Monthly Archives: May 2012

“Nobody said it would be easy, and nobody was right.” On the (Im)possibilities of International Policy Coordination

International Policy Coordination: The Long View

Barry Eichengreen (, University of California at Berkeley (United States)


Abstract: This paper places current efforts at international economic policy coordination in historical perspective. It argues that successful cooperation is most likely in four sets of circumstances. First, when it centers on technical issues. Second, when cooperation is institutionalized – when procedures and precedents create presumptions about the appropriate conduct of policy and reduce the transactions costs of reaching an agreement. Third, when it is concerned with preserving an existing set of policies and behaviors (when it is concerned with preserving a policy regime). Fourth, when it occurs in the context of broad comity among nations. These points are elaborated through a review of 150 years of historical experience and then used to assess the scope for cooperative responses to the current economic crisis.

Review by: Manuel Bautista González

“The question is whether those who talk the talk also walk the walk.” (Eichengreen 2011: 1)

Barry Eichengreen

Financial turmoil in the European Union has been increasing in the last months. According to The Economist, credit in the eurozone is tighter than it was in the worst months after the Lehman bankruptcy. “Forget about a rescue in the form of the G20, the G8, the G7, a new European Union Treasury, the issue of Eurobonds, a large scale debt mutualization scheme, or any other bedtime story. We are each on our own”, wrote Simon Johnson and Peter Boone earlier this week (Johnson and Boone 2012). Paul Krugman has brought attention to the horrific consequences of the defeat of the European monetary experiment: “Failure of the euro would amount to a huge defeat for the broader European project, the attempt to bring peace, prosperity and democracy to a continent with a terrible history. It would also have much the same effect that the failure of austerity is having in Greece, discrediting the political mainstream and empowering extremists” (Krugman 2012).

It is in this context that this paper written by Barry Eichengreen and distributed by NEP-HIS on 2012-01-03 is an opportune “breathless historical review” (Eichengreen 2011: 29) of past attempts of international policy coordination in monetary, fiscal and financial matters from the last quarter of the nineteenth century to our days. In so doing, Eichengreen provides an interesting narrative centered in politics and institutions that complements optimally a reading of his classical work on the history of the international monetary system and global capital markets (Eichengreen 2008) as well as his most recent account of the US dollar as a dominant international currency (Eichengreen 2011b).

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Political Power and Regional Economic Performance

Who is the boss here? Regional power and participation of the Caribbean coast in the ministerial cabinets, 1900-2000.
(Original title: ¿Quién manda aquí? Poder regional y participación de la costa Caribe en los gabinetes ministeriales, 1900-2000)

by Adolfo Meisel Roca (


Abstract (Translated from Spanish by the reviewer)

It is well known that regional identities are very strong in Colombia and that they have had an influence in the politics of the country. One of the dimensions that Presidents of the Republic take into account for the composition of their cabinet is regional origin. In this paper we analyse the regional origins of Colombian ministers at cabinet level during the twentieth century. This to identify whether particular regions dominate the number of ministers in the cabinet and whether individuals from a particular region were overwhelmingly appointed to a specific ministry. To analyze the regional participation in the cabinet, we constructed a database with the names of the 702 persons that served as ministers during the twentieth century. The paper focuses on the Caribeann region, because we wanted to study its participation in the national political scene, during a century in which its economy lagged behind in comparison to the central region of the country. However, to articulate a comparative regional perspective, we have also widely discussed the cases of Antioquia and Bogotá and, to a lesser extent, of other regions of the country. The results show the strong influence of Antioquia and the departments of the coffee-growing region on the cabinets of the first part of the twentieth century, as well as the rise of Bogotá in the last decades of the century.

Review by Sebastián Fleitas

This paper was distributed by NEP-HIS on 2012-04-17. It addresses the role of the Caribbean region in the executive branch of the Colombian government, given that it was a region that fell behind in terms of economic development, human capital and political power throughout the twentieth century. The regional inequality in Colombia is well-know. It is an issue of economic and political policies to the extent that each president of Colombia has had to take into account while aiming for a balanced regional composition of his cabinet. To describe and interpret the links between political power and economic development at the regional level, Adolfo Meisel constructs a database with the information about regional origin for all the 702 persons that were ministers during the twentieth century in Colombia.

