Accounting for inflation: Henry Sweeney and the German gold-mark model

              The Accounting Historians Journal Vol. 14, No. 1 Spring 1987
O. Finley Graves UNIVERSITY OF MISSISSIPPI
ACCOUNTING FOR INFLATION: HENRY SWEENEY AND THE GERMAN GOLD-MARK MODEL
Abstract: In his book Stabilized Accounting of 1936, Henry Sweeney differentiated his indexation model for accounting for inflation from the French and German inflation-accounting models of the 1920s by describing the European methods as "usually quite content to stabilize the paper-money book figures on the basis of merely some gold money." Sweeney's composite characterization of the Euro-pean thought, however, generalizes broadly and proves technically inexact when applied to the Germans. This study offers an account of the German gold-mark model of accounting for inflation as con-tained in the works of Walter Mahlberg and Eugen Schmalenbach.
INTRODUCTION
Henry W. Sweeney's Stabilized Accounting of 1936 contains the first book-length treatment of inflation accounting to appear in the United States. In that book, Sweeney recommends a price-level-adjustment model for accounting for inflation that adjusts for price-level change by means of a general index. The ideas in the book, however, did not originate with Sweeney. Rather, as Sweeney himself acknowledged [1964, p. xliv], they had their roots in inflation-accounting methods previously de-veloped in Germany and France. Early in the 1920s Sweeney had chosen as a topic for a doctoral dissertation at Columbia University the overall valuation process, a process he found as currently practiced characterized by extreme conservatism. In attempting to infuse logic into contemporary valuation prac-tices, however, he reports finding himself repeatedly frustrated by the effects of fluctuations in the value of the dollar. As a result, he turned to Germany . Hyperinflation had only recently ended in that country, and he hoped to discover a solution to the problem of accounting under conditions of a fluctuating currency in what had been done there. As he set about mastering the German thought, the French, too, began to publish a body of literature on