No, Really! This is a Serious Question

So I’m talking to a co-worker named Phil, and he tells me that he’s frothing mad. He’s been writing Cecil at The Straight Dope for months and never saw his question appear in print. The question in question is…..

“If intelligent space aliens were to land on Earth and present themselves, is it likely that we would find them using double entry accounting”

I had pretty much the same reaction that you’re probably having right now. He’s a bit odd, wondering about the way our new galactic overlords keep track of accounts recievable. But he clarified it and I realized that it was a very serious question indeed.

“Is double entry accounting just one of any number of equally good methods for managing scarce resources-or is there something that makes it uniquely fitting for the task?”

“Could it be that it’s prevalence in the business world owes only to the desirability of using a universally understood method? If not, is it superior to all other known methods? Could it even be thought of almost like being a law of nature?”

The main thing that I know about double entry bookkeeping is it’s historical impact. Used with the new Arab numerical system, it allowed businesses to expand during the latter part of the Dark Ages. In fact, some people even say that this accounting method spelled the end to the Medieval Period by promoting trade.

So are there equally effective methods out there? If so, why aren’t they better known? And, of course, is the system so tuned to basic reality that it could be thought of as a reflection of basic accounting truths?

I’ll leave it up to you guys. There’s got to be someone who knows this accounting stuff who’s also writing for this blog.

20 thoughts on “No, Really! This is a <i>Serious</i> Question”

  1. Proof of the above is that I added the comment nearly 2 hours before the original post, clearly demonstrating my access to alien time-travel technologies.

  2. Double entry accounting shows the development of a business very accurately and transparently (at least for those who have leasnred it) and is therefore good enough, even if it not easy to understand. Worrying if there might be a better method would make it a case of the theoretically perfect being the enemy of the good enough actually existing. So, don’t. :)

  3. This is a question of Platonic Form, no?

    Plato used a cave with light and shadows to describe our challenge: from the shadow, can you infer the shape of the object between the wall and the light? the Platonic Form?

    Phil is my kind of guy.

    The basic question could be, “do credits and debits encompass all that is conceivable when describing the present condition and changes occuring in any operation involving sentient actors and physical resources?”

    If they do, you’ve got one of those Forms on your hands and the aliens are just going to bring you cheaper software that runs cross-platform.

    Not that there’s anything wrong with that.

  4. So you’re saying there’s a connection between Platonic forms, Visual Basic Forms and IRS forms?

  5. This is an example of a more general question. A different example would be this: do we create mathematics, or do we discover it?

    A different way to phrase that would be: Does a given kind of mathematics exist even if we do not know about it? (i.e. did Euclidean Geometry exist before Euclid? Is there a sense in which it could be thought of as “existing” without being present in any human brain?)

    If you try to pin mathematicians down on this, I think most would uncomfortably answer that we discover math, we don’t create it. However, some kinds of maths are low-hanging fruit and are easy to find, and other kinds are not anything like as easy.

    The space alien becomes a way of considering that question: would that same alien be familiar with the principles of Euclidean geometry?

    If so, it would be because they discovered it, too.

    It turns out there are practical consequences for the answer to this question. One is in patent law: we are permitted to patent inventions but not discoveries (though in recent years this principle has been abused rather seriously in some cases). Historically the courts had decided that mathematical advances could not be patented because they were discoveries, and they used to apply that to computer algorithms as well. That was why the patent which was issued for the Fast Fourier Transform algorithm was historical: the courts ultimately refused to revoke that patent, making it the first patent on an algorithm to survive court test.

    The other consequence is communicating via radio with an interstellar civilization. Suppose we find one out there, at a distance of between 100 and 1000 light years. Suppose we decide to try to beam a message to it in hopes of establishing a dialogue (albeit with long latency). What would we say?

    If we assume that some kinds of math are discovered, then it would represent a “common language”, a foundation on which other communications could be built.

    But if math is created, then we might well not be able to come up with anything to say which they might have a reasonable expectation of understanding.

  6. Typically astute commentary from SDB.

    I think we can safely assume that aliens capable of communicating over interstellar distances must have developed very close analogues to a great deal of terrestrial mathematics, from Euclid’s geometry through Maxwell’s equations and beyond. How they might symbolically represent such knowledge is, however, almost completely indeterminate, though there are good reasons for expecting it to use light in or very near the visible spectrum, and sound transmitted through air in approximately the range of human hearing, just as we use printed matter and oral explication to convey such concepts.

    (Our own attempts to communicate include the Arecibo message, the Pioneer plaque, and the Voyager interstellar record.)

