SUMPTUOUS ACCOUNTING™

The working paper Sumptuous Accounting™ uses the sci-fi genre and a story-telling narrative to explore how capitalism could be evolved. Sci-fi allows us the creativity to explore an alternative reality. It frees us from preconceptions and the inertia of habit. Good sci-fi is rooted in practical feasibility – it is not fantasy.

This thought experiment allows us to ask: ''how can capitalism be improved by changing our socio-economic construct?'

Download the full paper here

Sumptuous Accounting™ is an accounting methodology that incorporates the non-financial impacts of commercial transactions. These economic externalities – positive or negative – are not reflected in conventional accounting methodologies. They are often excluded from market prices and financial asset valuations. Such omissions can result in market failure if price sensitive decisions are disconnected from their broader societal consequences.

The methodology employs a rigorous three-layer data architecture that maps onto and redresses known reasons for the divergence of non-financial data: (1) capturing raw, objective non-financial data throughout supply chains to fix measurement divergence; (2) formulating these data into sumpt values via standardised calculations to accommodate scope divergence; and (3) applying stakeholder-specific, normalised scores that reflect policy priorities to facilitate weight divergence.

Optionally, Sumptuous Accounting™ can be extended to calculate dynamic Value Added Tax (VAT) rates and to compensate for externalities. This can align market incentives with societal values, functioning as a behavioural tax mechanism that can both penalise perceived negative externalities and reward positive ones.

The methodology for dynamic VAT is designed with procedural consistency, transparency, and non-discriminatory application in mind. This ensures compatibility with WTO and GATT rules by treating domestic and imported goods equivalently. The methodology offers a unified and auditable framework for internalising externalities across all economic activities, supporting better informed decision-making for consumers, businesses, and regulators.

1. Sumptuous Accounting™ solves the classic economic challenge of correctly pricing externalities. It introduces the concept of a sumpt that can enumerate non-financial attributes. The sumpt gives rise to the affectionate term 'Sumptuous Accounting™'.
2. A three-layer data architecture is employed to redress known reasons for the divergence of non-financial data. This follows a strict discipline of separating non-financial data into (1) the raw data that record the axiomatic facts, (2) the formulation of raw data into sumpt values for comparative analysis (several different sumpt values are possible for each attribute, each sumpt value uniquely representing a different worldview), and (3) sumpt scores between -100 and +100 that codify the individual interpretations of all actors. The scores are not a core part of the data consumed by economic actors but are a lens that reflects a normalised weighting of their interpretation and prioritisation of the non-financial attributes they are analysing.
3. All actors can have access to the same data – end-consumers, supply chains, investors, and regulators. Each layer within the data architecture is additive without distorting or corrupting the preceding data layer, enabling all actors to work with the same data.
4. Regulators can use these data to determine if markets are working well or not with respect to their policy priorities, and can be better informed to design policy interventions (either incentives or disincentives as required).
5. When markets do not automatically price the non-financial attributes, then regulators can optionally utilise tax policy to adjust the mercantile pricing of products to internalise the economic externalities as part of the purchase price. Normalised sumpt scores can be used as the basis for supervisory bodies (if they want) to develop dynamic VAT rates. This functions as a behavioural tax to nudge consumer preferences towards the policy priorities of that jurisdiction. VAT, unlike tariffs, is rebated on exports to maintain international price competitiveness. The approach is transparent based on the same underlying data, which means that different jurisdictions can take different positions, and apply different VAT rates based on different priorities – these may change over time and across election cycles. Implementation is consistent with WTO and GATT rules.
6. Sumptuous Accounting™ can be universally applied to all mercantile transactions and to all financial assets under management. The three-layer data architecture enables all actors to have access to the same common set of non-financial data; akin to how they have access to the same common set of financial data. Of course, many actors may wish to augment these non-financial data with additional data, which they are free to do in the same way that they would augment financial data for more nuanced analysis.