank independence, collateralized debt obligation, collective bargaining, conceptual framework, Corn Laws, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Hernando de Soto, income inequality, income per capita, invisible hand, Joseph Schumpeter, labor-force participation, labour market flexibility, laissez-faire capitalism, land reform, Long Term Capital Management, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, new economy, North Sea oil, oil shock, open economy, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, reserve currency, risk tolerance, Ronald Reagan, shareholder value, short selling, Silicon Valley, special economic zone, the payments system, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, working-age population, Y2K

I cannot count how many letters I received from Capitol Hill in the 1990s outlining one scheme or another to spend more or tax less, with the pay-go requirement 233 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. T H E AGE OF T U R B U L E N C E satisfied by some sleight-of-hand financing obscurity, the purpose of which was to hide the cost of the scheme. In the Congress, double-entry bookkeeping had become a lost art. It finally dropped the pretense. During the final year of the Clinton administration, Congress had ignored its self-imposed discretionary spending caps to legislate an estimated $ 1 trillion of additional spending over ten years. Without this spending, the record $237 billion surplus in 2000 would have been even larger. Then with George Bush came the tax cuts, unmatched by decreased spending, and, in the wake of September 11, still more openhanded spending.

If you put a price ceiling on gasoline, shortages emerge and long lines at filling stations develop, as became all too apparent to Americans in 1974. The beauty of a market system is that when it is functioning well, as it does almost all the time, it tends to create its own balance. The populist view is equivalent to single-entry bookkeeping. It scores only credits, such as the immediate benefits of lower gasoline prices. Economists, I trust, practice double-entry bookkeeping. Burdened by its dearth of meaningful economic policy specifics, populism, to attract a following, has to claim a moral justification. Accordingly, 338 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. LATIN AMERICA AND POPULISM populist leaders must be charismatic and exhibit a take-charge aura, even an authoritarian competence.


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

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affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, colonial rule, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Plutocrats, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, women in the workforce

Assuming one really brilliant idea per billion people per year, then the million-strong Homo erectus population in 300,000 B.C. would have been coming up with one such idea every thousand years. By 1800, the dawn of the Industrial Revolution, with a billion people in the world, the innovation rate would have risen to one stunning idea every year. By 1930 it would be one world-changing idea every six months. With six billion minds on the planet we should now be producing this kind of idea every two months; such ideas could be anything from double-entry bookkeeping to crop rotation. It’s an absurd, grotesquely oversimplified model; it also fits the data perfectly. Kremer suggests simply taking population growth as a measure of technological progress: The faster the human population is able to grow, the more advanced technology must have become. It turns out that these eminently Malthusian assumptions fit very nicely indeed, at least until 1960 and the pill.


pages: 237 words: 72,716

The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality by Roland Berger, David Grusky, Tobias Raffel, Geoffrey Samuels, Chris Wimer

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Branko Milanovic, Celtic Tiger, collective bargaining, corporate governance, corporate social responsibility, double entry bookkeeping, equal pay for equal work, fear of failure, financial innovation, full employment, Gini coefficient, hiring and firing, illegal immigration, income inequality, invisible hand, labour market flexibility, labour mobility, Long Term Capital Management, microcredit, offshore financial centre, principal–agent problem, profit maximization, rent-seeking, shareholder value, Silicon Valley, Silicon Valley startup, time value of money, very high income

Again, going back to the comments I just made, if you list the top one hundred or five hundred CEOs’ compensation in the last five to ten years, I would be very surprised if a disproportionate number of the ones who have received the eye popping packages are not in the financial sector. Second, the Black-Scholes model for the value of stock options makes compensation reports often misleading. For the first time since double-entry bookkeeping, you have an expense that is dragged through the profit-and-loss statement, and if the value of the options goes south, you never reverse the entry. That’s never been done. The thing that bothers me about it is that the man who came up with this formula is one of the architects of Long-Term Capital Management, so I’m not sure I really have a lot of confidence in this valuation formula.


pages: 287 words: 44,739

Guide to business modelling by John Tennent, Graham Friend, Economist Group

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correlation coefficient, discounted cash flows, double entry bookkeeping, iterative process, purchasing power parity, RAND corporation, shareholder value, the market place, time value of money

The model development process 33 THE MODEL DEVELOPMENT PROCESS Set up output and input templates The first stage of the model development process is to set up sheets containing templates for all the outputs. The content of the output sheets was the subject of Chapter 3. Templates for the profit and loss, balance sheet and cash flow can also be created if these form part of the solution. During the model-building process the financial statement templates can be completed continuously, as if performing double-entry book-keeping. The modeller can ensure the accuracy of the work by checking that the balance sheet continues to balance throughout the development of the model. Sheets containing the input templates should also be created at the start of the process. Populate input templates with base or test data The input templates must be populated with data to allow model development to continue. Without input data the modeller will be unable to gauge the effectiveness and accuracy of the work done on the model.


pages: 353 words: 97,352

The Importance of Being Seven by Alexander McCall Smith

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double entry bookkeeping, Malacca Straits, working poor

Anything good, anything positive, was seen by him as a dubious privilege that would be paid for dearly; even a fine day – in Scotland a rare gift of those most fickle local weather gods – would be paid for by cold and damp later on. The bill for a warm spring was a miserable, rain-sodden summer; the bill for happiness was subsequent anxiety about the loss of exactly that happiness – it was a bleak system of double-entry book-keeping, but one that had a firm root in the Scottish psyche. And was that what she was like, she asked herself. The egg boiled, and Elspeth sat down to eat it. Matthew sat at the table opposite her. He was jumpy – she could tell that. And this nervousness increased until the telephone rang and he shot up from his chair to answer it. It was his lawyer. ‘I’ve spoken to Lesley Kerr,’ she said.


