That said – while I understand that the models I refer to in the post are massive and deliberate over-simplifications, I think it can still be legitimate to criticise those over-simplifications; partly because they have real effects (there must be plenty of people in the world whose actions and decisions have substantial political and economic effects who possess only an elementary-textbook-level knowledge of economics); and partly because I think these over-simplifications reveal something about the attitude behind a lot of economic theorising, even when that theorising is whole orders of magnitude more sophisticated and insightful than the textbooks’ models. You say that the macro-economy is assumed to be in balance because this makes the model easier to understand; which is certainly true – by why is this oversimplification chosen, rather than another? Doesn’t this emphasis partly reveal and partly perpetuate a broader emphasis, within economics, on balance rather than imbalance, equilibrium rather than disequilibrium; and doesn’t this emphasis prevent us from properly theorising some of the most distinctive and important features of capitalist economies? This kind of unease is why I’m pushing very hard on the problems I see with these elementary models, rather than just waiting until I’ve read enough to understand more sophisticated theorising.

On accounting: “this ‘basic rule of accounting’ is far from being ‘complete nonsense.’ Rather it is fundamental precept in double entry accounting, by convention, debits are made equal to credits so that there is a balance… which can and does occur when the transaction is between two parties.” Well okay – I understand the basics of double entry (though the logic behind it does my head in; one of the more important things on my list of things to study properly ). But I’m not sure this answers my confusion. For, I think, two reasons:

1) If, in this massively over-simplified model of the economy, “flows out of any box are equal to flows into the box”, then this economy can’t grow (or shrink). Plainly, economies do grow, which means that somewhere ‘value’ is entering the system. It seems to me (and perhaps I moved onto this point too hastily in the post) that value enters the system in two locations. In the ‘real’ economy, value is produced in firms’ production of commodities. In the ‘money’ economy, value is produced in the financial sector, through the creation of money. But the point is: somewhere flows out of a box are not equal to flows into the box; if they were, there would be a constant and unchangeable amount of value – to use the language of the textbook, a constant and unchangeable level of flow – in the economy. Which there obviously isn’t. That’s what I meant when I said that this ‘basic rule of accounting’ must be nonsense. Somewhere, surely, you’ve got credits without debits, or debits without credits. And I don’t see how the conventions of double entry accounting change that.

2) On accounting itself (and forgive me for moving into more philosophical terrain); I don’t retain much from my analytic-philosophy education – but I do retain a confidence in Quine’s claim that even analytic propositions – that is, propositions that are true simply by convention – can be proved false (or, in practice, modified) by changes in the real world that the conceptual system these propositions help to constitute aims to describe. So I’m always suspicious when an apparently contentful statement is justified by an appeal to truth by convention. That’s what I meant to (no doubt impenetrably) gesture towards in my comment #4 above; and that’s why I’m interested to read Donald Mckenzie, who from what little I’ve read I gather discusses this aspect of accounting rules (though I think from a Wittgensteinian rather than a Quinian perspective).

I should say more, but it’s already getting late. Thanks again for your comment. I wish I knew about Quesnay & Yutaka TAKAHASHI; one day, maybe, I’ll be in a position to get round to reading them.

The stock and flow diagram is NOT the “real” economy, simply an economic accounting of some of the major transaction aspects of a “real economy” that occur between producers and consumers. (In that sense, households simply represent consumers and firms are representative of producers.)

In this model the macro-economy is presumed to be in perfect balance because it makes the model easier to understand; it is not meant to imply that the real economy as whole is actually in perfect balance.

On the other hand this ‘basic rule of accounting’ is far from being “complete nonsense.” Rather it is fundamental precept in double entry accounting, by convention, debits are made equal to credits so that there is a balance … which can and does occur when the transaction is between two parties.

Incidentally, other authors do add auxilary variables to change the rate of flows (see Yutaka TAKAHASHI Translation from Natural Language to Stock Flow Diagrams) which serves to convert stock and flow into a more dynamic model; yet even this kind of objective function is just a crude represention of the “real” economy.

As for this:

Why these affiliations or affinities, at this time and place?

