Tom Taylor on Austrian Accounting
Tom Taylor, author of an underappreciated primer on Austrian economics, just so happened to email me (about one of my Mises Daily articles) when a Free Advice reader had asked me about accounting books that were Austrian-friendly. Since Taylor is an accounting guy at Wake Forest, I asked him. Here’s his answer (reprinted with permission):
Unfortunately to my knowledge there are no accounting texts that explicitly take on an Austrian thrust. But conventional Managerial/Cost Accounting is easily connected to Austrian thought regarding cost of production (alternative/opportunity costs), transfer pricing, as well as the socialist calculation problem. As to Financial Accounting, i.e., reporting to external parties including investors and creditors, the entrenched paradigm has aspects which can be seen as Austrian-like although it is never explicit as such and is non-Austrian in many other important aspects.
I read Charles Koch’s management book and he discusses how they make decisions based on opportunity cost. I am still wondering how Koch Industries does this across such a huge company…I just can’t figure out how they do it in reality and how they integrate it into an accounting framework.
Thanks a lot! That reader was me, and I thought that I was too stupid to find books of that kind…
I really do appreciate your help, but I cannot promise to buy your books (the politically incorrect guides) as a sign of my gratitude – I have already bought them.
Ágain, many thanks.
Austrian accounting?
What would be an example of Austrian accounting?
Financial markets plus Geithner equals insolvency.
It is about questions like that: when is an asset an asset? Whether a capital good is a capital good does not depend on its physical properties but on what you intend to do with it. How do you value an asset? Valuation is something subjective. But Financial Accounting is about reporting to third parties. Shareholders want rules to suppress manipulation. They do not want subjectivity. They want reliability. So how do you create accounting rules for external reporting which are somehow reliable without becoming meaningless?
Should you prefer rules-based accounting standards or principles-based standards? How should you account for changes in prices? Should you use historical ccost accounting, fair value accounting or a mixed model? Well, a sound microeconomic theory might be helpful in discussing these questions. That is why I was looking for a book about accounting theory from an Austrian point of view.