pages: 459 words: 103,153

Adapt: Why Success Always Starts With Failure by Tim Harford

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Andrew Wiles, banking crisis, Basel III, Berlin Wall, Bernie Madoff, Black Swan, car-free, carbon footprint, Cass Sunstein, charter city, Clayton Christensen, clean water, cloud computing, cognitive dissonance, complexity theory, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, Deep Water Horizon, Deng Xiaoping, double entry bookkeeping, Edmond Halley, en.wikipedia.org, Erik Brynjolfsson, experimental subject, Fall of the Berlin Wall, Fermat's Last Theorem, Firefox, food miles, Gerolamo Cardano, global supply chain, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, Jarndyce and Jarndyce, John Harrison: Longitude, knowledge worker, loose coupling, Martin Wolf, Menlo Park, Mikhail Gorbachev, mutually assured destruction, Netflix Prize, New Urbanism, Nick Leeson, PageRank, Piper Alpha, profit motive, Richard Florida, Richard Thaler, rolodex, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, South China Sea, special economic zone, spectrum auction, Steve Jobs, supply-chain management, the market place, The Wisdom of Crowds, too big to fail, trade route, Tyler Cowen: Great Stagnation, web application, X Prize

Evolution is effective because, rather than engaging in an exhaustive, time-consuming search for the highest peak – a peak that may not even be there tomorrow – it produces ongoing, ‘works for now’ solutions to a complex and ever-changing set of problems. In biological evolution, solutions include photosynthesis, pairs of eyes and mothers’ milk. In economic evolution, solutions include double-entry book-keeping, supply-chain management and ‘buy one, get one free’. Some of what works seems to be perennial. The rest, such as being a Tyrannosaurus rex or the world’s most efficient manufacturer of VHS video cassettes, is rooted in a particular place and time. We know that the evolutionary process is driven by variation and selection. In biology, variation emerges from mutations and from sexual reproduction, which mixes the genes from two parents.


pages: 791 words: 85,159

Social Life of Information by John Seely Brown, Paul Duguid

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AltaVista, business process, Claude Shannon: information theory, computer age, cross-subsidies, disintermediation, double entry bookkeeping, Frank Gehry, frictionless, frictionless market, future of work, George Gilder, global village, Howard Rheingold, informal economy, information retrieval, invisible hand, Isaac Newton, Just-in-time delivery, Kevin Kelly, knowledge economy, knowledge worker, loose coupling, Marshall McLuhan, medical malpractice, moral hazard, Network effects, new economy, Productivity paradox, rolodex, Ronald Coase, shareholder value, Silicon Valley, Steve Jobs, Superbowl ad, Ted Nelson, telepresence, the medium is the message, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, Turing test, Vannevar Bush, Y2K

Consequently, it is important to understand them. When people are championing the decline of old institutions and the rise of new ones, for example, it's always worthwhile to look around to see if there are any old ones that sweeping visions take for granted. For instance, while many people talk about the new landscape of business and finance, it's worth noting that the "bottom line" is a 600-year-old relic from double-entry bookkeeping. The institutions of profit-and-loss accounting still exert remarkable influence over our thinking. Reengineers may have told us all to "forget all we know," but few of those caught up in reengineering were allowed to forget the bottom line. Or, again, while people rightly talk so enthusiastically about the new economics of e-business, the power of the Web, and the emerging markets, it's worth noticing how much is predicated on the continuation of advertising.


pages: 363 words: 107,817

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

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bank run, banking crisis, banks create money, Basel III, Bretton Woods, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, informal economy, land reform, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Northern Rock, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, seigniorage, shareholder value, short selling, South Sea Bubble, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

When the harvests failed the loans would not be repaid: everyone would start falling into debt traps (and debt slavery). The social unrest this created would be so great that the only way to stop society breaking down (or the rulers being overturned) would be to periodically forgive everyone their debts – a debt jubilee. 4. These innovations included: courier services to convey messages; carrier services for the transport of goods; double entry bookkeeping; the extension of joint enterprises for longer durations (previously these had been established for single ventures and then dissolved); the accepting of deposits by businesses for funding purposes and the payment of interest on them (rather than a share in the profits); and bills of exchange (which allowed local payments to be made without the need to transport coins or bullion). 5.


pages: 305 words: 89,103

Scarcity: The True Cost of Not Having Enough by Sendhil Mullainathan

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American Society of Civil Engineers: Report Card, Andrei Shleifer, Cass Sunstein, clean water, computer vision, delayed gratification, double entry bookkeeping, Exxon Valdez, fault tolerance, happiness index / gross national happiness, impulse control, indoor plumbing, inventory management, knowledge worker, late fees, linear programming, mental accounting, microcredit, p-value, payday loans, purchasing power parity, randomized controlled trial, Report Card for America’s Infrastructure, Richard Thaler, Saturday Night Live, Walter Mischel, Yogi Berra

For example, several would put the cash from their store in one register and pay themselves a fixed salary. This prevented the commingling of home money and business money that makes it difficult to determine how much they were spending at home versus how much the business was earning. (Some of the women kept one wad of cash in their bra’s left cup, and the other in the right cup.) This is not quite double-entry bookkeeping, but it was effective and simple. It economized on bandwidth and preserved most of the benefits. Schoar collected the best rules of thumb and designed a different “financial education” class based on them. Her class was shorter and much easier to grasp. It used a lot less bandwidth, and this showed up in the data. Attendance was much higher, and at the end of the rules-of-thumb class, clients were ecstatic and asking for more; many even said they would pay for another class themselves.


pages: 368 words: 32,950

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile by Alexander Davidson

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accounting loophole / creative accounting, algorithmic trading, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Big bang: deregulation of the City of London, capital asset pricing model, central bank independence, corporate governance, Credit Default Swap, dematerialisation, discounted cash flows, diversified portfolio, double entry bookkeeping, Edward Lloyd's coffeehouse, Elliott wave, Exxon Valdez, forensic accounting, global reserve currency, high net worth, index fund, inflation targeting, interest rate derivative, interest rate swap, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Nick Leeson, North Sea oil, Northern Rock, pension reform, Piper Alpha, price stability, purchasing power parity, Real Time Gross Settlement, reserve currency, shareholder value, short selling, The Wealth of Nations by Adam Smith, transaction costs, value at risk, yield curve, zero-coupon bond

