Summary:
“…we have seen a calculation… which shows that the fixed charges, for machinery and the general management of a mill, are as nearly as possible equal to the cost of wages in the process.” In my earlier post on the "Wild and Dangerous Scheme" I teased the "egregious accounting error" committed by the author of the 1844 article in the Economist. In plain terms the error was double counting -- the author deducts 16.5% from wages to compensate for a decrease in output and then attributes a second loss of 16.5% to the decrease in output resulting from it's effect on "fixed charges."That double-counting error seems self-evident to me but there is also a semantic smoke screen at play that obscures it for some readers. The term "fixed charges" seems to refer to an immutable absolute quantity of
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“…we have seen a calculation… which shows that the fixed charges, for machinery and the general management of a mill, are as nearly as possible equal to the cost of wages in the process.” In my earlier post on the "Wild and Dangerous Scheme" I teased the "egregious accounting error" committed by the author of the 1844 article in the Economist. In plain terms the error was double counting -- the author deducts 16.5% from wages to compensate for a decrease in output and then attributes a second loss of 16.5% to the decrease in output resulting from it's effect on "fixed charges."That double-counting error seems self-evident to me but there is also a semantic smoke screen at play that obscures it for some readers. The term "fixed charges" seems to refer to an immutable absolute quantity of
Topics:
Sandwichman considers the following as important:
This could be interesting, too:
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“…we have seen a calculation… which shows that the fixed charges, for machinery and the general management of a mill, are as nearly as possible equal to the cost of wages in the process.”In my earlier post on the "Wild and Dangerous Scheme" I teased the "egregious accounting error" committed by the author of the 1844 article in the Economist. In plain terms the error was double counting -- the author deducts 16.5% from wages to compensate for a decrease in output and then attributes a second loss of 16.5% to the decrease in output resulting from it's effect on "fixed charges."
That double-counting error seems self-evident to me but there is also a semantic smoke screen at play that obscures it for some readers. The term "fixed charges" seems to refer to an immutable absolute quantity of costs and -- implicitly perhaps? -- an unalterable production process. It doesn't. It refers to accounting entries, as the term "charges" indicates.