Saturday, January 02, 2021

Capitalism, rationality and double-entry bookkeeping

In his book Capitalism, Socialism, and Democracy the economist Joseph A. Schumpeter discussed the deep and widespread rationalizing influence that capitalism had on society, particularly that of double-entry bookkeeping.


"the rational attitude presumably forced itself on the human mind from economic necessity; it is the everyday economic task to which we owe our elementary training in rational thought and behaviour’— I have no hesitation in saying that all logic is derived from the pattern of the economic decision."

there is "inexorable definiteness and, in most cases, the quantitative character that distinguish the economic from other spheres of human action, perhaps also to the unemotional drabness of the unending rhythm of economic wants and satisfactions. Once hammered in, the rational habit spreads under the pedagogic influence of favorable experiences to the other spheres"

"capitalism develops rationality and adds a new edge to it in two interconnected ways.

First it exalts the monetary unit—not itself a creation of capitalism—into a unit of account. That is to say, capitalist practice turns the unit of money into a tool of rational cost-profit calculations, of which the towering monument is double-entry bookkeeping." 

Without going into this, we will notice that, primarily a product of the evolution of economic rationality, the cost-profit calculus in turn reacts upon that rationality; by crystallizing and defining numerically, it powerfully propels the logic of enterprise. And thus defined and quantified for the economic sector, this type of logic or attitude or method then starts upon its conqueror’s career subjugating— rationalizing—man’s tools and philosophies, his medical practice, his picture of the cosmos, his outlook on life, everything in fact including his concepts of beauty and justice and his spiritual ambitions."

"The rugged individualism of Galileo was the individualism of the rising capitalist class."

"rising capitalism produced not only the mental attitude of modern science, the attitude that consists in asking certain questions and in going about answering them in a certain way, but also the men and the means."

"capitalism—and not merely economic activity in general—has after all been the propelling force of the rationalization of human behavior."

"all the features and achievements of modern civilization are, directly or indirectly, the products of the capitalist process."

"The capitalist process rationalizes behavior and ideas and by so doing chases from our minds, along with metaphysical belief, mystic and romantic ideas of all sorts."

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