Watts, Ross & Zimmerman, Jerold. (1979).

The Demand for and Supply of Accounting

Theories: The Market for Excuses. The Accounting Review. 54. This paper addresses
the questions of why accounting theories are predominantly normative and why no
single theory is generally accepted. Accounting theories are analyzed as economic
goods, produced in response to the demand for theories. The nature of the demand is
examined, first in an unregulated, then in a regulated economy. Government
regulation creates incentives for individuals to lobby on proposed accounting
procedures, and accounting theories are useful justifications in the political
lobbying. Further, government intervention produces a demand for a variety of
theories, because each group affected by an accounting change demands a theory that
supports its position. The diversity of positions prevents general agreement on a
theory of accounting, and accounting theories are normative because they are used
as excuses for political action (i.e., the political process creates demand for
theories that prescribe, rather than describe, the world). The implications of the
authors' theory for the changes in the accounting literature as a result of major
changes in the institutional environment are compared with observed phenomena.