    Similarly, assuming their psychology to be anything similar to human, they would have developed analogous economic tools; but once again the specific representation of the concepts could prove enormously difficult to translate.

    Conversely, non-applied mathematics might indeed be regarded as largely “created” and therefore less susceptible to communication.

    PS – Michael, the future’s fabulous! It’s amazing what a difference of 1:52 makes …

  7. I guess I’m the only accountant here, so here’s my opinion (and a bill).

    Ask Phil why he thinks the aliens engage in commerce, or have a notion of money as a medium of exchange. Double-entry bookkeeping is pretty far down a series of branching paths.

    Hey, who knows, maybe Marx was right — on another planet.

  8. “Ask Phil why he thinks the aliens engage in commerce, or have a notion of money as a medium of exchange. Double-entry bookkeeping is pretty far down a series of branching paths.”

    I think it’s important to keep the main question firmly in mind. Mainly, would any organized society with division of labor find double entry accounting to be the best way to maximize effeciency? If the answer is yes then I suppose that it would follow that division of labor is a natural state for any organized society.

    Or, at least, that’s the way I interpret the question. I could very well be wrong, but we won’t know until later tonight when I go to work and ask him.

    Phil just framed the question using space aliens to pique interest, and it’s worked like a charm so far.


  9. As a CPA and a former Econ major, I had to toss in my two cents…

    1) Would aliens have commerce? Someone once said that a free market is what happens when you leave people alone. If you have a situation where different agents have different amounts of goods, different preferences for these goods, and/or different abilities in utilizing goods, then there exists the possibility of mutually beneficial trades, i.e. commerce. If the aliens were as alike as peas in a pod, then I would guess there would be no reason for any of them to get a MBA.

    2) Would aliens have money? Bartering can be such a time consuming hassle that having a universally accepted standardized trading good seems like a no-brainer. Still, some highly advanced South American cultures never made use of the wheel. So even if an invention seems obviously does not necessarily mean that it will be made.

    3) Would aliens use double entry? Ignoring all the damn rules in GAAP (Generally Accepted Accounting Principles), double entry accounting is simple in concept. For every asset an enterprise acquires (a future benefit) it also records a liability (a claim on the future benefit). Under double entry, you get not only the assets the enterprise controls (cash, inventory, etc.), but also who has claims on these assets (wages for workers, loans from creditors, returns on equity for investors.)

    Besides, you have the inherent check built into the system: debits must equal credits. You mess up one journal entry and the books don’t balance.

    Assuming the aliens have sufficiently advanced commerce (they have both money and continuous enterprises), I think they would use double entry.

    Of course, their financial statements would look nothing like ours. Only humans are dumb enough to create GAAP.

  10. OK, I’ll try to be serious. Marx wouldn’t have been right on any planet.

    We got along without double-entry bookkeeping for thousands of years. Accounting records were kept as marks on clay tablets (Mesopotamia), knotted strings (Peru), even pebbles in a bowl (“calculi”). Humans didn’t need anything more sophisticated until they had developed the concepts of private property, an economic entity separate from its owners, widespread literacy and numeracy, and a standardized currency. These things took a long time to come up with.

    Double entry bookkeeping is really just simplified algebra. You keep the equation balanced by adding or subtracting equal amounts from each side. All you have to do is remember debits are left, credits are right (I wrote this down in case I forget).

  11. I don’t think there’s any question that a space faring civilization will have developed science and mathematics analogous to our own. Physics isn’t any different on a planet near Sirius than it is here. There may different conditions: different intensities of gravity or different relative quantities of chemical compounds, but the underlying science and mathematical relationships will be consistent. Whether it is *described* in the same way is a more subtle question.

    There are multiple ways of ‘thinking about’ or ‘describing’ something as basic as gravity: as a curvature of space, as a force, or as an exchange of force particles (gravitons). Different paradigms (viewpoints) are useful (easier) for solving different problems.

    The same concept, I believe, would apply to bookkeeping. There are certainly a whole range of ways a problem like that can be approached and solved. A particular method might emerge as the preferred method for a host of reasons but the underlying priciples would remain.

  12. Mitch has a good point about ancient Peru. Similarly, there were major economies with a good deal of industry, trade, etc. [India under the Guptas, China under Han, Tang, Song, etc.] that got by without double entry accounting.
    I think the really deep questions is whether aliens playing baseball would use the DH rule. If they don’t use it, we could coexist with them.