Investment bankers have been more likely to have a public school background and commercial bankers a grammar school education, but the dividing line has blurred. Commercial banks today Commercial banks are mainly involved in deposit taking and lending. Deposits build up when people leave surplus money in saving accounts. When banks lend money to their clients, it comes from other banking clients. In effect, what goes into one person’s account as a loan must come out of another’s. The banking system is said to be like double-entry bookkeeping.  20 HOW THE CITY REALLY WORKS __________________________________ Banks pay a small rate of interest on cash deposited, and lend out much of it at a much higher rate, making a margin on the difference. In common alone with the government, they keep bank accounts with the Bank of England. A bank must retain a required level of liquidity, and it can borrow or lend money wholesale on the money markets (see Chapter 11), dealing with other banks or perhaps multinational companies.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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3D printing, balance sheet recession, banking crisis, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

Moreover, we are accustomed to thinking of deficits as something that requires borrowing, which we presume takes financial resources away from savers, thereby ‘crowding out’ other forms of economic activity. But, as anyone who understands monetary operations knows, this gets things completely backwards.20 To see this, one can run through the balance sheet entries, tracing the debits and credits that arise as the government spends, taxes and issues bonds.21 Or, perhaps more straightforwardly, one can rely on the internal logic of double-entry bookkeeping and simply interpret the sector balance model. Either way, careful analysts will discover that deficits add to (rather than subtract from) the financial balances of other economic agents. Simply put, government deficits are a flow of funds that increases the stock of net financial assets to the non-government sector.22 The government’s deficits (flow) accumulate to financial debt (stock).


pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

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asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, working poor, yield curve

balance sheet An accounting convention, first recorded by the Franciscan friar Dominic Luca Pacioli in his 1494 blockbuster, Summa de arithmetica, geometria, proportioni et proportionalità. Pacioli didn’t invent the set of accounting techniques he described, which were in use in mainly Venetian banking circles, but he was the first person to write them down. It’s a remarkable fact that every business in the world uses them on a daily basis more than five hundred years later. The fundamental feature of Pacioli’s system, known as double-entry bookkeeping, is that everything is recorded twice, as an asset in one place and a liability in another, and that the two sides of the balance sheet are always equal: assets = liabilities + equity. There’s a beautiful descripton of the system’s impact in James Buchan’s book Frozen Desire: To be able to keep books in double-entry is to have a machine for calculating the world. Understanding the technique is the work of a few days—practising it no doubt requires longer—but one feels one has mastered an ancient and far-flung language: one seems to see better into the nature of things.


pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

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affirmative action, agricultural Revolution, airport security, anti-communist, Asian financial crisis, battle of ideas, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, illegal immigration, interest rate derivative, knowledge economy, Mahatma Gandhi, Martin Wolf, mutually assured destruction, new economy, oil shock, open economy, out of africa, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, The Great Moderation, Thomas L Friedman, Thomas Malthus, trade route, Washington Consensus, working-age population, young professional

This, too, has caught on in some other countries, especially with younger people in technology-based industries. The pattern remains the same. Western styles have become the standard mode of work dress for men, signifying modernity. The Death of the Old Order Westernization is not merely about appearances. Executives all over the world manage their companies by means of what we could call “standard” business practices. The truth is that these standards, from double-entry bookkeeping to dividends, are all Western in origin. And it’s not just true of business. Over the last two centuries, and especially the last two decades, government institutions everywhere have also become more alike, encompassing parliaments, regulatory agencies, and central banks. Surveying several countries in Europe and Latin America, two scholars found that the number of independent regulatory agencies (American-style bodies) rose sevenfold between 1986 and 2002.16 Even politics has an increasingly familiar feel across the globe.


pages: 471 words: 124,585

The Ascent of Money: A Financial History of the World by Niall Ferguson

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Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, Corn Laws, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, interest rate swap, Isaac Newton, iterative process, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour mobility, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Naomi Klein, Nick Leeson, Northern Rock, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, value at risk, Washington Consensus, Yom Kippur War

Munro, ‘The Medieval Origins of the Financial Revolution: Usury, Rentes, and Negotiability’, International History Review, 25, 3 (September 2003), pp. 505-62. 33 Richard A. Goldthwaite, ‘The Medici Bank and the World of Florentine Capitalism’, Past and Present, 114 (Feb. 1987), pp. 3-31. On the background to the Medicis’ rise, see Raymond de Roover, The Rise and Decline of the Medici Bank, 1397-1494 (Cambridge, MA, 1963), pp. 9-34. 34 Venetian State Archives, Mediceo Avanti Principato, MAP 133, 134, 153. 35 Franz-Josef Arlinghaus, ‘Bookkeeping, Double-entry Bookkeeping’, in Christopher Kleinhenz (ed.), Medieval Italy: An Encyclopedia, vol. 1 (New York, 2004). The first book to describe the method was Benedetto Cotrugli’s Il libro dell’arte di mercatura, published in 1458. 36 Raymond de Roover, ‘The Medici Bank: Organization and Management’, Journal of Economic History, 6, 1 (May 1946), pp. 24-52. 37 Venetian State Archives, Archivio del Monte, Catasto of 1427.


pages: 289 words: 113,211

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

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affirmative action, Albert Einstein, asset allocation, backtesting, Black Swan, Black-Scholes formula, Bonfire of the Vanities, butterfly effect, commodity trading advisor, computer age, disintermediation, diversification, double entry bookkeeping, Edward Lorenz: Chaos theory, family office, financial innovation, fixed income, frictionless, frictionless market, George Akerlof, implied volatility, index arbitrage, Jeff Bezos, London Interbank Offered Rate, Long Term Capital Management, loose coupling, margin call, market bubble, market design, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, new economy, Nick Leeson, oil shock, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk/return, Robert Shiller, Robert Shiller, rolodex, Saturday Night Live, shareholder value, short selling, Silicon Valley, statistical arbitrage, The Market for Lemons, time value of money, too big to fail, transaction costs, tulip mania, uranium enrichment, yield curve, zero-coupon bond

