Organizations
1982.
in Great Britain.
ANTHONY
M. TINKER, MARILYN
of Business,
D. MERINO University
and
DALE NEIMARK
Schools
Abstract theories are frequently promoted as being more realistic, descriptive and empirical Positive, factual and relevant than normative approaches. This paper argues that positive or empirical theories are also normative and value-laden in that they usually mask a conservative ideological bias in their accounting policy implications. We argue that labels such as positive and empirical emanate from a Realist theory of knowledge; a wholly inadequate epistemological basis for a social science. We use an alternative philosophical position (of Historical Materialism) together with a historical review role played by theories and theoreticians in of the concept of value to illustrate first, the partisan questions concerning social control, social conflict and social order; second, the ideologically conservative underpinnings of positive accounting theories; and last, some indications of alternative (radical) approaches to accounting policy.
It is commonly believed, inside and outside the accounting community, that accounting is independent and neutral as regards major social and conflicts. This paper contends that, being partisan that accountants neutral, in such have (partly accountants matters. been have Specifically, often influenced been struggles far from highly we argue by default) by one
accounting) such as Positivism, Realism. Whatever their specific here that these theoretical masks the socially partisan instead its technical, ive aspects. We begin popular ture: Positivism Historical an accounting, leaving notion our exposition masks
role of accounting and elevate factual and seemingly objectby examining that enjoys accounting one of litera-
by choice
widespread We contrast
particular viewpoint in economic thought (utilitybased, marginalist economics) with the result that accounting serves to bolster particular interest groups in society. The social allegiances are rarely pretentions Academics sophisticated theories logical apparent, of have (theories theories
in the current
(or Realism).
alternative philosophy of and show that the former is foundation acts-of-faith for and too many
and biases of accounting they are masked by and independence. some of the more of accounting and epistemotheorizing in
inadequate
masks
in the form
because cannot
Researchers
who remain
l The authors are grateful to the following for their helpful suggestions and comments: George Benston, University of Rochester; Charles Christenson, Harvard University; and the faculty seminars at Baruch College and New York Universities. Special thanks are due to Anthony Hopwood for his perceptive comments on an earlier draft of the paper. Any errors and shortcomings in the paper are the exclusive responsibility of the authors.
167
168
ANTHONY
M. TINKER
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
fact
are open
tools groups.
the
social
agencies Historical We Theory. arguments in social though monplace little ledges concepts ent
of special
practice
a more plausible of
improvement
theorizing. application Historical of Value role that For there acknowalis by means of a brief history the central history.
What were the led to greater corporate increased that any cost to work Is there
auditing
highlights throughout
that is demand-
and enriching?3
in the
REALIST Accounting ness parts 1972; a struggle of Realism Caws, approaches, throughout is not indeed
PHILOSOPHY the their first positive discipline and to witnormative counter(Harre, 1974).
of value that differ from the utility-based of value (with which which theories. we suggest value offer the of the ideoforms dominates
accounting
of western
of the paper
logical, political and social predispositions of accounting. We explore the implications of this realignment for areas such as multinational acaccounting; management counting, corporate accounting; that, cept in each of value behavioral of these enables accounting; accounting areas, social accountWe show cona range of ing; tax accounting; law etc.
Realist philosophy asserts that reality objectively exists out there and is independent of our perceptions and thus reality is ultimately the same for every observer. Given this, we may come to know this one, ultimate reality by searching out the underlying laws and mechanisms that regulate its behavior. possibility objective dependently Note that this philosophy of discovering reality and that of individual holds out the absolute, exists inidiosynone single, this truth perceptions,
a reconstituted
us to investigate
critical social issues and questions looked by the present literature. how public degree should we evaluate the and private of unequal societies?
cracies and biases. Thus ultimately, there is only one truth facing the Pentagon, Polit Bureau and the Catholic Church. Final agreement is considered (in principle) possible on such questions is, what causes what and what as what exists, because researchers need merely to consult facts about our shared reality in order to
pricing
monopolies? Can we assess the exchange that occurs (through developed behavioral and underDoes accounting
multinationals) developed
between
* We use this conventional categorization of the subject merely to expedite our discussion; this should of accounting. On the contrary, in our opinion, many of to mean that we concur with this structuring that afflict the subject arise from the kind of partitioning that is entailed by these conventional categories. tion of the historical from the social from the financial from the behavioral aspects are some damaging divisions (Lowe & Tinker, 1977; Tinker & Lowe, 1980, 1981, 1982). 2 For concepts Elson, 1979. of value that embrace the notion of alienation, see for instance Braverman, 1974;
Ollman,
3 We do not attempt to explicate most unrealistic for a single paper. and indicate some of the theoretical
value theories that address all of the above questions; such an objective would be What we do provide is an introduction to literature on different value approaches and political reorientations that they suggest for accountants.
