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economic thought
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On the Origin of Facts

Accounting at the Heart of the Performativity of


By Eve Chiapello

HEC School of Management Paris,

Recent research has demonstrated the performative power

of economics, in the sense that economic theory tends to

mould the world to itself and its descriptions. The role of

accounting in the performativity of economics is highlighted


The idea of the performativity of


The concept of performativity comes from linguistics, most

significantly the work of J.L. Austin, and was introduced

into economic sociology by Callon (1998) and MacKenzie

(2004). D. MacKenzie (2004: 305) proposes two meanings

for this notion. The first, generic performativity, points to

the fact that the categories of social life “are not selfstanding,

natural or to be taken as given, but are the result of

endless performances by human beings and (an actor-theorist

such as Callon would add) by non-human entities and artefacts

as well. (…) In this meaning, performativity is at the

most general level entirely obvious. (…) Except in areas such

as sex and gender where social categories might be read as

natural, generic performativity is a weak claim (could matters

be otherwise?) but still empirically important.” The second

meaning of performativity, Austinian performativity, is less

universal but stronger. In this sense, “a performative utterance

is one that makes itself true, that brings into being that

of which it speaks, as when a monarch designates someone an

outlaw, an appropriate authority designates a couple husband

and wife.” MacKenzie then uses this definition to study the

performativity of models in financial economics (p. 306).

“To ask whether a model in financial economics is performative

in the Austinian sense is to ask, among other things,

whether the effect of the practical use of the model is to change

patterns of prices towards greater compliances with the

model.” More recently, Mackenzie, Muniesa and Siu (2007)

have dedicated a whole book to the question of the performativity

of economics.

Exploring this research agenda, I rely in this contribution on

the Austinian meaning and argue that accounting helps to

make economics performative, being one of the instruments

through which economics can make the world conform

more closely to its descriptions.

Two phenomena are important to understand this role of

accounting. The first is the longstanding relationship between

accounting and economics: the former has supplied

many concepts for the latter, such that the latter’s performative

power partly depends on its capacity to latch on to

native representations in the world, constructed by businessmen

and tradesmen. Partly fluent in accounting language,

economics has adopted accounting practices to

bring its revised economic concepts into being. A second

dynamic lies also in the relationship between accounting

and economics, notably whenever economics parts company

with or opposes accounting concepts. In a reversal of

influence, economic concepts are introduced into accounting

frameworks via a new discipline originating from the

early 20th century, accounting theory, which has translated

economic concepts, originally foreign to accounting,

into accounting concepts. Both phenomena are studied


Accounting as an inspirer of economics

The fact that accounting practices were a major source of

inspiration for the earliest economists (especially classical

economists) hardly needs further demonstration (Klamer

and McCloskey 1992; Thompson 1998). Accountants and

economists share the same vocabulary: costs, expenses,

investments, capital, assets, revenues, balance sheet,

budget, expenditure, profit, etc.

The concept of capital that is central to economics is also

central to, and in fact comes from, accounting. Italy supplied

the first occurrence of the word capital in an economic

sense in a Florentine accounting ledger dating from

1211. The term then appears to have spread within commerce

and banking from Italy throughout Europe (Braudel

1981). In order of historical appearance, the economic

meanings1 of the word capital have been:

Accounting at the Heart of the Performativity of Economics

economic sociology_the european electronic newsletter Volume 10, Number 1 (November 2008)


The amount of money loaned as opposed to the interest

on the loan.

The money invested in a trading concern or funds contributed

by a merchant to his new concern. This second

meaning is the closest to the accounting meaning.2

By extension, for late 18th century economists, capital

meant all wealth invested in the economy for production.

Here, the term became dissociated from the idea of an

amount of money, covering all sorts of wealth and capital

goods. This extension caused a frequent confusion between

the meaning of capital in the sense of money invested,

and in the sense of the things in which money is

invested, since economists did not always explain their

positions despite the significant consequences (Hicks

1974). This confusion never arose for accountants trained

in double-entry bookkeeping, for the accounting model

makes a clear distinction between the two meanings,

which are also represented by the two sides of the balance


Further, regarding the influence of the accounting framework

on the birth of economic thought, I have shown

elsewhere (Chiapello 2007) that Karl Marx took a close

interest in accounting, helped by his friend Friedrich Engels

who was aware of the cutting-edge practices of Manchester

manufacturers. Marx sought to define the specific

characteristics of capitalism and needed to recreate an

interrelated system and its dynamics. For this systemic

understanding, the representation of circulation and accumulation

in accounting terms played a central role. For a

mid-19th century observer such as Marx, the language of

accounting was similar to that of political economy, a field

in which he read every work published. Capital, profits,

and wages were concepts common to accounting and the

political economy of his time. Marx would choose the

closest economic concepts possible to accounting.

The importance of accounting in the genesis of economic

concepts is thus clearly visible in the works of the classical

economists. They borrowed accounting terms and concepts

very consciously. Yet, once introduced into economic

thought, these concepts began to lead an autonomous

life, progressively diverging from their roots.

In contrast with classical economics, neo-classical economics

departs from traditional accounting representations of

the economy. Irving Fisher’s complete redefinition of the

concepts of capital and income enabled, at least intermittently,

a divorce between accounting and economics (see

e.g. Fisher 1906). Post-Fisher, capital is no longer backward-

looking and seen as the money invested in capital

goods or as the capital goods themselves, as conceptualized

in accounting. It is now forward-looking and conceptualized

as all future services expected of the capital goods.

Discounted cash-flow calculation4 was then invented to

operationalize the new economic concept of capital, and

accounting, hitherto dedicated mainly to registration of

past events, became a practice removed from neoclassical

economic thinking.