  13. Trust is the reason we use double-entry accounting. In order for your employees to cheat you, they now have to collaborate. (It is a side benefit that you also see that you haven’t cheated yourself, that you can trust your own math.) This is the magic of having two independent tallies needing to match up, that allows organizations to scale, that provides the basic mechanism for checks and balances.

    If aliens come in groups of individuals that have interests both in their individual pursuits and in the pursuits of the group, then they will have double-entry bookkeeping.

  14. I like Mike’s comment. Aliens have something which fills the function of double entry bookkeeping, but may be a different algorithm / mechanism.

    Steven Den Beste:

    Having just finished Hao Wang’s A Logical Journey i’m not sure of the split for creation / discovery. Wang cites Brouwer and Riemann as examples of the creation school, though of course Goedel, as a true Platonic believer, said that their notion of creation was not really creation. I would also think anyone in the logical positivist school of philosophy would come down for creation.

    Quine, in Word and Object and “Success and Limits of Mathematization” pretty clearly argues that numbers and classes are real objects and so would be a discovery persion.

    It seems pretty heavily divided, or at least the philosophically oriented writings i’ve seen are somewhat evenly divided.

    But i don’t hardly read anything by or about current mathematicians (unless maybe Jaakko Hintikka counts, but i’ve just started looking at his philosophy works). So have no feel for what’s current.

    Maybe we should take this offline…

    Matya no baka

  15. “Ask Phil why he thinks the aliens engage in commerce, or have a notion of money as a medium of exchange. Double-entry bookkeeping is pretty far down a series of branching paths.”

    I’m starting to seriously wonder if the continued absence of alien visitors in our Solar System is due to the fact that any aliens that exist don’t have free-market commerce, or don’t keep it long enough to leave their home planet.

    Humanity developed thousands of civilizations over its history. None that we know of ever established even one permanent outpost anywhere off-planet. The civilization we live in has gotten further than any that came before, but the free-market rules that enabled its rapid advancement have been partially discarded, and its drive to the stars has (so far) stagnated almost completely. I wonder, in my more pessimistic moments, if any civilization of intelligent creatures is bound to experience the same thing.

    To get to the stars, your civilization has to endure long enough to develop the requisite technology. Not only must it endure, it must continue to be governed by the correct policies to facilitate technological development and economic growth generation after generation for centuries. Let the government go wrong during this time, and the drive to the stars stagnates.

    The government is going to have to stand by as large numbers of respectable and even high and mighty people find themselves made completely redundant and unemployed by new technology – not once, but several times. The government is going to have to stand by as upstart nobodies, foreigners, and other riffraff become wealthy beyond anybody’s wildest dreams with the new stuff and take away lots of other people’s livelihoods – repeatedly. The government is going to have to resist the overwhelming temptation to raid the society’s capital for loot, either for the ruler and his family or for the “welfare” of the voters, and the perhaps greater temptation to take over and micromanage in order to steal the credit for all the technological advancement going on. The government is going to have to resist demands by respectable people to prevent their jobs from being “destroyed” or “exported”, to prevent their tasks from being changed and their lives from being turned upside down – and resist those demands again and again and again for hundreds of years straight. It will have to resist the demands of busybodies to stop young people from being corrupted, made soft, and otherwise led astray by all the changes being wrought. It will have to refrain from asserting the authority to demand that the people working on new technologies ask permission before they can sell it, demand that people ask permission before they can buy it, or otherwise insert appeasements of the authorities as a necessary step before every incremental step of development. It will have to stand back as people do all sorts of nutty things, sometimes hurting themselves in the process, as they work out the right way to do things that no one’s ever done before.

    The record of human societies shows that sustaining such an unswerving, centuries-long dedication to the necessary laissez-faire policies on the part of the governing classes, regardless of who those governing classes are, is extremely problematic, at least among human beings. Assuming aliens aren’t that much different from us, I could easily see a galaxy populated by hundreds or thousands of sentient species, all of which find their civilizations stagnating and falling before they can escape their home planets.

  16. Bill Roule writes:

    Bartering can be such a time consuming hassle that having a universally accepted standardized trading good seems like a no-brainer. Still, some highly advanced South American cultures never made use of the wheel. [emphasis added]

    Jared Diamond goes into this in “Guns, Germs and Steel”.  Condensing what I remember of his treatment, wheels are also the end of a set of branching options and one of the prerequisites is draft animals.  South America has no good candidates for domestication among the native fauna, and that’s enough to keep wheels restricted to use for toys.

    Another factor is that wheels are most useful on fairly flat terrain, which the Andes are not.

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