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
169
determine
the
(Giddens, Realist
1974; philosophy
Novack, Realism, have philosophy Friedman (see or for gave Positivism, accounting it his stamp became an authentic when in 1953 researchers of approval
been especially pronounced in the social sciences because of the difficulties of verifying propositions involving man-made intangibles and constructs. 4 In what sense can we touch an equilibrium, see a bliss point their or smell an income and existence number and verify character in the same way that
Hakansson, 1969, pp. 137-144; 1973, pp. Friedman had taken his cue from 153-160).6 Keynes. Thus, in 1980, Zimmerman cited Friedman (1953) who quoted from Keynes (1891) that a positive science is a body of systematized knowledge concerning what is and a normative science is a body of systematized knowledge discussing expanded criteria of what
ought to be.
we can (say) with an element or a sulphur crystal? Are personalities, market prices, pluralistic ideologies, role structures, costs, growth paths, culture, dissonance, motivation and leadership, items that we can show, unequivocally, exist out there; or are they imputations, contrivances and projections that originate relations? Can we say that mand are natural put them out within ourselves, reality the laws of supply and delaws like gravity, or did we If they in part, do originate then whose the correct making? are these the from truth basis If the usual 5 from within ourselves and our social
Friedman as
his argument
for viewing
economics
a positive science in Capitalism and brecdom (1962, p. 86) claiming that while the economists value judgments he reaches point ments same that, page, doubtless influence at times, there These quite the subjects he works on and perhaps, the conclusions
in economics.
contradictory;
if the researchers
make all their value judgments causal ordering and the posited
that we observe
and study
science) adequate
of explanation
for evaluating
outset of the research, then the results objective and value free. If this is true,
4 Realism has also had its difficulties in the so-called natural sciences (see, for instance, Kuhn, 1970, pp. 55-68). Thus, early physicists climbed mountains in search of aether that subsequently turned out to be a figment of their theoretical imagination (Kuhn, 1970, pp. 52-59). In contemporary physics, certain particles behave as though they had different personalities, thereby raising the question for some academics as to whether a personality-theory of particles is needed (Capra, 1975; Zukav, 1979). The above is not intended to ignore questions related to the social construction of the physical world. There is a substantial body of literature (e.g., Mendelsohn & Whitlcy, 1977; Knorr et al., 1980) that argues that the theories and epistemology of the natural sciences are formed by and continually interact with the broader social order. Further, todays researchers are no longer merely investigating (and interpreting) the world; they are creating the world they are investigating in genetic engineering, space research, waste disposal, forestry control, industrial planning etc. (Boulding, 1969). The epistemological roots of Positivism, as the term is used in accounting, are muddled at best. Its proponents at the University of Rochester are not Positivists in the sense of any of the common uses of the term. For example, in asserting that the term theory should be reserved for principles advanced to explain a set of phenomena Watts & Zimmerman (1979, p. 272) seem to reject Friedmans positivist (really instrumentalist) epistemology - that the criteria for theory acceptance is the precision, scope and conformity of the predictions it yields (1953, p. 4). On the other hand, Christenson (1981) shows that their research is inconsistent with the standards of both 20th century logical positivism (e.g. Popper, 1959) or Verificationism (Positivisms 19th century form). In linking Positivism in all its manifestations with Realism, we are not ignoring the differences between these forms of Positivism. Rather, we are suggesting that despite these differences, all versions of Positivism share a common Realist foundation - a belief that the facts stand out there, somehow independent of our theories about them.
170
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
that follows is trivial, for the analytic decisions (in Schumpeters side the theory formulation
into normative
and positive
and therefore
subject to critical analysis or discussion. The recent accounting literature of the efficient market-related research contains numerous amples of attempts to deny or diminish significance analytical intellectual this desired of value-jugments In this embodied literature, decisions. maneuvers separation exthe
where a theory has been infected by values, the very act of recognizing the value-judgments (usually called stating ones assumptions) somehow exorcises It seems that wealth the the theory of the troublesome element. that confessing ones assumptions (e.g. market is efficient; indicator that we can ignore efficiency wellthat informational
in prevarious
endowments;
is an important
of real economic
being; that we can add utils together) is taken by some researchers as absolution from all that logically follows from the assumptions (however outrageous and unrealistic the assumptions may be). Some of for the efficient resemble market articles research of assumpthat faith of faith they than that mask market
a landmark paper in 1974, Gonedes & Dopuch argue that researchers can only assess the effects not the desirability In have those theories) (such the that of alternative same tradition, that commit theories argued accounting Watts can & be procedures.8 Zimmerman divided into (normative tive theories). ing research used to manner, form Dopuch
closely
In a similar welcomes
research.
connection
piricism in accounting research and lauds attempts to eradicate (value-laden) theorizing in the standard-setting process. He asserts that theories can be divided into empirical and non-empirical (later becoming positive and normative) and that while normative theories they will be discontinued ly to produce any Underlying either theories are not because dead, he hopes they are unlike(op. cit.).
between informational efficiency and economic efficiency: that the speed with which new information is impounded into stock market prices correlates real goods assumption directly with the efficiency with which and services are produced. Second, the that the stock market remains a signifi-
cant economic institution under contemporary capitalism when only a small fraction of new capital primary tions. is secured through the stock market: the source of corporate finance being retenThis is in addition to assuming that partial
further
benefits
Friedmans 1953 essay resulted in a decade-long controversy in which Friedmans arguments and his instrumentalist epistemology were sharply criticized, e.g. Grunberg (1957); Nagel (1963); Bunke (1964); Boland (1979) and Blaug (1980). For example, Nagel (1963) concluded that Friedmans thesis ranged from trivial to absurd depending upon one chose (Christenson, 1981, p. 41). which of his several meanings of assumptions 8 Nowhere do Gonedes & Dopuch discuss the criteria effects to security price effects.