Colombian Regions (number two is Caribbean Region)

Colombian Regions (number two is Caribbean Region)

I think that this paper makes two important contributions. The first one is that the article describes in a very precise way that the Caribbean region had a low participation in the executive branch during the twentieth century and that in fact this low participation contrasts with the increased influence of the capital city (Bogotá) and the coffee-growing region. This trends can be seen in the fact that no president was born in the Caribbean region; in the participation of the Caribbean region in the total number of ministers during the century (about 12%); and also in the fact that the participation of ministers born in the Caribbean region in key areas (like the Treasury, Trade, Defense, Education or Economic Development) was lower than than the average participation of individuals from other regions. Meisel also advances some possible explanations regading the change in regional political power in Colombia: the backwardness of the Caribbean region, the rise of the coffee-growing region and the consolidation of Bogotá as the most important economic center.

Second, this paper addresses the important issue of political power and economic development, making focus in the regional dimension in a country with strong regional inequalities. The literature on the linkages between political power and economic development has a long tradition. More recently it has had a big impulse with the work of Acemoglu and some of his co-authors (see Acemoglu, et. al., 2005, the recent book by Acemoglu and Robinson´s Why Nations Fail as well as Anna Missiaia’s entry to NEP-HIS entitled Acemoglu on Past, Present, Future and Beyond). However, similar efforts to understand the institutional factors and the role of political power in economic development in Latin America are few and far apart (such as the work of Roderic A. Camp for Mexico). This issue is of great importance in Latin America due to the persistence of institutions that have been blamed of deterring economic development. Moreover, Latin America exhibits significant levels of inequality that could lead to worse economic performance if the elites use their political power to perpetuate themselves using these extracting institutions.

Cartagena de Indias (The most famous Caribbean region city)

There are, however, two major concerns that limit the scope of the contributions in this paper and in particular, regarding the linkages proposed between regional political power and economic development. The first one relates to the fact that the author uses the place where the minister was born in order to assess the regional origin, which in turn is used to assess the political power of the regions during the twentieth century.

It is not straightforward that the origin of the minister is a good indicator of the political power of a region and even more that this type of political power could be transformed into a better economic performance of that region. At least two reasons can be argued. First, the region where the minister was born might not be a good indicator of his commitment with that region, either because this commitment is not strong before being elected or because after being elected his preferences can change. For instance, whether President Obama was born in Kenya or Hawaii is somewhat besides the point as he took office as Senator from Illinois.

As a cabinet minister rather than an elected official, a politician might wish to maximize, among other things, their continuity in the Executive branch, which depends more on the President’s decisions than on the regional support for a particular individual. On the other hand, there is not a direct relationship between this kind of political power and the economic performance of a region, because even when if a minister wants to favor a region, policies enter in a political process in which the other ministers take part, and also a complex process of negotiation in the legislative branch (were possible lobbyists can take action). For these reasons, I think that the paper would benefit if the author discussed a little bit more the relationship between the executive and legislative branch, the role of regional lobbyists and the existence of regional development policies, in order to try to isolate the effect of the regional composition of the cabinet on the performance of the Caribbean region.

Casa de Nariño (Colombian Government House)

A second important issue that Meisel could address is the existence of endogeneity between political power and economic development. It is key to address this endogeneity in order to make conclusions and to determine the causality in the relationship. An example may help to make this point more clear. Assume that a region that has better performance over time due to different commodity endowments and invests some of the proceeds to improve its educational system. Assume that eventually the more educated people serve in the cabinet. In this example, the composition of the cabinet will show that people from more developed regions have a greater participation in cabinet, but note that the causality goes from a better performance to increased participation.

But the things can be the other way around. Assume now that exogenously a president born in the central region decides to appoint only ministers from his region for the Cabinet. Assume also that these people decide to allocate the resources for education in a very unequal way, favoring this region. Assume that eventually by this process the people from this region get more educated than the people from other regions and that this increase in human capital boosts economic growth. Under the assumption that the more educated people have better opportunities to be in the Cabinet, then the data will again show that people from more developed regions have a greater participation in cabinet, but note that this time the causality goes from the political power to economic development.

These two very simplified examples predict the result that the author finds for the composition of the Colombian Cabinet during the twentieth century. However, the reasons for this are very different in each example. In the first example economic development generates political power while in the second political power causes a better economic performance. Overall, I find that the discussion of the linkages between political power and economic development are really important to economic development. This is particularly true for Latin American countries, where the existence of a huge inequality could be seen as a hint of the presence of an economic elite that reproduces its privileges over time. However, in order to advance in the understanding of the linkage between political power and economic development, the big challenge is to find exogenous shocks that allow to draw conclusions about the direction of the causality.