Leonardo provided illustrations for Pacioli’s work, De Divina Proportione, which applied the golden ratio, a topic that later became the object of study in his famous Vitruvian Man. As a favor to one of his patrons, Pacioli included in the Summa a discussion on the Venetian method of bookkeeping. The Venetian method recorded every business transaction in two parts, a debit (an account that received funds) and a credit (an account that provided funds). If that sounds familiar, it is; this is the source of double-entry bookkeeping, which makes up the core premise of accounting 500 years later. The propagation 136 ccc_demon_125-142_ch07.qxd 2/13/07 1:46 PM Page 137 COLOSSUS of the Venetian method through Pacioli’s work was a key ingredient in the voyages of discovery of the sixteenth century. It provided a reliable system to record investments and returns, essential in attracting wealthy merchants to provide the backing required for these voyages, which opened the way for trade with the New World and the Far East.8 DA VINCI’S ACCOUNTANT IS STILL KEEPING OUR BOOKS This approach has remained the foundation of accounting to the present, first blossoming in the United States with the building of railroads.


pages: 446 words: 138,827

What Should I Do With My Life? by Po Bronson

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back-to-the-land, Berlin Wall, clean water, double entry bookkeeping, Exxon Valdez, financial independence, high net worth, job satisfaction, Menlo Park, microcredit, new economy, Silicon Valley, South of Market, San Francisco, special economic zone, telemarketer, traffic fines, young professional

He was surrounded by “fat ugly women” who had made the school district their life, and there was a woman down the hall who was very upset that Mark wasn’t “getting it.” She was making his life hell. “How long have you been there?” I asked. “A few months. I was hired to handle their finance. I thought it would mean managing their investment portfolio. Turns out they needed a clerk to handle accounting on a prehistoric non-double-entry bookkeeping system. It sucks. I’m making twenty percent of what I was earning just two years ago. I can’t believe how badly I screwed up.” “You’re living your brother’s life,” I said. “Except for the wife and kids and house part.” “Are you still with that woman I met?” He laughed, like No way. “Nicole? You remember her?” “No, I’m being polite and pretending like I remember her. I only remember you were with someone.”


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

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air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, Bretton Woods, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy

Banks cease to lend. This forces further de-leveraging on the rest of the economy. Moreover, banks automatically create money as a by-product of their normal lending (a point explained in full in Chapter Six below). That is a fundamental characteristic of banks. When they lend, they create a debt from their client to the bank and, simultaneously, a debt from the bank to the client. This is just double-entry bookkeeping. A debt from a bank to a client is a deposit and a deposit is money. So the growth of the stock of money in the hands of the public declines when the growth of bank lending falls. The fourth reason why post-crisis economies are weak is that inflation may become too low or, worse, deflation may set in. Deflation, or falling prices, creates the danger of what the great American economist Irving Fisher called ‘debt deflation’ in the 1930s – rising real level of debt and debt service within a collapsing economy.61 Such debt deflation is already, alas, in progress in parts of the Eurozone.


pages: 566 words: 155,428

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead by Alan S. Blinder

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, banks create money, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Detroit bankruptcy, diversification, double entry bookkeeping, eurozone crisis, facts on the ground, financial innovation, fixed income, friendly fire, full employment, hiring and firing, housing crisis, Hyman Minsky, illegal immigration, inflation targeting, interest rate swap, Isaac Newton, Kenneth Rogoff, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market bubble, market clearing, market fundamentalism, McMansion, moral hazard, naked short selling, new economy, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, price mechanism, quantitative easing, Ralph Waldo Emerson, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, statistical model, the payments system, time value of money, too big to fail, working-age population, yield curve, Yogi Berra

Hope Now focused on outreach, counseling, and encouraging delinquent borrowers to talk to their mortgage servicers about ways to become current again. It was more about minimizing lenders’ prospective losses than about reducing homeowners’ financial burdens. Such a tilt is hardly surprising in a voluntary, industry-led effort. After all, any mortgage modification that reduces homeowners’ payments must, by the inexorable laws of double-entry bookkeeping, also reduce lenders’ receipts. For that simple reason, as Paulson’s aide Phill Swagel put it, “avoiding more foreclosures required someone—either the government or lenders—to write a check.” No one should expect lenders to volunteer for that honor with enthusiasm. Nonetheless, by now many of the mortgages modified voluntarily have reduced principal, interest payments, or both—and the program continues.


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

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accounting loophole / creative accounting, agricultural Revolution, barriers to entry, cognitive bias, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

Indeed, we find that knowledge is so embodied that craftsmen were bribed, and sometimes kidnapped and taken to an area where their skills were lacking: An inquiry by the Bergskollegium in the 1660s into the emigration of Swedish iron masters revealed that a number of workers sailed from Nykoping believing that they were being taken to some other part of Sweden. Instead they were brought to Lubeck, from there to Hamburg, and finally to France, where Colbert was determined to start an iron industry on the Swedish model.21 P1: KNP head margin: 1/2 gutter margin: 7/8 CUUS245-07 cuus245 978 0 521 87928 6 May 21, 2008 16:55 166 Against Intellectual Monopoly Yet another example of the slow spread of knowledge is the use of double-entry bookkeeping. This was invented in Italy at the end of the fourteenth century, and widely used in Venice in the fifteenth century. It did not reach the Hanseatic League cities in northern Europe until well into the sixteenth century. However, one does not have to turn to the Middle Ages to find examples of the difficulty in transferring ideas. The Economist of December 22, 2001, ran an amusing piece on the “search for a perfect cup” of espresso coffee.


pages: 369 words: 121,161

Alistair Cooke's America by Alistair Cooke

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Albert Einstein, Alistair Cooke, British Empire, double entry bookkeeping, full employment, Hernando de Soto, imperial preference, interchangeable parts, joint-stock company, Maui Hawaii, Ralph Nader, Ralph Waldo Emerson, Spread Networks laid a new fibre optics cable between New York and Chicago, strikebreaker, The Wealth of Nations by Adam Smith, transcontinental railway, Triangle Shirtwaist Factory, urban sprawl, wage slave, Works Progress Administration