9
(values)
them to reduce
Zimmerman has refined this categorization by suggesting that theories can be further compartmentalized into descriptive, positive and normative (Zimmerman, 1980). The motivation behind this analysis remains the same as before accounting research from value however; if, by isolating the normative seed, we can purge positive and descriptive judgments, then all accounting policies that flow from this research will be blessed with an objectivity and impartiality that transcends particular class, institutional and other interests. lo A July 1962 study by the Machinery and Allied Products Institute found that between 1947 and 1961 internally generated funds provided 85% of corporate capital requirements. Net stock issues in the same period accounted for less proportion of than 4% (Baumol, 1965, p. 68). Baumol concludes from this and other studies that a very substantial American business firms manage to avoid the direct disciplining influences of the securities market, or at least to evade the type of discipline which can be imposed by the provision of funds to inefficient firms only on extremely unfavor-
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
171
in the into
capital a general
market
translates for
unthe imper-
other igations
these
invest-
that have a
despite
legitimate
Keynes,
Baumol,
1965; Stiglitz, 1972; Jensen & Long, 1972; Mayshar, 1978). Since the ultimate object of economic activity sistence, mediaries stock prices is to reproduce with in stock this the (real) merely the means paper linkage of subinterbetween prices process,
claim to be more exhaustive and reliable Compustat tapes. than peering at life through Efficient market research washes-out the variance belonging to such results with large samples: such results are dismissed as mavericks and outhers. of the What efficient social market studies that lack is a sense appears public to be outcases loss-function sufficient
associated rage against function in these interested whole, Although efficient sampling) dents because but
services is critical and cannot be taken for granted. Third, both general equilibrium theory and efficient market research have been criticized for assuming (rather than demonstrating) that markets exhibit equilibrium-seeking properties (Hicks, 1965, p. 15; Shaikh, 1981, pp. 270-278); for the implausible causal assumptions that are used to explain observed behavior (Kregel, 1973, pp. 1214);12 and for the errors are frequently committed preting Fourth, ante; from stock market there are the choose Penn data, National Student Central, in logical inference that by researchers data (Ronen, facts that Leasco in inter1979).r3 efficient and RehEquity of
to mobilize
efficiency
at every
individual
perhaps over-dramatic, the response of market researchers (through their massseems most analogous Mile Island show to arguing are not that that inciof of of the a problem down. critique
like Three
surveys
the majority
nuclear power stations are not melting We reserve our main philosophical Realism where these and Positivism we are able to highlight approaches of by juxtaposing Historical
Mattel;
section
the financial
to investors,
the effect on stock prices and the damage to investor confidence resulting from these cases has been established by legal, journalistic, SEC and
alternative
Materialism.
We should
point out however, that Positivism itself has its own long and checkered history and can be (and
able terms (ibid, p. 70). The Wheat Report (1969, p, 59) noted that between volume of new issues to those of established stocks declined from 5.3 to 1.6%. l1 For instance, Shaikh rather than equilibria&g occurring. has persuasively argued tendencies. Tendential 1961 and 1967 the ratio of the trading
that market prices are subject to a form of tendential regulation provides for the possibility of disequilibrium
regulation situations
l2 Kregel and Robinson have both challenged the omniscient abilities that are attributed to Walruss mythical auctioneer. Walruss auctioneer is an imaginary person (symbolizing the tatonnement process) who, like a stock market specialist, supposedly causes the market convergence towards an equilibrium price by issuing a series of prices, based on successive schedules of bids from buyers and sellers. Kregel notes that Walruss infamous auctioneer is like most religious apparitions, only seen if believed. Kregel adds that, even if we could be sure that this imaginary person exists in some sense, the information requirements, computational ability and foresight required to act, just like a real broker (but for the whole economy) makes the proposition totally absurd. A particular set of stock market prices may signify either equilibrium or disequilibrium in a macroeconomic Efficient market theory cannot distinguish between equilibrium and disequilibrium structures. l4 Although investors may increase their (social) discount rate reduces the amount which seem advantageous to the individual well-off community.
13
sense.
individual discount rates to allow for such contingencies, a higher overall of investment and therefore, the level of economic growth. Thus, actions investor may, in the longer term, impoverish him/her as a member of a less-
172
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
has been)
criticized
materialistic
theory,
research.
of its links to Realism. lie in the works and subsequently Hayek, version into Hayek (1962). of these accounting Auguste early
of Madame
de Stael, Comte
(Giddens,
OF
1981). A rather garbled ideas has been the translated writings of from
an alternative
epistomolygy to that of Realism. A materialistic philosophy contends that knowledge of the world is as much an invention as it is a discovery. Facts never speak for themselves and therefore consulting the facts about reality is never a sufficient explanation as to how we come to know what we 1978). The researchers know (Abercrombie, 1980; psychological predispositions (Brown, 1974; Mitroff, 1974); social environment (Domhoff, 1981; Strickland, 1972; Shaw, (Baritz, institutional affiliations Shaw, of
Christenson, 1981; Zimmerman, 1980.) In the view of early Positivists, the methodology of natural science offered the prospect of positive knowledge about initial presumption what is (Harre, 1972). This was followed by two deduc-
tions; both of which have been accepted by accounting positivists and both of which were shown to be invalid by the philosopher David Hume (1888). The first assumption was that, from knowledge about what is, it is possible to solve questions about what should be 1969). The second assumption involves lem of induction: that is, it is possible on purely logical grounds, inference from experience. Both assumptions by accounting 14-16) positivists (Christenson, even though, (Hudson, the probto justify,
their cultural and 1979; Lecourt, 1975); 1960; and their Muthern,
1981; Debray, 1981) are all relevant to how we construct knowledge in the fashion that we do; whether that knowledge pertains to surgical practice (Ehrenreich & English, 1973); genetic engineering (Reich, 1971); economic management (Routh, 1975); motor-cycle practice of maintenance accounting that absolute (Pirsig, (Burchell 1974); or the et al., 1980). There knowledge outcome throughs times
ed as erroneous in conventional thought (see for instance Novack, son, 1981; Morick, 1974). operating in the 1980; Cornforth, Giddens, theory,
are many
examples for
rather
Realism,
clothes
theory a discipline
frequently
claims theoretical
supremacy
of crisis
born of fact, not values. We contend separation of theorizing into descriptive, and normative impartiality is designed and to create independence
social system. For example, Edmund ideas came in response to the challenge
an illusion
to support
for democratization; Adam Smiths thought served as an important theoretical justification of laissezfaire; Marxism nation of capitalism; Marxism;17
including
ative policy type decisions.16 As an epistemology, we find such a linear representation of the complexities of the scientific imagination unacceptable, and offer an alternative epistemology, a
was an attempt
to provide
an explaof to be
com-
the more disturbing consequences marginal analysis was a counterblast Webers bureaucratic theory can
Logical Positivism, which some research
5 Our critique of Realism extends to all variants of Positivism, mends as the new epistemological Nirvana for accountants.
