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:
“Freud was a hero. He descended to the “Underworld” and met there stark terrors. He carried with him his theory as a Medusa’s head which turned these terrors to stone.”
—R.D. (Ronald David)
“A theory of the middle class: that it is not to be determined by its financial situation but rather by its relation to government. That is, one could shade down from an actual ruling or governing class to a class hopelessly out of relation to government, thinking of gov’t as beyond its control, of itself as wholly controlled by gov’t. Somewhere in between and in gradations is the group that has the sense that gov’t exists for it, and shapes its consciousness accordingly.”
—Lionel Trilling (1905–1975)