Acemoglu on Past, Present, Future and Beyond

The World our Grandchildren Will Inherit: The Rights Revolution and Beyond

By Daron Acemoglu (


(a free download version is available in Acemoglu’s profile)


Following on Keynes’s Economic Possibilities for Our Grandchildren, this paper develops conjectures about the world we will leave to our grandchildren. It starts by outlining the 10 most important trends that have defined our economic, social, and political lives over the last 100 years. It then provides a framework for interpreting these trends, emphasizing the role of the expansion of political and civil rights and institutional changes in this process. It then uses this framework for extrapolating these 10 trends into the next 100 years.

Review by Anna Missiaia

This NBER working paper by Daron Acemoglou was distributed by NEP-HIS on 2012-04-23. The contents covers 200 years of worldwide economic life, 100 from the past and 100 from the future. The grip for this reflection on the past and future economic, social and political trends is the birth of the author’s second child. Acemoglu develops several conjectures on what world we will leave to his grandchildren, who will probably be in their 40s or 50s a century from now. The most interesting feature of this paper is the ambitious connection established between past and future. Acemoglu attempts a quite punctual forecast of what the next generations to come should expect.

The hit parade of the main trends he considered is, in order of importance, as follows: the increasing spread of civil rights; the sweep of technology; the sustained economic growth; the uneven growth; the geographic division of labour; the widespread improvement of health; the globalization of technology; the decline in wars; the rising success of “counter-Enlightment” in politics and finally the explosion of the world population.

The trend that is judged to be the most important is the expansion of civil and political rights, which took place over the 20th century and according to Acemoglu will continue in the 21st. Acemoglu connects this trend to a specific type of institutions, which he calls inclusive institutions. Inclusive political institutions are the ones that have both a “pluralistic, broad-based distribution of political power” and a

sufficient state centralization, so that there is a sort of monopoly of violence in the hands of the state […] upon which order and security […] can be grounded.

Opposed to these, there are political extractive institutions, where the power is in the hands of few and the majority is subject to their power. Political institutions of the two types lead to inclusive and extractive economic institutions. The trend of wide spreading civil and political rights is seen as happening in the context of inclusive institutions and is closely connected to the second trend of spreading technology. The diffusion of technology is shaped by the spread of inclusive institutions. These two are the main trends to look at, while other trends like economic (uneven) growth, shift of jobs towards low wage areas and increase in health conditions all generate from the first two trends.  The globalization of technology and the end of wars are also made possible by the rights revolution. The last two trends are two for which we should be worried with respect to our grand-children’s future.

As for the role of the so-called “counter-Enlightment” movements, which are for the author mostly religious movements (above all fundamentalist Christians and fundamentalist Islamists) and possible neo-fascist movements. The threat their represent is downplayed by Acemoglou by saying that although it is possible that these threats “are largely far-fetched”. The last trend is concerned with population rising to the point that resources will be scarce and the environment will not be able to cope anymore. This point is neutralized by again bringing up technology: the transition to clear energy will be able to solve both the scarcity of resources (namely fossil fuels) and emissions caused by the increase in population. Politically, this will be viable only by

international agreement [that] can ensure the transition to alternative energy sources – even if this means higher costs in the short term for participating countries.

Daron Acemoglu

There are many possible critiques often moved to institutions as explanation to economic and social development. It is beyond the scope of this post to do the usual laundry list of these critiques. Leaving aside this debate, what strikes the most about this work by Acemoglou is it pervasive optimism. All the “positive” trends are described as well established and mostly likely to continue while the main two negative are underplayed and seen as temporary. In particular, Acemoglou claims that “bad” extractive institutions tend to disappear as the majority has an incentive to rise up against the extractive elite. His prediction for the spread of civil rights is that it will continue, as the spread of technology, the end of wars, the increase in health and the continuing economic growth. All these in Acemoglou’s view are actually  emanated by the rights revolution. Very often it is the author himself offering to the reader the main critique to each of this claims. For example, extractive institutions often persist because of the political and economic power of the elites and civil rights have been undermined by the rise of religious extremism in many parts of the world. The paper concludes with a reflection on climate change and fossil fuel consumption, which are closely correlated and appear to be Acemoglou’s main concern on his grandchildren’s future. The author claims that “only an international agreement can ensure the transition to alternative energy sources” which are crucial to winning this battle. The predictions that appear more hazardous are the ones on the end of wars in spite of the affirmation of unconventional wars in the last decade, the fundamental harmlessness of religious extremism when this has been fuelling the former for about a decade if not more and the agreement on the development of alternative energy in spite of the “higher costs in the short term for participating countries” when the same countries have been unable to reach most environmental agreements that would have had these effects (see Kyoto protocol).