His responsibility to the Cleveland money men at an end, Rockefeller and his partner pooled their savings and invested all of $4,000 in the candlemaker’s refinery. Very soon, Rockefeller got richer men to build more refineries, and richer men still. Since his habits were more austere than theirs, he absorbed them. And then he sat back and he dreamed a dream. He was of the type of Columbus, and Fray Marcos, but with a gift for double-entry bookkeeping. There really wasn’t anything to stop him making his refinery business in Cleveland the biggest in Ohio, the biggest in the Midwest, in America. Why not the world? When he was thirty, he formed the Standard Oil Company of Ohio and bought twenty-five refineries. Rockefeller built a monopoly by means both genteel and ruthless, and it was rudely hinted that he had in the palm of his hands the best state legislatures and United States Senators that money could buy.


pages: 497 words: 153,755

The Power of Gold: The History of an Obsession by Peter L. Bernstein

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Albert Einstein, Atahualpa, Bretton Woods, British Empire, California gold rush, central bank independence, double entry bookkeeping, Edward Glaeser, falling living standards, financial innovation, floating exchange rates, Francisco Pizarro, German hyperinflation, Hernando de Soto, Isaac Newton, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, large denomination, liquidity trap, money: store of value / unit of account / medium of exchange, price stability, profit motive, random walk, rising living standards, Ronald Reagan, seigniorage, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, trade route

In spite of the continuous depredations of warfare and religious turmoil, these unpleasant developments played themselves against the background of the High Renaissance, when artistic and scientific achievements reached extraordinary levels. Leonardo, Tintoretto, Raphael, Palladio, Cellini, Michelangelo, Titian, Diirer, Cervantes, and El Greco were all active during the 1500s. The great cathedral of Saint Peter's rose up on the banks of the Tiber, well splashed with gold in its interior. Copernicus and Galileo were exploring the solar system, while businessmen for the first time took the giant step of using double-entry bookkeeping.22 This was also a period when Latin was being replaced by vernacular languages, which facilitated communication among the great mass of individuals, including some very rich ones, who had neither been to universities nor joined the clergy. The single most important event of the century occurred in 1517 when Martin Luther posted his 95 theses on the door of the church in Wittenberg. The Reformation tore through Europe like a hot poker, transforming beliefs and revolutionizing artistic styles while ripping across political and dynastic relationships.


pages: 505 words: 137,572

Dr. Johnson's London: Coffee-Houses and Climbing Boys, Medicine, Toothpaste and Gin, Poverty and Press-Gangs, Freakshows and Female Education by Liza Picard

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clean water, double entry bookkeeping, joint-stock company, New Urbanism, Plutocrats, plutocrats, South Sea Bubble

At eleven o’clock they came home (for luncheon?) or went to meetings, presumably in other coffee-houses. At two o’clock they went to the Exchange for an hour or so until it shut at 3 o’clock. At three or four o’clock they went to ‘lounge a little longer at the coffee house and then dine about four … dinner concluded the day, they give the rest of it to their friends’.8 M. Grosley was struck by English commercial methods. Although double-entry bookkeeping was now widely used, the record most relied on by a merchant was a ‘debt-book which [he] carries always in his pocket’, so he could carry on his business on the hoof, in coffeehouses or the Royal Exchange, which must have been an astonishing sight. It was open between one and three every day, not only to English merchants, but also to foreigners from as far away as Japan and Moscow.9 Each trade had its own spot, called a ‘walk’, in the courtyard, some under the arcades and some, including the stockbrokers, in the open space10 – no wonder they migrated to coffeehouses.


pages: 442 words: 135,006

ZeroZeroZero by Roberto Saviano

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Berlin Wall, Bernie Madoff, call centre, credit crunch, double entry bookkeeping, Fall of the Berlin Wall, illegal immigration, Julian Assange, London Interbank Offered Rate, Mikhail Gorbachev, new economy, open borders, planetary scale, Ponzi scheme, Ronald Reagan, Skype, Steve Jobs, uranium enrichment, WikiLeaks

Four years later an Englishman with impertinent blond hair crosses the threshold of Wachovia Bank, one of the giants of the American credit system: a man named Martin Woods. He’s just been hired as a senior money-laundering reporting officer in the bank’s London office. Punctilious and precise, maniacal about order. Just the right person for a bank aiming to adhere scrupulously to the new money-laundering protocols. But Martin isn’t merely a zealous employee who is good with numbers and loves double-entry bookkeeping. He is a former agent of the National Crime Squad. This gives him a huge advantage over his banking peers around the world: Martin understands people. He knows how to talk with them, how to read their gestures, how to weigh the nuances of their moods. Money is just one of the many variables, just one of the many color gradations, on his personal grid for evaluating people. There are already three actors onstage in this drama: a wounded country that’s reacting to attack; a measure that aims to stifle threats by fighting them on the financial front; and a man who wants to do his job.


pages: 565 words: 164,405

A Splendid Exchange: How Trade Shaped the World by William J. Bernstein

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Admiral Zheng, asset allocation, bank run, Benoit Mandelbrot, British Empire, call centre, clean water, Columbian Exchange, Corn Laws, David Ricardo: comparative advantage, deindustrialization, Doha Development Round, domestication of the camel, double entry bookkeeping, Eratosthenes, financial innovation, Gini coefficient, ice-free Arctic, imperial preference, income inequality, intermodal, James Hargreaves, John Harrison: Longitude, Khyber Pass, low skilled workers, non-tariff barriers, placebo effect, Port of Oakland, refrigerator car, Silicon Valley, South China Sea, South Sea Bubble, spice trade, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade liberalization, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, upwardly mobile, working poor

