Tim Worstall I have been thinking about something that is so obvious within conventional accounting that almost no one thinks to question it. It is the assumption that labour is a cost.
Every accountant thinks this. A business has sales, and from those sales it deducts the costs incurred in generating them. Those costs include materials, energy, rent, depreciation and, most importantly for many businesses, wages and salaries. What is left after those costs have been deducted is called profit.
But suppose we ask a different question. Suppose that the purpose of a business was not to maximise the return to capital but was instead to maximise the sustainable return to labour. What would accounting look like then?
Oh Lordy. Save us.
Labour is a cost because labour is a cost. It’s the human effort required to get something doe. This is a cost. Which is why it is treated as a cost.
The post Another new accounting first appeared on Tim Worstall.
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