In principle there is no reason why all the trends described by Acemoglou cannot evolve in the way optimistically described here. However, Acemoglou’s grandchildren, as our own, will surely need a lot of luck and possibly, optimism.

See the link below to follow Professor Acemoglu’s (along with Professor James Robinson) discussion on the origin of power, prosperity and poverty,

When Accountants Come to Power

Management From Hell: How Financial Investor Logic Hijacked Firm Governance
By Robert R. Locke (
Paris: Boostzone Editions, 2012
57, ebook, ASIN: B007MOYC56 (RRP €5.50 – £4.42)

Abstract – Corporate governance now is strongly controlled by a «caste» of financial investors that forgets employees and other stakeholders as well as society at large. This control is a major cause of our current crisis and of a growing disbelief in modern capitalism. Why and how did this happen? A renowned American historian of management, Robert R. Locke, develops a well-argued and powerful point of view about the limits of financial investor capitalism and shows that more balanced models should be explored, like family business as well as Geman and/or Japanese corporate governance.


Review by H. Thomas Johnson
(Professor of Business Administration at Portland State University in Oregon and Distinguished Consulting Professor of Sustainable Business at Bainbridge Graduate Institute in Washington)

In Management From Hell, Robert Locke offers an alternative to the belief that the purpose of a business is to enrich a small elite caste of investor-capitalists who use financial markets and business institutions to trade the future of humanity and non-human life for unlimited personal financial gain. That alternative is the entity view of business in which the purpose of a business is to flourish for the indefinite future and serve the well-being of society as a whole by providing gainful employment to people (employees and suppliers) whose job is to sustainably supply the economic needs of other people (customers). The book begins by examining the impact on large corporations since the late 1970s of “investor capitalism,” a “proprietary” view of business that sees the activities and the capital of a corporation as controlled by its owner-investors and managed by their hired agents, all for the purpose of maximizing its financial returns, to which they – the investor-owners – claim exclusive rights. Locke draws on extensive historical research to show how advocates of investor capitalism used modern academic theories of economics and finance to justify the morally dubious claim that a corporation’s sole concern is to maximize the financial returns to its investor-owners and their delegated agents, without regard for how its activities affect other constituencies such as employees, customers, suppliers and non-human members of Earth’s life-sustaining biosystem.

Robert R. (Bob) Locke

During the 1980s and 1990s top corporate managers, despite their role as the investor-owners’ agents, gained effective control over corporate boards of directors and, implicitly, the power to set their own personal compensation. The spectacular rise in corporate CEO, CFO and other C-level compensation in the last 20 or so years (from salaries, bonuses and stock options) relative to the compensation of lower-level managers, employees and even investor-owners is well known and does not require further documentation here. Locke shows in Management From Hell and at greater length in his co-authored book with J.-C. Spender, Confronting Managerialism (Zedbooks, 2011) that top managers accomplished this change by gradually shifting strategic decision-making power to themselves and away from owners. They achieved that shift largely by promoting the claim that their special post-graduate business education (especially in MBA programs of elite U.S. business schools) put them in exclusive possession of special knowledge and expertise needed to efficiently run today’s complex, global corporations.

As a consequence of successfully marketing their supposedly unique management expertise gained from exclusive access to the nation’s most elite graduate business schools, top managers in the last generation ran large American corporations with impunity. Almost never were they held accountable for the social costs of the management practices they pursued to maximize financial returns for the personal gain of the owners and their “elite” agents. In retrospect it seems clear that many of those practices seriously impaired the vitality and strength of the American economy in the past 30 or so years.

Locke demonstrates persuasively that the damaging consequences of these investor-capitalist management practices were not experienced to the same degree outside America, where management practices were guided by alternative economic philosophies that viewed the purpose of a business in terms of the interests of a much broader constituency than just investor-capitalists and their manager-agents, and not just in terms of maximizing immediate financial returns. He shows how large corporations in Germany and Japan are managed from an “entity” perspective that views success as ensuring the corporation’s long-term survival and sustainability on behalf of all its constituents – employees, customers, suppliers, communities and shareholder/owners — not just owners and their manager-agents. A firm run from an entity as opposed to a proprietary perspective measures success in terms of conditions that contribute to firm sustainability – e.g., average longevity of employees (presumes that returns on investment in humans increase with tenure of employment), employee training, customer satisfaction, reputation, quality of design and delivery, and financial returns (sufficient to flourish and develop over many generations, not maximum short-term profits).

