Cold Hard Wonk

No sentiment but politics

Double-Entry Budgets

Posted by JJ in Brass Tacks (Monday March 19, 2007 at 5:41 pm)

As Double-Entry Bookkeeping is to accounting, so double-entry budgeting is to politics. Double-entry budgeting isn’t about accuracy, though. It’s about efficacy.

State spending can be measured in two ways: by its political value and by its investment value. Political value is the degree to which a spending item improves the government’s chances for re-election. Spending that pleases more people than it alienates is more valuable than spending that does the reverse. Investment value is the degree to which a spending item improves the public interest which it targets. Spending that solves an underlying problem is of greater value than spending that merely compensates for problems.

Take, for example, a program to cope with rampant escalation in food prices. A program which subsidized food purchases with public money might prove to be of great political value, but since it does nothing to solve the real problem, it is of little investment value.

The best spending, then, is that which hits highest in both columns. That’s why, in this week of budgets, the Frosty Wonk will provide a rundown of the Canadian federal and Ontario provincial budgets, using the patent, if not patented, double-entry system.

Tomorrow: Federal Budget, Part One

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