l6 Zimmerman (1980) and Watts & Zimmerman (1979) are among the leading proponents of positive the final analysis, the only reason for conducting positive research is to formulate normative policy-type theorists interpret facts, (i.e. why variables are related) without also subscribing to some normative (i.e. usually what ought to be) has not been explained. l7 Solow (1963) marxist backlash 1972, p. 380.)
has acknowledged that marginalist capital theory in the 19th century resulted in part from a nonand fulfilled the social function of providing an ideological justification for profit. (See Harcourt.
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
173
estimate 1978).
that
this
become
due Week,
of the contradictions
the mid-1990s
at the earliest
(Business
associated in present
vironment economics
Keynesian pragmatic
intellectual
the current
response to the crisis of mass unemployment and the inability of neoclassical economics to locate the cause (Allen, 1975, p. 72). In a similar vein, the philosopher Wittgenstein has argued that even mathematical theory is better understood when viewed as an invention rather than just a discovery fundamentally that theory reality that the (Bloor, 1973; Young, 1975). Materialist philosophy differs from Realism in that it recognizes may theory come to form part of the purports to describe.
fall considerably. The fiction is maintained of course because accounting statements and footnotes are not disinterested and expenses, they can be used politically best estimates of profits that regulaare certified documents
to resist government
tion and to lobby for a more favorable business climate (Sloan, 1976). From a materialistic viewpoint therefore, financial statements should be seen as creatures of business reality rather than objective descriptions of historical dead facts. The difficulty with the Realist assumption (that truth comes from facts) is that it fails to recognize that theory plants some of the facts. split: reality Realism presupposes a subject-object can observe and analyze completely observers (objects) models detached (subjects) they observe of observation less the subject-object we (the subjects) (the object) in a fashion. Neverthe-
comes to have a life of its own - it is reified - and therefore may be experienced as external to the theorist. Thus for example, how is the validity of Monetarist or Keynesian are employed theory affected by the rationcomkind, or both fact that they to both act upon and
objective
describe reality? Are features of economic ality (such as acquisitiveness; selfishness; petitiveness) are they (reifications)? management score In the inherently products There relevance of natural are to human theoretical examples accounting it is
split is a false assumption: are a product of the reality are their Moreover, of the (and so therefore and perception).
and financial
the object (reality) is changed by the results subjects analysis and theorizing. The rejection Realism theories quandary. truth world about if our of the subject-object
of a materialist accounting,
split leaves
management
acknowledged that budgets are not merely best estimates of what will happen; they are also targets particular Stedry, casting used to motivate of action managers (Hopwood, to adopt 1974; courses
and the promoters of positive accounting in something of an epistemological How the can theories we talk have of discovering helped aspects create the the is one workings of the socio-economic of the reality
1960). In this respect, it is not the forability of a budget that is important, rather that it helps in financial re-
institutional
and ideological
we are examining?
The problem,
in essence,
it is the desirability of the situation create. Similar examples abound accounting (although this
is less commonly
of trying to discover when much of human and its theories. ing secrion
cognized): for example, many U.S. oil companies and utility firms have, in recent years, protested their high tax burden. They cite, as evidence, the expense items in their income statements and the footnotes, which show effective tax rates that are often in excess of 40% of profits. Yet payment of this expense is deferred, often for many years, and in certain cases indefinitely. AT & T, for instance, showed a deferred on its 1978 tax liability balance sheet. in excess Market of $11 billion
with a specific
how a materialist viewpoint may enhance our understanding of the evolution of accounting theory. The example we have selected is the historical development of the concept of value in economic theory. Two questions require attention before we proceed, however. First, as many accountants would view the history of Value Theory as only tangentially related to the evolution of
174
ANTHONY
M. TINKER,
BARBARA
DALE NEIMARK
accounting theory, what constitutes the proper domain of study for accounting researchers who are concerned with the development of accounting thought? Second, what kind of evidence should be admissible in such an historical inquiry? Both questions mental research sources prejudge raise issues. should about research exceedingly To insist be bookkeeping questions that confined complex to but (say) fundahistory primary be to have accounting would they
Value velopment
Theory
has been
so central that
to the deGeorgescu-
of economic
thought
Roegen (1971) has said that a broad perspective of the history of economics emerges as a struggle with the problem of value. central for We argue that Theory Value Theory ally and argue Value has also been the to the development has traditionrelations, We will for acis for measuring exchange
practices before
the system
been articulated. argued that such What state the feel that ing
Danto (1971, pp. 9-13) has questions as What is history? What is philosophy?
subsequently Theory or
counting
is economics?
which one to choose. If this choice is to be an informed one, then accounting researchers need to take the nature of social conflicts as problematic
history?
