TRIPLE ENTRY BOOKKEEPING™

The discussion paper Triple Entry Bookkeeping™ uses the sci-fi genre and a story-telling narrative to explore how capitalism could be evolved. This approach was taken because sci-fi allows us the creativity to explore an alternative reality. It frees us from preconceptions and the inertia of habit. However, sci-fi is also rooted in practical feasibility - it is not fantasy.

This thought experiment allows us to ask: 'if our socio-economic construct was different – how could capitalism be improved?'

Download the full paper here

Triple Entry Bookkeeping™ 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: (1) capturing raw, objective non-financial data throughout supply chains; (2) formulating these data into sumpt values via standardised calculations; and (3) applying jurisdiction-specific, normalised scores to reflect policy priorities, which are then used to dynamically adjust Value Added Tax (VAT) rates. This dynamic VAT mechanism aligns market incentives with societal values, functioning as a behavioural tax that can both penalise perceived negative externalities and reward positive ones.

The methodology 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. Triple Entry Bookkeeping™ solves the classic economic challenge of correctly pricing externalities. To achieve this, it introduces the concept of a sumpt that can enumerate non-financial attributes. The sumpt concept also gives rise to the affectionate term Sumptuous Accounting™.
2. The key is to fix the underlying problem of inconsistent data via a three-layer data architecture. This follows a strict discipline of separating non-financial data into (1) the raw data that records the axiomatic facts, (2) the formulation of raw data into sumpt values for comparative analysis (several different sumpt values are possible for each attribute, every one uniquely representing a different formulation of the raw data based on different worldviews and different metadata), and (3) sumpt scores between -100 and +100 that codify the interpretations of actors. Importantly, the scores are not a core part of the data consumed by economic actors but reflect 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, industrial supply chains, investors, and regulators. Each layer within the three-level data architecture is additive without distorting or corrupting the preceding data layer, enabling all actors to work with the same data, at the appropriate level, based on their requirements.
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 where required (either incentives or disincentives as may be most suitable).
5. When regulators identify market failure, or when the natural dynamics of markets are not automatically pricing the non-financial attributes i.e. when these remain persistently as economic externalities, then regulators can utilise tax policy to adjust the mercantile pricing of products to internalise the economic externalities into the purchase price. The normalised sumpt scores can be used as the basis for supervisory bodies (if they want) to develop dynamic VAT rates. This functions in the market as a behavioural tax to nudge consumer preferences in a way that aligns with the policy priorities currently active in that jurisdiction. Importantly, the approach is transparent and based on the same underlying data, which means that different jurisdictions can take different positions, and apply different dynamic VAT rates based on their different priorities – these may change over time and across election cycles. Implementation is also consistent with WTO and GATT rules.
6. Triple Entry Bookkeeping™ (and 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.