Assets and Liabilities
Assets and liabilities come into prominence when double-entry bookkeeping and the balance sheet were invented, a prerequisite for the development of complex market economies. Production is a function of the size and structure of real assets, including human capital. We derive more satisfaction from the use of assets rather than from their consumption. Like any business, the household has a balance sheet of assets and liabilities. The lack of capital accounting in government means that many of its activities have no real ‘bottom line’, and their value is usually assessed in noneconomic terms, sometimes resulting in catastrophic mistakes of judgement.