Aristotelian Accounting

Aristotelian Accounting

Gerhard Michael Ambrosi Jean Monnet Chair ad personam

November 1, 2012

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.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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