The islanders fell on the Dutchmen as soon as they landed and cut to pieces forty-seven soldiers and officers. A Dutch rescue party arrived too late. Among the members of that party was a young "junior merchant" whose name later became synonymous with Dutch efficiency and brutality: Jan Pieterszoon Coen. Before embarking for the Indies, he had spent his teenage years as an apprentice to a branch of a Dutch merchant company in Rome, where he learned the new science of double-entry bookkeeping, which was not yet in widespread use in Holland. Coen shipped out in 1607 to the East Indies for three years (during which he served on the unsuccessful Lonthor rescue party). He then returned to Holland for two years. In 1612 he was sent out again as a "senior merchant." In this capacity Coen submitted a brilliant analysis, based on the new bookkeeping techniques, of the VOC's operations, Discoers Touscherende den Nederlantsche Indischen Staet, which soon caught the attention of the Heeren XVII.


pages: 624 words: 127,987

The Personal MBA: A World-Class Business Education in a Single Volume by Josh Kaufman

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Albert Einstein, Atul Gawande, Black Swan, business process, buy low sell high, capital asset pricing model, Checklist Manifesto, cognitive bias, correlation does not imply causation, Credit Default Swap, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, discounted cash flows, double entry bookkeeping, Douglas Hofstadter, en.wikipedia.org, Frederick Winslow Taylor, Gödel, Escher, Bach, high net worth, hindsight bias, index card, inventory management, iterative process, job satisfaction, Johann Wolfgang von Goethe, Kevin Kelly, Lao Tzu, loose coupling, loss aversion, market bubble, Network effects, Parkinson's law, Paul Buchheit, Paul Graham, place-making, premature optimization, Ralph Waldo Emerson, rent control, side project, statistical model, stealth mode startup, Steve Jobs, Steve Wozniak, subscription business, telemarketer, the scientific method, time value of money, Toyota Production System, tulip mania, Upton Sinclair, Walter Mischel, Y Combinator, Yogi Berra

The sheer enormity of integrating these gigantic, complex business systems was ignored or overlooked, leading most of the companies that attempted huge mergers to ruin. Playing with Fire Beware of geeks bearing formulas. —WARREN BUFFETT, CHAIRMAN AND CEO OF BERKSHIRE HATHAWAY AND ONE OF THE WEALTHIEST INDIVIDUALS IN THE WORLD Finance, in the meantime, was steadily increasing in complexity. Before the twentieth century, accounting and finance were a matter of common sense and relatively simple arithmetic. The widespread adoption of double-entry bookkeeping (a thirteenth-century innovation) brought many benefits, like increased accuracy and ease of detecting anomalies like theft, at the cost of simplicity. The introduction of statistics to financial practice simultaneously enhanced analytical capability at the cost of abstraction, increasing opportunities to fudge the numbers without anyone noticing. Over time, managers and executives began using statistics and analysis to forecast the future, relying on databases and spreadsheets in much the same way ancient seers relied on tea leaves and goat entrails.


pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

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Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Bretton Woods, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, corporate governance, corporate social responsibility, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer lending, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social software, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, unbanked and underbanked, underbanked, unorthodox policies, X Prize, Y2K, Zipcar

If you wanted to steal a bitcoin, you’d have to rewrite the coin’s entire history on the blockchain in broad daylight. That’s practically impossible. So the blockchain is a distributed ledger representing a network consensus of every transaction that has ever occurred. Like the World Wide Web of information, it’s the World Wide Ledger of value—a distributed ledger that everyone can download and run on their personal computer. Some scholars have argued that the invention of double-entry bookkeeping enabled the rise of capitalism and the nation-state. This new digital ledger of economic transactions can be programmed to record virtually everything of value and importance to humankind: birth and death certificates, marriage licenses, deeds and titles of ownership, educational degrees, financial accounts, medical procedures, insurance claims, votes, provenance of food, and anything else that can be expressed in code.


pages: 467 words: 503

The omnivore's dilemma: a natural history of four meals by Michael Pollan

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additive manufacturing, back-to-the-land, clean water, cognitive dissonance, Community Supported Agriculture, double entry bookkeeping, Gary Taubes, Haber-Bosch Process, index card, informal economy, invention of agriculture, means of production, new economy, Steven Pinker, the scientific method, transaction costs, Upton Sinclair, Whole Earth Catalog

Corn is the hero of its own story, and though we humans played a crucial supporting role in its rise to world domination, it would be wrong to suggest we have been calling the shots, or acting always in our own best interests. Indeed, there is every reason to believe that corn has succeeded in domesticating us. To some extent this holds true for all of the plants and animals that take part in the grand coevolutionary bargain with humans we call agriculture. Though we insist on speaking of the "invention" of agriculture as if it were our idea, like double-entry bookkeeping or the lightbulb, in fact it makes just as much sense to regard agriculture as a brilliant (if unconscious) evolutionary strategy on the part of the plants and animals involved to get us to advance their interests. By evolving certain traits we happen to regard as desirable, these species got themselves noticed by the one mammal in a position not only to spread their 2 4 * THE OMNIVORE'S DILEMMA genes around the world, but to remake vast swathes of that world in the image of the plants' preferred habitat.


pages: 725 words: 221,514

Debt: The First 5,000 Years by David Graeber

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Admiral Zheng, anti-communist, back-to-the-land, banks create money, Bretton Woods, British Empire, carried interest, cashless society, central bank independence, colonial rule, corporate governance, David Graeber, delayed gratification, dematerialisation, double entry bookkeeping, financial innovation, full employment, George Gilder, informal economy, invention of writing, invisible hand, Isaac Newton, joint-stock company, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, oil shock, payday loans, place-making, Ponzi scheme, price stability, profit motive, reserve currency, Ronald Reagan, seigniorage, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transatlantic slave trade, transatlantic slave trade, tulip mania, upwardly mobile, urban decay, working poor

Yet it was said that its merchants shunned enforceable contracts, preferring to seal transactions “with a handshake and a glance at heaven.”78 In Islamic society, the merchant became not just a respected figure, but a kind of paragon: like the warrior, a man of honor able to pursue far-flung adventures; unlike him, able to do so in a fashion damaging to no one. The French historian Maurice Lombard draws a striking, if perhaps rather idealized, picture of him “in his stately town-house, surrounded by slaves and hangers-on, in the midst of his collections of books, travel souvenirs, and rare ornaments,” along with his ledgers, correspondence, and letters of credit, skilled in the arts of double-entry book-keeping along with secret codes and ciphers, giving alms to the poor, supporting places of worship, perhaps, dedicating himself to the writing of poetry, while still able to translate his general creditworthiness into great capital reserves by appealing to family and partners.79 Lombard’s picture is to some degree inspired by the famous Thousand and One Nights description of Sindbad, who, having spent his youth in perilous mercantile ventures to faraway lands, finally retired, rich beyond dreams, to spend the rest of his life amidst gardens and dancing girls, telling tall tales of his adventures.


