Value Theory
The system of gross and netting actually used, is ultimately based on a value theory, which specifies what may generally count as:
- comparable value (value equivalence)
- value decrease
- value increase
- conserved value
- transferred value
- newly created value
In other words, we cannot relate, group and aggregate prices in different ways without making some value-based assumptions that enable valid comparisons. Without those value assumptions, the aggregates themselves would be meaningless. Thus, when economists focus on market-prices, value assumptions are always in the back of their mind, even if they are not aware of that, and regard value theory as metaphysical.
Neo-classical economics rejects any value theory other than subjective marginal utility preferences, but social accountants who provide the empirical data for their economic science cannot regard value as simply subjective. Otherwise, anything can count as anything, according to subjective preference, and any old computation is permissible.
Read more about this topic: Double Counting (accounting)
Famous quotes containing the word theory:
“The whole theory of modern education is radically unsound. Fortunately in England, at any rate, education produces no effect whatsoever. If it did, it would prove a serious danger to the upper classes, and probably lead to acts of violence in Grosvenor Square.”
—Oscar Wilde (1854–1900)
“It is not enough for theory to describe and analyse, it must itself be an event in the universe it describes. In order to do this theory must partake of and become the acceleration of this logic. It must tear itself from all referents and take pride only in the future. Theory must operate on time at the cost of a deliberate distortion of present reality.”
—Jean Baudrillard (b. 1929)