H. Thomas Johnson

Locke cites research findings showing that American firms that are run from a proprietary perspective do report higher financial returns in the short run than do firms run from an entity perspective. In Germany or Japan, however, the entity firms, although earning less spectacular short-term returns, do earn respectable returns, and they live much, much longer. To indicate the long-term consequence of this difference, Locke cites a 2001 book by Richard Fosterand Sarah Kaplan entitled Creative Destruction: Why Companies That Are Built to Last Underperform the Market–And How to Successfully Transform Them. The authors of this book interpret the increasingly rapid rise and fall (turnover) of large corporations on American financial markets in the 20th century as evidence that the markets weed out less efficient firms by rewarding current financial performance over firm longevity. Although the authors view this outcome favorably, Locke points out that their conclusion begs the question,

“At what cost to individuals, society and Earth’s life-support system do markets achieve such outcomes?”

Indeed, in the post-1970s era of investor capitalism the “leaders” of American corporations (whether top managers working from inside a firm as agents for the investor-owners or take-over operators working for themselves from outside a firm) have pursued the goal of maximum financial returns at increasingly heavy cost to workers, communities, and government. It is not an exaggeration to say that top managers or investors no longer view a business corporation as a community of people (employees, managers, investor-owners, suppliers) serving people (customers and communities) for the economic well-being of society. Instead, they view a business corporation as a commodity with a market value/price set by traders in global financial markets. In other words, a corporation is viewed as a pool of investors’ financial capital seeking maximum returns, if not in one enterprise then by liquidating that enterprise and re-investing the capital in another enterprise ad infinitum.

Because it is assumed that financial markets obey the dogma of financial economics and value corporations according to their discounted current and expected future financial returns, then top management’s job inside a firm is to maximize those returns even if the steps management takes to do so destroy the firm by, say, off-shoring work to lower-wage countries, outsourcing supply purchases to force down prices of non-labor inputs, re-locating headquarters and bank accounts in other countries to reduce taxes and so forth. No different in principle, even if the steps taken are often more extreme, are the steps taken by an outside private equity firm that borrows funds in order to purchase a target corporation, take control and then pursue steps to increase the target firm’s market value by, say, cutting costs via layoffs, revising labor contracts to reduce wages, terminating employee pension contracts and so forth. In addition, private equity take-over firms often use their legal control of the target firm to pay themselves hefty management fees and other forms of compensation. They also borrow against the firm’s assets and draw out cash from its employee pension funds, and then use that cash to pay back the loans they borrowed to purchase the target firm originally. Eventually the private equity firm hopes to cut costs and raise the financial returns of the target firm sufficiently to re-sell it for more than their purchase price, pocket the difference, and walk away much richer. They leave behind a financially-strapped community of unemployed workers, bankrupt suppliers and tax-starved public services. In several chapters Locke enlivens his discussion of these practices with references to specific private equity take-over firms, especially Bain & Co., an example of the industrial-capitalist spirit at its most socially destructive and immoral, particularly its activities conducted in the 1980s and 1990s by Bain’s most famous partner, former Massachusetts Governor and 2012 Republican candidate for U.S. President, Mitt Romney.

This book is for anyone who is concerned about the precarious state of the US economy, including those who are, or plan to be, employed by large corporate businesses. Implicit in the book’s message is the conclusion that investor-capitalist management of “corporations-as-financial-commodities” is an important cause of the growing inequality of wealth and income in the American economy. The huge private fortunes amassed as a consequence of this inequality are being used increasingly to control elections and legislatures in the United States, threatening to replace democratic governance in American society with plutocratic control by a handful of unimaginably rich individuals, almost all of whom view the economy and society through the nineteenth-century liberal ideology of individualism and free markets.

