Patrick Jahnke is right: this is a fundamental flaw at the heart of modern accounting. I have said this morning that nothing lasts forever, and I stand by that. It’s wise to realise that’s true. But to assume nothing has value in a generation’s time is as flawed as thinking anything lasts in perpetuity. And what the practice of discounting in accountancy means is that no company plans for a generation hence. And yet it is believed that investing in the shares of these companies is a rational basis for making pensions provision.
That this is not true – because these companies have no plan for the time when pensioners will want to realise their investments – should be apparent. But it is not.
Which human organisation has a longer time horizon than the major corporation?
No, not in theory, in practice?
Bonus question. If we have an inevitable too short a time horizon among the things we can invest in then aren’t we going to have to have a secondary market in investments?