Aristotelian Accounting
March 30, 2013 Leave a comment
Gerhard Michael Ambrosi Jean Monnet Chair ad personam
November 1, 2012
Abstract:
Aristotle’s analysis of economic exchange in the Nicomachen Ethics involves two paradigms which he addresses separately but then stresses that there is no difference between them: barter and monetary exchange. Each one of them can be rendered separately but in a mutually consistent way by using geometrical methods which were well established and widely used at Aristotle’s time, namely by the ‘algebra of areas’. In this framework Aristotle’s ‘monetary equivalence’ in exchange appears as an application of Euclid’s proposition Elements I,43 about the equality of complements. Aristotle insists that the analysis of exchange must account also for the artisans’ respective ‘own production’. In modern parlance this is their (yearly) income. Comparing, say, farmer and shoemaker in these terms leads to the accounting statement: as farmer to shoemaker, so shoes to food, namely in terms of percentage sold out of own production. The explanation of this relation solves one of the major puzzles of Aristotle’s text. But this analysis deals with accounting and not with justice. Indeed, it is Aristotle’s central critique against the Pythagoreans that they wrongly take the formal conditions of exchange as the essence of justice. But justice is a topic which goes beyond the scope of the present paper. The paper shows that Aristotle used a consistent and interesting system of geometrical accounting in exchange. It definitely merits his listing as one of the ancestors of economic analysis.
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