That’s what my whole project is about But I was trying to speak more generically above – to talk about a line of attack for an answer, about a sort of answer, rather than about my personal tilt at this windmill. My personal answer is difficult to condense, but relates to the impact of practicing particular dimensions of our collective lives in a way that manages to mutually differentiate out dimensions that can plausibly be taken as asocial, dimensions that are (plausibly but incorrectly) taken to be social (but intrinsic), and dimensions that tend to be cast as “overtly” social (in the sense of subject to deliberate and conscious political transformation). This sort of enacted structure of social experience can make it plausible, although certainly not inevitable, to separate off what are taken to be asocial or intrinsically social, from “overtly social” dimensions of the context – and then to derive normative standards from the bits of the context that appear timeless and “secure” – so that you tend to get various sorts of criticism of “artificial” bits of the context, from standpoints that claim to be less “artificial”. But the argument is long and complicated – I wasn’t trying to dodge it above, although I don’t know that I can explain my position adequately in any single exchange, but was more just trying to gesture at how the question might be asked…

Robert – thanks for reading! I’ll try to check out the Nell essay; though I guess I should read, like, Marx, Ricardo, etc. first. So much to read & so little time!

N. Pepperell – “My feeling is that this configuration, although by no means historically inevitable, nevertheless does express one of those strange “elective affinities” that do make a certain sort of “social sense”, both in terms of the history of ideas, and in terms of social history…” Ah, but why? Why these affiliations or affinities, at this time and place?

On accounting: “are the claims here bounded and perhaps explicitly intended to express a fairly limited perspective?” I guess they might be. The textbook’s claim seems to be that the ‘facts of accounting’ are, as it were, analytic, rather than synthetic. And here my inclination is of course to say that such rules of organisation or description are just as loaded with practical and ideological commitments as the most blunt statement of fact. Someone who looks to be really worth reading is the sociologist Donald Mackenzie – who advocates what he calls “ethnoaccounting”, studying the forms of social life expressed in accounting rules. But your suggestion that I’m reading more into this than I should do is probably accurate…

Re: “value”. I don’t recall the text foregrounding (or, indeed, mentioning) this word. Basically I’m paraphrasing wildly, being completely unfair to the stuff I’m discussing. First flannel, then apology, then (eventually) nuance – that’s my approach

One question, just to be kind to the text you’re reading: there’s a reference above to principles of accounting – might this be slightly different to, say, principles that might be invoked in modelling an economic system? In other words, are the claims here bounded and perhaps explicitly intended to express a fairly limited perspective?

If I weren’t so tired, I would ask something about the way you draw the distinction between money and “real” economies… And also (out of curiosity) whether the term “value” is being used in this text? But too tired to formulate clearly why I’m curious… (Apologies – I should just wait until tomorrow to post, but that would be too rational… ;-P)

why, when we talk of the ‘right’, do we refer both to free market dogmatists and to homophobes, misogynists and racists

First: I really shouldn’t respond to this now… ;-P

But second: this particular configuration, of course, is not historically constant (and isn’t uniform within the current historical moment, either, although the question makes sense as a comment on the strange configuration that seems to have gone into forms of “neo-liberalism” in Anglo contexts in the wake of the transformations of the 1970s…).

But third: strangely, although this configuration isn’t historically constant, there is a sort of logic to it, if you think of “liberalism” philosophically in terms of the distinction between “natural” and “artificial” social institutions, where an “artificial” social institution, in this context, means an institution that is formed by conscious political action, while “natural” institutions are institutions that arise in the absence of such conscious political action – a category that can therefore encompass both things like the “market” (when this is understood as a mechanism for the nonconscious coordination of the consequences of a range of individual actions) as well as things that arise due to “tradition” (or perceived tradition) like the family and even private voluntary organisations of certain sorts…

My feeling is that this configuration, although by no means historically inevitable, nevertheless does express one of those strange “elective affinities” that do make a certain sort of “social sense”, both in terms of the history of ideas, and in terms of social history…

Doesn’t make it less irritating, but may make it seem less utterly bizarre… Not sure whether that helps (or is even plausible…)…

Take care…