Decision Accounting (DA-1): From Missing Rationales to Mandatory Reconstruction

Hollow wins dominate when system welfare is excluded from the decision record

Boeing 737 MAX, Purdue Pharma, Silicon Valley Bank, and Volkswagen all show the same pattern: private parties gain while the shared system degrades, because the welfare-relevant tradeoff was never recorded before commitment.

• In each case, the bilateral payoff (A and B gain) was legible; the system cost (C loses) was not.
• The missing term is always Field 17: SYSTEM_WELFARE .

Bilateral authorization games exclude the system from the payoff space

Under the Missing System Theorem, outcomes that look Pareto-optimal inside the firm can degrade the broader system. The canonical signature is the Hollow Win: C=0, A=1, B=1.

• A proposes a choice; B approves it. Both gain. The system is not a required object in the decision rule.
• Disclosure-only fixes fail because they change the information set, not the payoff structure.

Decision Accounting requires a 17-field record before material decisions

Fields 1–15 (WHO, WHAT, WHY, PREDICTION, etc.) follow from adversarial reconstruction demands. Field 17 is the structural addition: it forces the institution to book the system-welfare term.

• Field 17 cannot emerge from bilateral governance; it must be imposed by external rule (Theorem 4).
• Partial proofs-of-concept exist: surgical checklists, SOX 404, GDPR.

Complete DA records shrink the equilibrium set and close ex post escape routes

2 shows that mandatory records raise expected sanctions for welfare-negative decisions. Theorem 3 shows that the PREDICTION field closes the unforeseeability claim.

• Without a recorded prediction, the decision maker can always claim the harm was unforeseeable.
• With a recorded prediction, that escape route is blocked.

System welfare cost per dollar of revenue ranges from 0.8 to 167 across cases

Boeing: β_W=0.8–1.3 (50–80B system cost vs. 60B revenue). Purdue: β_W=14.3 (500B system cost vs. 35B revenue). SVB: β_W=8–16. Volkswagen: β_W=1–2.

• In every case, each dollar of industry revenue generated more than fifty cents of system welfare destruction.
• The variation reflects differences in harm concentration and time horizon.

Boeing and airlines gained 32B+; 346 died; system cost 50–80B

The missing DA record is the contemporaneous rationale: accepting a new failure pathway for schedule and sales continuity. No field required the program to state that tradeoff before commitment.

• Boeing's revenue from 737 MAX: ~32B. Airline savings from avoided simulator training: 4–6B.
• The PREDICTION field would have required a concrete forecast of pilot response under sensor failure.

Purdue and its channel gained 35B; 200,000–500,000 died; system cost 500B–$1T

The missing DA record is the marketing and distribution rationale. Internal documents later showed executives knew about diversion but continued the strategy.

• Sackler family distributions: 10–12B. Wholesaler and pharmacy gains: 8–15B.
• A DA record would have required naming the communities and patients bearing the addiction cost.

SVB gained 1.8B in interest income; failure cost FDIC 16B; system cost $50–100B

The missing DA record is the treasury strategy rationale. No document required the board to state the public-backstop exposure before committing to duration concentration.

• SVB's 2022 revenue: $6.2B. Implied β_W: 8–16.
• The PREDICTION field would have required a concrete forecast of deposit outflows under rate stress.

VW gained 30B in U.S. diesel sales; 50–1,000 premature deaths; system cost 30–60B

The missing DA record is the defeat-device rationale. Engineers and executives knew the software was illegal but continued to meet sales targets.

• Direct cost savings from avoiding selective catalytic reduction: $2.5B.
• A DA record would have required a prediction of detection probability and regulatory response.

The barrier to DA adoption is institutional, not physical

6 states that no physical law prevents complete DA records. The constraint is the private value of ambiguity, the cost of record production, and the absence of mandatory requirement.

• Partial proofs-of-concept (surgical checklists, SOX 404) show feasibility.
• The task is to unify these partial proofs into a complete DA framework.

DA transforms the authorization game from Hollow Win to accountable choice

The transformation R alters payoff structure, information structure, and enforcement structure. The Hollow Win is no longer the structurally dominant equilibrium.

• Expected payoff for welfare-negative decisions drops because sanctions rise.
• The magnitude of the shift is proportional to enforcement strength.

Mandatory DA records shift outcomes away from Hollow Wins

The six theorems show that complete records restrict the equilibrium set, limit ex post rationalization, and make system-welfare costs legible before commitment. The rule change is achievable through statute, regulation, or board rule.

• Field 17 is the unique field that cannot emerge from bilateral governance.
• The framework is testable: controlled implementation studies or natural experiments can falsify the theorems.