Social
change
and
changes
m the
concept
of value
(Smith, Ricardo, \
1776; 1817)
-Marxism
Lousonne
(Gossen
1854
Mercantillst School (Barbon, 1690; Pol lexfen, 1700 Cory, 1719) FEUDALISM--MERCANTILISM-
;
EARLY CAPITALISM STATE AND -MONOPOLY CAPITALISM
*The The
of publication interrelations
contrlbutlons
Fig
1. and to understand the active role that the concept of value has played in wider social struggles. To see this however, one must view the changes that have occurred in the concept of value, not in Realist
something to be discussed and investigated by scholars, not prejudged by equating historical research to hard accounting or bookkeeping data.
THE
NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
175
terms reality,
as an accumulating but
wisdom
about
a fixed of the
detail
passages,
as an ideological
positioning
foretaste contrasting
implications
social imagination designed to explain contemporary social conflicts and concerns. In this way we may gain a better perspective on the partiality of our contemporary notions of value, as well as a feeling for the compromises and assumptions must commit in accepting such notions. we
the essential
differences
between
utility-based and labor-based theories of value lies in the manner in which each approach deals with the social relations underlying economic categories. In the case of utility-based value theories, the relative value or worth of all goods and services
HISTORY THEORY
OF
(producer contribution
goods,
interdeterof this
by their
map
of the constreams
As suggested
the diagram,
concept
of value
along two competing themes - value socially necessary labor (i.e. production ation) demand social fested concepts retical ing prescribe Figure evolution tions: the perspectives versus value based side struggles in, and valuation). stimulated which on subjective period It will be seen by these share
materialists have criticized this analysis because of its a historical and a social character; it treats factors of production (eternal categories) that and these factors wealth evident the first, goods; producing as the genesis thus failing to found of of value recognize of is social This
in one type
in each historic
two explain
historical
conditions
a common relations
production
be structured.
1 summarizes a great deal more than the of two streams of economic abstractwo lines of thought correspond to that are fundamentally opposed:
perty ownership. This second (Marxian) meaning of the term capital is specific to capitalism and signifies a social entitlement to income for a class that has no personal involvement in production. This shows that the notion of factors of production is socially specific to capitalism: factors refer to sources as features of appropriation of value (labor) as well of value (capital) that
philosophically, politically and ideologically. Moreover, insofar as accounting has used economic thought as a rationale for its own practices (consciously have been approaches: and almost otherwise) exclusively these borrowings from one of these (the lower
are specific to Capitalist Society. Socially specialized labor is the only factor that is common to all societies, in the view of labor theorists, and therefore labor is the common origin and determinant of value (for capital itself is appropriated and accumulated labor). We may develop still further the labor-theory critique of utility-based value theories to show that factors of production and associated concepts such as profit, wages, capital, equilibrium and
utility-based
value theories
stream of ideas in Fig. 1). What kinds of accounting are suggested by labor-based theories of value (the upper stream of thought in Fig. l)? How might they differ from the accounting which has grown-up in the shadow of utility-based value theory? While the evolution of these two economic paradigms is considered in
18
Including
capitalists
who
express
their
preferences
for consumption
over
time
in a time-preference
discount
rate.
176
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
are
to
the
social
relations
ceremonial exchange and exchange by plunder that transgressed this rule, however, even in these cases, the value principle was still prevalent: a product was worth the socially necessarylg labor expended quantity equivalent pp. 49-67). This production-based the exchange of equal value principle amounts (based on of labor time) was on it, and it could of other products of labor amount be exchanged that time embodied (Mandel, for a an 1968,
capitalists
and landowners)
Nature and property (Shaikh, 1981; Dobb, 1963). Theoretical categories such as capital, rent, profit and wages are not universal societies; they are (socially) and therefore to all wealth specific producing in the to capitalism because,
final analysis, it is the social relations of capitalism that distinguish it from other social systems (Meek, 1967; Mandel, 1968). Thus, what utility-based value theorists regard as fixed in the form of factors that produce wealth, labor theorists take as problematic the latter treat factors (like capital) relations changeable 1978). here: social whereas order of capitalism (Arthur, utility into Being that 1979; are both Elson, is the factors, 1979; vital labor because as social and Amin, element theory
one of the most influential legacies that Antiquity bestowed on the medieval period. Canonist theorists were concerned with the terms of exchange between small independent producers, i.e. the proceeds that each obtained from the sale of products and what could be obtained with those proceeds. As Canonist scholars and clerics were frequently involved in adjudicating trade disputes as well as other matters of distributive justice, there usually merchant the was a need just accrued price. to to the be develop Since the direct a concept proceeds producer of an of sale (not with a the ethically
changing
changeable fixed
approaches
intermediary should
or capitalist) commensurate
approaches highlight the fact that a social order may be recreated, enhanced and developed. The difference ail social the opportunity The canonist from the the existing is crucial beings): social to change theory and place transferred 1968). irregular for accountants structure, it. the (as it is for for other is on one approach is an apology
rewards
outlay and effort expended in production provided an obvious definition of a just price (Kaulla, 1940, Chapter 1). The exchange of equal amounts of labor time - the practice evolved in Antiquity - became the Canonists primary rule for determining the fairness for the of a particular time exchange. was Compensation labor expended
of value value principles primitive societies that in quantities labor-time (Anderson, Certainly exchange, to emerge was that equalized in ex-
One of the dominant Antiquity took amount products Mandel, from exchange
the most important element of medieval just price; with additional amounts added to cover the costs of raw materials, involved.2 justice transport attained and sometimes measure the risk of a A reasonable of distributive
of non-slave
was probably
by the concept
1963; amples
silent
just price in Aquinass time because trade took place in small, static and relatively self-sufficient
ly 1n this context, socially necessary labor time means time spent productively in a trade or craft that has evolved as part of the division of labor of the community in question. Thus, time spent as a finance professor would have been unnecessary in feudal times but necessary in other societies (Mandel, 1968, pp. 63-65). 20 The Canonist concept of value may be traced to 13th century philosophers such as Thomas Aquinas. I The fact that the Canonists placed equal value on an hour spent by different craft specialists was in keeping with customs dating back to the very beginnings of commodity production, estimated to be about 3000 B.C., when labor was frequently considered to be equivalent, regardless of its specific character. On the tables found at Sasa, inscribed in a Semitic language, the wages in a Princes household were fixed at 60 qua of barley for the donkey man, shepherd, cultivator, smith, cobbler, cook, engraver, tailor and carpenter (Mandel, 1963, p, 65).
