The cracks in postmodern economic theories are visible. They’ve spilled into politics, with governments slashing budgets worldwide.
The spark came from Richard Thaler (Nudge) and Daniel Kahneman (Thinking, Fast and Slow), but the roots run deeper. In 1978, Herbert Simon won the first Nobel Prize for behavioral economics. Thaler later brought the field into public view with his “anomalies” articles in the Journal of Economic Perspectives between 1987 and 1990.
The message was clear: People act based on their environments. Psychology had already demonstrated this in clinical practice; economics eventually followed.
With that, homo economicus—the hyperrational actor of industrial modernity—died. Along with him went the playbook of meritocracy, technical determinism, and cold rationality.
In his place rose concepts like culture, institutions, purpose, inclusive HR, gender equality, quotas, and language—social dynamics grounded in behavioral insights.
As service economies expanded, requiring soft skills more than industrial hard skills, behavioral economics spread. But the field made a major oversight: It never invited accounting to the conversation.
THE ACCOUNTING BLIND SPOT
Accounting frameworks from FAF and IFRS are still designed for industrial modernity: Only positive, immediate cash flows count as value. Everything else is classified as a cost.
That means the way a company treats suppliers, employees, communities, and the environment is booked as a loss, disconnected from value creation. Even ESG initiatives are paradoxically punished by the very systems that claim to encourage them.
Consider a practical case: a company with 10,000 Google reviews averaging 4.6 stars.
From a statistical perspective, this dataset holds weight. It is large enough to fall under the law of large numbers—valid, representative, and statistically significant.
It is a voluntary response sample with real-world significance, combining quantitative and qualitative depth. Most importantly, it suggests correlation with causation: Employees, suppliers, and communities are treated with respect and professionalism.
That number is not just a reputation score. It’s a direct indicator of ESG performance and long-term value creation. It also signals that leadership is competent and that the company is likely to sustain future cash flows, impacting valuation itself.
Yet none of this is captured on the balance sheet.
FROM BEHAVIORISM TO HYPER-MODERNISM
We are entering what could be called hypermodernism, a necessary blend of behavioral insights and rationalist rigor. But the dialogue has barely started.
Take HR practices, or today’s “people analytics.” Some companies still measure screen time as a proxy for productivity. Few integrate stakeholder feedback on employee well-being, family quality of life, or the actual value of deliverables.
Meanwhile, technology has already solved problems of scale. Large language models like ChatGPT process data in ways far more complex than corporate metrics. A simple 10-word sentence is represented by around 257,000 parameters, calculated in hundredths of a second. Training involves millions of such sentences, across billions of parameters.
If AI systems can process that complexity, organizations can certainly design models with 100-200 parameters to identify talent, monitor well-being, and measure real performance.
They can even share these benchmarks across industries, just as the scientific community shares open datasets.
With web scraping, API mining, sentiment analysis, metadata extraction, and time-series tracking, organizations can measure behaviors and relationships with a precision unavailable to earlier generations.
MEASURE WHAT TRULY CREATES VALUE
This is the opportunity: to move beyond the hard-line modernist models built to exclude unexplainable asymmetries from the balance sheet, and instead bring those very asymmetries into view through multiparameter models.
If we genuinely want to assign value to diversity, inclusion, and the social dynamics that generate wealth, we must measure these effects, not dismiss them as “expenses.”
That requires accounting to catch up, and for Nobel-winning thinkers to help rewrite the rules.
FURTHER READINGS
This debate isn’t isolated. Harvard’s Impact-Weighted Accounts Project is working to embed social and environmental externalities directly into financial statements, while frameworks like Context-Based Sustainability argue that performance should be judged against ecological and social thresholds.
At the same time, critiques of ESG ratings reveal how fragmented and inconsistent today’s measures are. New approaches—ranging from relational metrics of trust and community well-being to AI-driven sentiment analysis—are emerging.
All point to the same conclusion: Accounting must evolve to treat culture, relationships, and impact not as costs, but as core drivers of long-term value creation.
Rodrigo Magnago is researcher at RMagnago Critical Thinking.
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