Steve Roth — Does Saving “Fund” Investment?

Steve Roth explains the accounting meaning of funding.

...it’s important to understand what that key accounting verb (“funds”) actually means. It describes an after-the-fact and arguably largely arbitrary accounting allocation of income streams to outflow streams....

I guess my main point here, perhaps obvious to many, is that accounting descriptions — choices about how to describe the past in accounting-speak, especially regarding “saving” and “funding” — are, inevitably, rhetorical hence normative. Or at least, those choices of descriptions have inevitable rhetorical hence normative implications.

Or to put it simply: accounting is normative.

My impression is that many economic discussions and disagreements, especially in the “MM” worlds, are at their root disagreements about what “funds” what (frequently compounded by imprecise sector definitions with different parties using different implicit definitions), and the rhetorical hence normative implications of those competing descriptions.

Asymptosis
Does Saving “Fund” Investment?
Steve Roth

See also Steve's How Accounting “Constrains” Economics (February 1, 2012). Lots of comments, too.