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
177
where
the
efforts were
of
producers
and could
be compared
(Meek,
1975, p. 13).
What was distinct about Canonist Value Theory (compared with utility-based marginalist theories) was the centrality that was ascribed to a communitys labor time in imparting real value to a commodity the Accompanying to grant the status and in translating exchange this emphasis demand that or real value into relative value. refusal utility price commoditys
role in future
rizing. The ideas are well illustrated by Nicholas Barbons pamphlet (A Uiscourse on Trade) written in about 1690, when Classical Value was beginning to supercede Mercantilist Barbons modity pamphlet (its current links market the value Theory theory.
of a comMoreover, he
determinants
the concept
of the intrinsic
(ibid, p. 11). Mercantalist theory of value The growth of merchant trade initiated transition in the concept of value.
or subjective
a major in in
The Churchs
and suggests that this is causally linked to the market value; thereby anticipating marginalism and its causal ordering by nearly sixty years. The emphasis (in the mercantilist period) on utility as a legitimate factor in determining value and price was understandable in that the merchants gains came almost entirely from the consumer through price differentials. Conventional price value, with its emphasis labor as the primary source the merchants mary producers wishes ultimate (not bargaining rhe effort on utility position that expended) in determining rather than to pribe the of value, strengthened relative should the consumers the amount
involvement was ambiguous and contradictory this transition, reflecting its heavy investment
the feudal order (through ownership of land, for instance) and, at the same time, its expanding beneficial interests in ore-extraction and trade (Tigar & Levy, 1978). Gradually scholastic articulate keeping came order of the just) to a concept with dominate the growing the theoreticians of value new that social merchant began was more interests structure. to in who In trade as
by suggesting
consideration
of expanding
and commerce
to be paid to producers by merchants. The transition to the classical thcovy of value The emergence the late seventeenth stimulated The show where duction (Cary, economic was taking a further producer-cost of early forms transition approach to of capitalism centuries Theory. began to provalue in that Many in Value value in and early eighteenth
basis of the Canonists just price, and redefined just in terms of what has been called the conventional price approach. The conventional price was that which was
clear signs of a revival (especially we find writers costs 1719, pp. place as true 11-12, in value 98-99). or
in Britain) real
customarily received and paid for a commodity. This approach set aside its production-oriented traditions by admitting (utility and the subjective and consumers) demand-side expectations influences of owners
thinking
mirrored economic
a revolution
as determinants
and constituents
of value. Meek suggests that the conventional price was reconciled with Aquinass just price without too much difficulty by arguing that, in the absence of information about the difficulties in producing a merchants products, value was partly dependent on utility to the purchaser and therefore subjective valuations of the individual consumer
theoreticians of the times were spokesmen of the merchant-manufacturer and parvenu industrial capitalist and these new entrepreneurs were increasingly concerned with costs of production. Competitive pressures in the product market made it more difficult for merchants to maintain profit levels by traditional methods and the merchant classes began seeking new ways of exercising direct
178
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN DALE NEIMARK transition in which the to remove mercantilist expansion, i.e. the regulaimpediWhile Smith of a nations that of part and analysis unlike of prolabor of the acdeof a
control varied to
over from
These
methods im-
system,
to attempts technical
increase
provements and the division of labor. The latter form of reorganization was often instigated from within list which very the direct element, began ranks from producer group: themselves and the rise from of a capitathose risen this on the half-merchant, organize the ranks of the producers to subordinate which
and sectionally-protective
ments to free trade and competition. argued that the ultimate source wealth more ducts power, in which social was its labor, primitive were the capitalism product center of for societies, based on featured he recognized where equal
half-manufacturer,
exchanges amounts
it had so recently
unequal
(Dobb, 1963, Chapter 4). There was also a shortage period based age resulting, poor had the movement
capitalist
appropriated
of labor during
reinvestment of Smiths
in large part, from restrictions of labor and the existence 1957). by which the Well before
of parish
of that surplus
economic
recognized the importance of the supply of wagelabor for economic advancement. From the last quarter of the 17th century onwards, a variety of schemes emerged for encouraging immigration and permitting work; the most naturalization; serious in the the offences setting (Meek, with the 1975, greater and poor to and abolishing problems, attention the death together of penalty for all but p. 19). comhelped social
by capitalists for growth and development. These precepts were essential for Smiths basic theoretical mission: to show that the key to abundance lay in understanding how deployed and then periods. the study For Smith, the surplus redeployed wealth dynamics was appropriated, in successive time generation involved and this required
of economic
an invariable yardstick flow of production emanate from ments (distributions) Smiths yardstick cept of commandable work-people when theorists viewed of sale of a product.