pages: 540 words: 168,921

The Relentless Revolution: A History of Capitalism by Joyce Appleby

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1919 Motor Transport Corps convoy, agricultural Revolution, anti-communist, Asian financial crisis, asset-backed security, Bartolomé de las Casas, Bernie Madoff, Bretton Woods, BRICs, British Empire, call centre, collateralized debt obligation, collective bargaining, Columbian Exchange, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, Doha Development Round, double entry bookkeeping, epigenetics, equal pay for equal work, European colonialism, facts on the ground, failed state, Firefox, Ford paid five dollars a day, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gordon Gekko, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, hiring and firing, illegal immigration, informal economy, interchangeable parts, interest rate swap, invention of movable type, invention of the printing press, invention of the steam engine, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, knowledge economy, land reform, Livingstone, I presume, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, moral hazard, Ponzi scheme, profit maximization, profit motive, race to the bottom, Ralph Nader, refrigerator car, Ronald Reagan, Scramble for Africa, Silicon Valley, Silicon Valley startup, South China Sea, South Sea Bubble, special economic zone, spice trade, spinning jenny, strikebreaker, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thorstein Veblen, total factor productivity, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration, Yogi Berra, Yom Kippur War

Fresh intellectual interests, enhanced by a new vocabulary, became crucial to the modern transformation of traditional countries. Many mechanical devices and institutional procedures became useful to entrepreneurs without themselves being causes of the emergence of capitalism. The invention of movable type made printing cheaper, promoting a book trade that carried news of explorations throughout Europe. The Greek astrolabe and compass proved a great aid to navigating the waters of three oceans. Italian double-entry bookkeeping enabled merchants to keep better track of their profits. All these improvements contributed to industrial enterprise, but they didn’t cause capitalism to appear; they were propitious factors in its development. Capitalism required a different social dynamic and innovations that changed how food was grown and goods produced. Because traditional mores were thoroughly embedded in the literature, laws, religious rites, work rituals, and habits of people, they didn’t suddenly collapse; they crumbled slowly.


pages: 651 words: 180,162

Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb

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Air France Flight 447, Andrei Shleifer, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discrete time, double entry bookkeeping, Emanuel Derman, epigenetics, financial independence, Flash crash, Gary Taubes, Gini coefficient, Henri Poincaré, high net worth, Ignaz Semmelweis: hand washing, informal economy, invention of the wheel, invisible hand, Isaac Newton, James Hargreaves, Jane Jacobs, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, meta analysis, meta-analysis, microbiome, moral hazard, mouse model, Norbert Wiener, pattern recognition, placebo effect, Ponzi scheme, principal–agent problem, purchasing power parity, quantitative trading / quantitative finance, Ralph Nader, random walk, Ray Kurzweil, rent control, Republic of Letters, Ronald Reagan, Rory Sutherland, Silicon Valley, six sigma, spinning jenny, statistical model, Steve Jobs, Steven Pinker, Stewart Brand, stochastic process, stochastic volatility, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transaction costs, urban planning, Yogi Berra, Zipf's Law

(This is not strictly true, the ancients were also obsessed with measurements, but they did not have the Arabic numerals to do proper calculations.) His idea was that we learned to be precise about things—and that was the precursor of the scientific revolution. He cites the first mechanical clock (which quantized time), marine charts and perspective painting (which quantized space), and double-entry bookkeeping (which quantized financial accounts). The obsession with measurement started with the right places, and progressively invaded the wrong ones. Now our problem is that such measurement started to be applied to elements that have a high measurement error—in some case infinitely high. (Recall Fukushima in the previous section.) Errors from Mediocristan are inconsequential, those from Extremistan are acute.


pages: 740 words: 217,139

The Origins of Political Order: From Prehuman Times to the French Revolution by Francis Fukuyama

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Admiral Zheng, agricultural Revolution, Andrei Shleifer, Asian financial crisis, Ayatollah Khomeini, barriers to entry, Berlin Wall, blood diamonds, California gold rush, cognitive dissonance, colonial rule, conceptual framework, correlation does not imply causation, currency manipulation / currency intervention, demographic transition, Deng Xiaoping, double entry bookkeeping, equal pay for equal work, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, hiring and firing, invention of agriculture, invention of the printing press, Khyber Pass, labour market flexibility, land reform, land tenure, means of production, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, RAND corporation, rent-seeking, Scramble for Africa, spice trade, Stephen Hawking, Steven Pinker, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Washington Consensus

Chinese per capita income was largely flat over this same period, but when it began to increase after 1978, it took off at an even faster rate than Europe’s. FIGURE 7 The reasons for the massive increase in post-1800 productivity have always been at the core of studies of growth. They have to do with changes in the intellectual environment that promoted the emergence of modern natural science, the application of science and technology to production, development of techniques like double-entry bookkeeping, and supportive microeconomic institutions like patent law and copyright that permitted and encouraged continuous innovation.6 7 But the understandable focus on developments of the last two hundred or so years has obscured our ability to comprehend the nature of political economy in premodern societies. The presumption that a high rate of continuous economic growth is possible puts a premium on investment in the sorts of institutions and conditions that facilitate such growth, like political stability, property rights, technology, and scientific research.


pages: 585 words: 165,304

Trust: The Social Virtue and the Creation of Prosperity by Francis Fukuyama

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barriers to entry, Berlin Wall, blue-collar work, business climate, capital controls, collective bargaining, corporate governance, deindustrialization, Deng Xiaoping, deskilling, double entry bookkeeping, equal pay for equal work, European colonialism, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global village, hiring and firing, industrial robot, Jane Jacobs, job satisfaction, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, labour market flexibility, labour mobility, land reform, low skilled workers, manufacturing employment, mittelstand, price mechanism, profit maximization, RAND corporation, rent-seeking, Ronald Coase, Silicon Valley, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, transfer pricing, traveling salesman, union organizing