N.B. See also the review by Dominique Turcq (Editor)

The Pure Logic of Accounting

The Pure Logic of Accounting: A Critique of the Fair Value Revolution

Yuri Biondi (



When international accounting standards were renamed to become international financial reporting standards, this seemed to imply that accounting no longer needed to exist, but rather had to be reconsidered as a part of financial communication and advertising. Does traditional accountability no longer matter? Betrayed investors and globalized stakeholders would dissent. A difference of nature continues to exist between fair values disclosed by managers and certified by auditors, and the actual performance generated by the enterprise entity through time, space, and interaction. In a world shaped by complex organizations facing unfolding changes, hazard and limited knowledge, the quest for fundamental principles of accounting is not academic. Accounting principles constitute a primary way that the creation and allocation of business incomes is governed; that is, fairly managed and regulated in the public interest, having respect to “other people interests.” This article adopts a dualistic posture that opposes the accounting conceptual frameworks based on fair value (market basis) and historical cost and revenue (process basis). The fundamental premises about the underlying economics of the enterprise entity are discussed, including the representation of the business and the concepts of asset and liability. References are made to the case of accounting for intangibles, and to the distinction between equities and liabilities. The cost and revenue accounting perspective is then defended in terms of accountability, but also from the informational viewpoint: historical accounting information plays a special role as a lighthouse in the dynamic and strategic setting of the Share Exchange. In particular, two refinements of the historical cost (and revenue) accounting model are suggested. The first one regards the treatment of earned revenues from continuing operations, and the second, the recognition of shareholders’ equity interest computed on the actual funds provided in the past, coupled with the distinction between shareholders’ equity and entity equity.

Review by: Masayoshi Noguchi

This is an interesting piece of work distributed by NEP-HIS on 2011-02-19. Historians commonly use certain indications when they specify objects, organisations or periods to be analysed. Accounting income is one such indicator in accounting, business and economic history. But it is often assumed that firms gained their income through its main business activities. However, this is not always the case. More and more so, firms diversify and generate profitability from non-core activities (such as financial transactions). In the not so distant future, historians will have to face this and therefore, pay greater attention to the accounting assumption made by specific enterprises.

Yuri Biondi

This paper is not an historical study but makes timely comments on fair value accounting as represented by International Financial Reporting Standards (IFRS), under which an accounting income is assumed to be measured though changes in the market price of net assets. The author’s attempt is in fact a rehabilitation of cost-based accounting. An approach which builds on transaction-based measurements. This paper thus adopts the so-called ‘a dualistic approach’ (p. 3) or one that contrasts results from cost-based and fair value-based approaches. It is certain that papers like this will serve as a useful frame of reference for historical research.

Bondi criticises fair value accounting which, according to him, adopts ‘a market view’:

‘The underlying economics of the business firm is not considered by measuring the entrusted wealth and related (quasi-)rents (i.e., changes of value), but instead by representing its economic and monetary process as an enterprise entity’ (p. 7).

This view assumes that ‘the business entity is framed in a world of market forces capable of addressing and solving its accounting issues’ (p. 7). Bondi adds that ‘[t]he preference for fair value is motivated by this piecemeal valuation which does not consider the whole entity and the overall representation of business capital and income to the firm’ (p. 14). Furthermore that ‘[t]he fair value perspective appears to be at odds with the nature and role of enterprise entities that actually are socio-economic systems involving continuing relationships among interested parties and which raise public interest concerns’ (p. 10).For Bondi there main problem of fair value accounting is that it might lead to ‘inconsistencies'(p. 34).

At the same time, however, the advocates of fair value accounting are not so naïve and do recognise some of its limitations. And to be fair, assume a form of market behaviour much more complex than that Bondi has represented. In a way Bondi oversimplifies assumptions of market behaviour by stating that ‘[f]air value relies on perfect and complete financial markets’ (p. 33).

Bondi insists on the rehabilitation of cost-based accounting by stating that ‘the classic accounting principles fit a broader “accountability” framework that recognises the socio-economic nature of business entities’ (p. 10). From this perspective, ‘[a]ccounting is then understood as a mode of representing, organising and regulating these socio-economic systems and their institutional, organisational, and cognitive patterns and interactions’ (p.10).

However, the criticism to fair value accounting and the support for cost-based accounting do not necessarily mean that the latter comes out as the best choice. Bondi acknowledges that cost-based accounting is in need of reform. Specifically in the areas of intangibles and shareholders’ equity.

Bondi’s ultimate goal is to contribute to the ‘ongoing effort of conceptual clarification by drawing upon theoretical debates that have been going on for at least a century with respect to fair (current) value versus historical cost accounting’ (p. 3). But as of today it is far from clear there has been substantial progress on this debate.