with which to measure the through time that would sequnce of employof surpluses. of social value was his conlabor value: Such a concept the quantity is meaningful of rate capitalists of
market-place,
gradually
a particular
economists
philosophers away from the sphere of exchange to that of production. These changes were accompanied by a growing of labor of gold belief rather that it was through through nations the bespecialization accumulation than
came wealthy. It was no accident that Adam Smith, the pre-eminent economic thinker of this period, Nations the fund necessaries states that in the first sentence the and annual labor originally supplies of of the Wealth of of every life nation which is it it with all the
of accumulation
in terms of the
additional number of employees who could be hired in each period. It was natural, therefore, for Smith to appeal to such a value notion to describe in a nations Smith capital accumulation potential.23 uses the notion of a real measure
which
conveniences articulated
initially
in his
Glasgow Lectures (1740) and developed and expanded in his Wealth of Nations (1776) - reflects ** From
counting. originating
the special sense that it not only captures the magnitude of a commoditys value but also embodies, inheres, or composes the product.
that this interest Here we have a clear instance of accounting from social and economic conditions (Pollard,
in production costs preceeded early developments in cost acideas and practices - as we would recognize them today 1965). that one
23 Meek also notes that it is only in a society in which labor power has become a commodity (i.e. capitalism) would associate real value with the power to purchase labor itself and not the products of labor (1975, p. 65).
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
179 and the labor theory to the ideological attacks in his re-
While
Smith
regarded of the
money value
as a measure possessed
of
economy
product (Meek, 1975, p. 51). Thus, Smith states in We have shown what rendered the Lectures: money the measure of value, but it is observed that labour, not money, is the true measure of value (Smith, 1838, p. 190).24 The intellectual climate of Smiths era was a period of transition from the mercantilists concern about concentration social Smith and labor. would the exchange to the early capitalists on production and the division of It was understandable regard force socially of behind labor progress endows therefore labor that as specialized
his trenchant
retical apparatus in his Principles (1817) that came to be feared by gentry economists as having revolutionary mischievous and even socially possibilities. concept the value accounting concept sequently paring the marginalism Ricardo Inherent theory of value maligned way for in the work much show of Ricardo, opposed contemporary Ricardos preof how it was subthereby theory is a to of value that is diametrically underlying We first and the and then research. examine
quintessence necessary
a commoditys
discredited utility-based
exchange value because that labor forms part of a social, collective whole: a form of social understanding that permits each member to specialize in a prescribed way and exchange the products of this specialization for the means of existence. In this sense, all exchange is not only an exchange of labor but ultimately an exchange of social activities, or as Meek puts it, The value relationship between commodities which manifests itself in the act of exchange the relationship 1975, (Meek, developed ultimately p. 63). is in essence men This accords by Marx, because a reflection as that producers value is of between
the path that an economy followed over time in terms of aggregate national income, income distribution between social classes, employment, savings and investment. Income distribution (and therefore the distribution of property and wealth) were at the center of Ricardos studies. Indeed, evolving problem Ricardo where, a distribution in Political saw economic once continuing theory activity was the in principle his view. loop Economy net investment
as a circular
and growth
subsequently
a social relation
are introduced, a significant portion of the outputs are ploughed back as fresh inputs before they have a chance to emerge as final consumer goods. Ricardo, and his twentieth century interpreters, such as Sraffa, sought to determine the trajectory an economy from laborers, would follow distribution and over time landowning to provide if it began among In classes. a conditional a particular capitalists of income
with the exchange of the life experiences of people whose labor is bound-up in the products, We are thus led to the conclusion that accountants participation adjudicating (and appropriaand in in economists who advise and guide market transactions are essentially social relations and in the transfer tion) of labor time.
this fashion,
he sought
24 It would be incorrect to say that, by the mideighteenth century, a fully fledged labor theory of value, such as that articulated by Ricardo and Marx, had developed. Many writers were still heavily influenced by the mercantilist view of exchange values, but a growing number were beginning to take an interest in the link between the increasing amount of labor specialization in society and the accumulation of social wealth. This would eventually develop into the idea that labor contributed value to commodities in proportion to the total social effort that it was necessary to expend in their production (Meek, 1975, p. 445).
180
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE
NEIMARK
forecast
as to the
pattern
of growth,
employ-
Before
considering
the ideological
struggle
that
ment, etc., that would ensue time periods from an initial come. Such tractible measure a formulation problems the total raises
in economics: output
of goods
services
way that Ricardo dealt with contemporaries such as Malthus, who advocated incipient versions of the kind of economics that underlies much of the accounting that we practice and teach today. Utility of short-run policy fickle was an inadequate in Ricardos price source view and determinant in inducing economic who depended that was to and as inof value because value (except
from an economy (including capital goods that will be used in future production) for each time period? ability is to physical may tribution one (not measures monetary numaire, Such be a measure is necessary income of goods depending there between Unfortunately if the desirdistributions the and same services of different output (starting) quantity differently
fluctuations)
and the well-being and unassessable reiterated spirits in capitalism). theory because was
of those
ascertained.
on it were far too important dramatically the animal ingredient demand adequate
quantity
be valued
in Keynes Similarly, by
of income. a one-to-one)
In short, relation
of investors viewed
output
level. Therefore
measures do not provide metric or in Ricardos terms, of Absolute In Value.* that on this point Ricardos hand views on one value
in his view,
a theory
had to make some determinate statement about the level at which forces of supply and demand fixed 122). demand was zero determines price in the normal where begged case (Meek, 1975, p. It was not enough at the point because that cost?26 to argue supply net marginal the question: balanced revenue what
estimation that
on value: through
social labor that had been expended on its production and on the other hand to contend that a commoditys worth was equal to the number of laborers that could be hired from (i.e. Smiths concept of commandable its proceeds labor value).