It is in this context that the economic significance of the Protestant Reformation can be seen. The economic historians Nathan Rosenberg and L. E. Birdzell note that in the early capitalist period (from the late fifteenth century on) people had to outgrow firms based on kinship and separate their personal finances from their firm’s finances. In this respect, a technical innovation like double-entry bookkeeping was indispensable. But technical advances were not, in themselves, enough: The need for a form of enterprise which could command trust and loyalty on some basis other than kinship was only one facet of a broader need: the rising world of trade needed a moral system. It needed a morality to support reliance on its complex apparatus of representation and promise: credit, representations as to quality, promises to deliver goods, or to buy goods in the future, and agreements to share in the proceeds of voyages.


pages: 828 words: 232,188

Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy by Francis Fukuyama

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Affordable Care Act / Obamacare, Andrei Shleifer, Asian financial crisis, Atahualpa, banking crisis, barriers to entry, Berlin Wall, blood diamonds, British Empire, centre right, clean water, collapse of Lehman Brothers, colonial rule, conceptual framework, crony capitalism, deindustrialization, Deng Xiaoping, double entry bookkeeping, Edward Snowden, Erik Brynjolfsson, European colonialism, facts on the ground, failed state, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gini coefficient, Hernando de Soto, Home mortgage interest deduction, income inequality, invention of the printing press, iterative process, knowledge worker, land reform, land tenure, life extension, low skilled workers, manufacturing employment, means of production, Menlo Park, Mohammed Bouazizi, Monroe Doctrine, moral hazard, new economy, open economy, out of africa, Peace of Westphalia, Port of Oakland, post-industrial society, Post-materialism, post-materialism, price discrimination, quantitative easing, RAND corporation, rent-seeking, road to serfdom, Ronald Reagan, Scientific racism, Scramble for Africa, Second Machine Age, Silicon Valley, special economic zone, stem cell, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, too big to fail, trade route, transaction costs, Tyler Cowen: Great Stagnation, women in the workforce, World Values Survey

What caused this sudden burst of economic growth? The Industrial Revolution had been preceded by a commercial revolution starting in the sixteenth century that vastly expanded the volume of trade both within Europe and across the Atlantic. This expansion, in turn, was driven by a host of political and institutional factors: the establishment of secure property rights, the rise of modern states, the invention of double-entry bookkeeping and the modern corporation, and new technologies of communications and transportation. The Industrial Revolution in turn rested on the systematic application of the scientific method and its incorporation into an institutional structure of universities and research organizations, which could then be translated into technological innovations.4 FIGURE 2. Real Income per Person in England, 1200–2000 SOURCE: Gregory Clark, A Farewell to Alms The sudden shift to a higher level of growth had a huge effect on societies via an expanding division of labor.


pages: 1,088 words: 297,362

The London Compendium by Ed Glinert

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1960s counterculture, anti-communist, Big bang: deregulation of the City of London, British Empire, Corn Laws, Dava Sobel, double entry bookkeeping, Edward Lloyd's coffeehouse, Exxon Valdez, hiring and firing, invention of the telegraph, Isaac Newton, John Harrison: Longitude, John Snow's cholera map, Khartoum Gordon, Mahatma Gandhi, Nick Leeson, price stability, Ronald Reagan, South China Sea, South Sea Bubble, spice trade, the market place, trade route, union organizing, V2 rocket

It now contains a variety of shops, bars and restaurants, and much preserved period architecture, but is spoiled by an excess of faux Victoriana. • Smithfield meat market, p. 8. Lombard Street Once the Jews, the City’s moneylenders, had been expelled from England in 1290, Venetians and Lombardians, who had first arrived in London during the mid-thirteenth-century reign of Henry III to collect taxes due to the Pope, took up the same role, later introducing into England double-entry book-keeping, doppia scrittura, which had been invented by a fifteenth-century Italian monk. The Lombardians’ power base was challenged by the opening of the first Exchange in 1565. They responded by increasing their banking rates, which failed to win back custom. In 1692 Lloyd’s Insurance moved from (Great) Tower Street to Lombard Street, and began publishing Lloyd’s News, the forerunner of Lloyd’s List and Shipping Gazette, here four years later.


pages: 1,157 words: 379,558

Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris by Richard Kluger

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air freight, Albert Einstein, California gold rush, cognitive dissonance, desegregation, double entry bookkeeping, family office, feminist movement, full employment, ghettoisation, Indoor air pollution, medical malpractice, Mikhail Gorbachev, Plutocrats, plutocrats, Ralph Nader, Ralph Waldo Emerson, RAND corporation, rent-seeking, risk tolerance, Ronald Reagan, The Chicago School, the scientific method, Torches of Freedom, trade route, transaction costs, traveling salesman, union organizing, upwardly mobile, urban planning, urban renewal, War on Poverty

When not directing the hired help, he was repairing the machinery, labeling the burlap sacks with the Dukes’ brand name—Pro Bono Publico—or off on a far-flung wagon route to deliver goods to storekeepers and gather new orders. Sent with his siblings to a Quaker academy for some formal learning, the big boy found the Latin, poetry, and much else in the curriculum lacking in any vocational relevance and after a couple of months came squawking home. A stay at a business school in Poughkeepsie, New York, better suited to his aptitudes, allowed Buck to master double-entry bookkeeping and other practical skills. Back home again, he applied his fresh tools to the Duke factory books and by sundown each day knew to the penny how their operations were faring. Wash Duke knew an unpolished gem when he saw one and made Buck, just eighteen, his full partner in the business. The three-story, false-front Duke establishment with its little bell tower had become a Durham fixture by now, and under Buck it grew into a well-run, steadily expanding business, but always well within the shadow of the mighty Durham Bull, which was spreading the town name across America and overseas.