But accounting frameworks played an important role at

another moment in the history of economic thought: the

construction of national accounts to provide statistical

resources for Keynesian policies. As Vanoli (2002) and

Studenski (1958) have explained, pre-1930s economic

statistics used incomplete information or only attempted to

estimate national income. It took time before the metaphor

of business accounting was consciously used in constructing

the model of national accounts (Suzuki 2003)5

and in systematic organization of statistical information in

a coherent framework. This international effort was completed

in the 1960s. Yet, since the 1980s, Keynesian macroeconomics

has been in crisis, and accounting began to

lose its attraction for many economists.

The moments of proximity, when economics refers consciously

to business accounting to construct its own representation

of the economic world, may explain the recurring

temptation for economics to return some theoretical input

into accounting, seeking to bring accounting into line or

rationalize it in conformity with its own representations.

Thus while accounting practices are not born out of economics

– having on the contrary supplied some of its

weapons – they may be influenced by economic theory.

When accountants sought to rationalize practices and

define their guiding principles, they turned to economics

for the theoretical discourse that accounting should serve

by operationalizing its concepts.

Accounting inspired by economics

Hopwood (1992) clearly identifies this movement. He

stresses the grip of economic categories on accounting

practice, and the demand placed on accounting to operationalize

economic practices and reform in order to produce

calculations that conform more closely to economics.

Accounting at the Heart of the Performativity of Economics

economic sociology_the european electronic newsletter Volume 10, Number 1 (November 2008)


One of the most striking examples of the influence of economics

on accounting concepts is the recent authorization

in International Accounting Standards (IAS) of discounting

future cash flows (DCF) as a valuation method for certain

assets, in the pursuit of fair value accounting. This accounting

policy assumes that the definitions of Capital and Income

provided in the work of Irving Fisher are accepted by

all. A few decades after economics, accounting is apparently

undergoing its own revolution.

The story of this conquest by economic concepts is quite

long. It begins with the birth of accounting theory in the

1920s, followed very closely by the creation of the first

accounting standards in the US under the auspices of the

new Securities and Exchange Commission (SEC). Accounting

theorists, such as Littleton and Paton, wanted to give

accounting theoretical foundations and influence accounting

standard production as part of the mission of their

newly created profession. Accounting theorists sought

those foundations in economics, and organized many

debates on Fisher’s concepts and their possible translation

to accounting. The tradition of dialogue between accounting

theory and economic concepts then lasted up the

1970s (special mention must be made of R.J. Chambers,

who can be seen as one of the fathers of fair value accounting).

The positivist revolution in accounting academia, inaugurated

by Watts and Zimmermann’s (1979) attack on the

old school, changed everything. The positivists saw no

point in thinking about what accounting should be, as

accounting theorists did. Instead, in their opinion, a careful

study of companies’ actual accounting practices was

needed. This new, highly aggressive generation of academics

successfully discredited their predecessors and, to a

large extent, put an end to accounting theory research. But

the accounting standard-setting system was still developing

and eager to take the old theories on board and reestablish

its legitimacy after a series of scandals through

the application of economic accounting theory. The newly

created (1973) US Financial Accounting Standards Board

launched its accounting framework project (Gore 1992;

Zeff 1999) in the first manifestation of this trend, followed

closely by other countries. The old accounting theorists’

dream of influencing standard-setting became reality,

strangely at a time when they were no longer welcome in

academia. The unexpected destiny of accounting theory’s

efforts to bring accounting closer to neoclassical economics

was also boosted by the rising influence of the financial

markets themselves and their penetration by Fisher’s economic


The close historical relationships between accounting and

economics, largely hidden because contemporary economists

often know little about accounting, explain why

accounting remains a good practical vector for pure economic

concepts, such as the Fisherian concept of capital.

This can be seen as a good example of accounting’s ability

to make economics perform the economic world.

Eve Chiapello is Professor at the HEC School of Management

in Paris. Her research interests include accounting

and the history of economic ideas, the sociology of accounting,

and the historical transformation of management

and capitalism. Inter alia, her articles have been published

in the journals Accounting, Organizations and Society,

Critical Perspectives on Accounting, Berliner Journal

für Soziologie, and Sociologie du Travail. With Luc Boltanski

she co-authored The New Spirit of Capitalism (Verso,



1The economic meanings of the word capital should be distinguished

from older uses, when as an adjective it was applied to

crimes and punishments, or carried the most obvious meaning of

most important (e.g. the capital city of a country).

2We talk here of the accounting concept of share capital, which

represents the historical value of the contributions to the firm

shareholders have made in the beginning and during the life of

the firm by making external resources available to the firm. Shareholders’

equity consists of two components, share capital plus

retained earnings (or reserves). Reserves represent the accumulation

of capital, the part of the value created through the firm’s

operations that shareholders have chosen not to take out of the


3Assets, to be found on one side of the balance sheet, represent

the value of the things in which money is invested. The money

invested is represented on the other side of the balance sheet

consisting of shareholder’s equity plus liabilities, as the money

invested comes from shareholders or other money bringers.

4The discounted cash flow (or DCF) approach describes a method

of valuing a project (company or asset) based on 1) a forecast of

all future cash inflows and outflows generated by the project at

different periods of time, and 2) a transformation of these flows

by the use of a discount rate supposed to give their value as if

they occurred at a single point in time so that they can be compared

in an appropriate way. The discount rate used is supposed

to represent the cost of capital, and may incorporate judgments

Accounting at the Heart of the Performativity of Economics

economic sociology_the european electronic newsletter Volume 10, Number 1 (November 2008)

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