Ricardos focus on income and property division between classes as a primary determinant of economic growth set him apart from many of his successors. He argued that an antagonism of interest existed between landed property and the interests of the landlord industrial capital: are always opposed to the interests of every other class in the community (Sraffa, 1946, Vol. IV, p. 18). Ricardian analysis suggested that income distribution and so, therefore, property-ownership, class-relations and the institutional context were the proper and could historian and legitimate not be parcelled or the sociologist. concern of economists off to the economic
If the wage rate changed, so would its commandable labor value in Smiths analysis, even though the social labor expended through production remained on the commodity constant. Rather, to
Ricardo, the ultimate source, regulator, and yardstick of real value was socially necessary labor. Monetary imperfect value. value and market of this values real were merely expressions underlying
25 Not (Sraffa,
until 1960;
1960 Kregel,
was
this
problem
solved
when
Sraffa
devised
a Standard
Commodity
Index
for
the
purpose
1976). and finance that they researchers able who to put priced accept their the the markets inability market theory prices verdict into as the sole arbiter of value question. in any way Their with of cost other than that and value in terms there of of reis no
economists means
criticisms:
to think
theory
is incapable
(excessively
or underpriced
commodities)
the corollary
or over-valued
in the modern
of finance.
THE
NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
181
evoked
by Ricardos
theories
and
Right 103,
on Capital of Critics
as a
rejection27
have been
attributed
Hodgskins pp.
to the fact that the majority of economists were very much aware of the dangerous use to which a number of radical writers were putting Ricardian concepts (Meek, and pamphleteers Ricardian Hodgskin, J. 1967, pp. 50-60). These writers have been described as the and included Thomas and William theories to
of Ricardos
Socialists
Thompson. ideology (Halevy, formulate a revolutionary 1928). Hodgskin for instance was a considerable influence in the incipient trade unions and working-class Mechanics noticed of Dublin Hodgskins would 1952, p. educational Institute. by economists establishments His work did who inhabited such not go
most vociferous relativist, starting able value denotes nothing . which two objects changeable
critics and a thorough going with a definition of exchangecontending but stand merely to each that value
and then
.
in
as ex-
.
because
as the un-
search . . . was pointless of defining unvarying Thus come Value Ricardos not only to weapon focus and property
the cloisters
and Oxford. James Mill once wrote of ideas that if they were to spread they of civilized society (Robbins, a rather 135). Hodgskin propounded
of Absolute became
transition against
be subversive
capitalism,
underdeveloped concept of exploitation where profit and rent were alike filched from labor 1825). Piercy Ravenstone elaborated (Hodgskin, an appropriation theory of property-income when he wrote: A man cannot excercise his faculties . make use of his limbs without sharing the produce nothing of his labor with those who contribute to the success of his exertions (Raventhat estabwith doctrines,
preoccupation
measuring
aggregate social product led him to average out the effects of alternative income distributions. In contrast, the causes of different income distributions were the economic history social centerpiece of Marxs contribution to analysis where he showed that social history the of the struggle social product was a manifestation between and that of the over
stone, 1821, pp. 199-200). Professor Meek was of the opinion lishment the scholars were character primarily dangerous of Ricardos
distribution
of income
concerned
exploitation of one class by another. Building on Ricardos ideas, Marx defined exploitation as the difference between the actual time spent working of that those by the producer classes time devoted ultimately classes. amount capital activity process. and the portion to reproducing
rather than with what they falsity: Their fundamental determined dangerous 1967, p. denouncing source mental author (I833), by the belief
that
could not possibly be true (Meek, 71).= Thus, we find Samuel Read Ricardos notion that labor is the only
Under capitalism, this difference is the of time the laborer spends working for and is an appropriation and lack personal the same of the labor participation as Marc prono productive in the apt exploitation Blocks
of wealth as a mischievous and fundaerror (Read, 1929). Poulett Scrape, of Political Economy for Plain teople refers to the mistaken hostility to
is fundamentally
well
into The
the
20th
century completed
until
the
Royal
Society
Piero
Sraffa
to produce theories
the to
of David
Ricardo.
project,
in 1946,
resulted
of Ricardian
debate. establishment economics. academics that Marx referred to hired prize-fighters taking over from
to these
of vulgar
182
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
of feudal
exploitation
as a system
such
critical
parameters
as the distribution
of in-
lords lived off the labor of other 1973, p. 145). Marx argued that in exploitation sphere hidden and income it or datum; in the market to consider relations; the of exchange, essence
come (that were molded by forces outside the market) were treated as given because (in the words of one marginalist) 1930). for marginalism was laid by to do otherwise would be to ask economists (Robertson, The foundation to commit value judgments
understand
distribution is necessary the social inner guises ideas alism, form source
the institutional
lying beneath the outward dismarket appearances of things. 29 section, it will be seen that to Marx and Ricardo margin(in the replaced prime in reaction demand-side and subjective necessary
Jevons. 3o In the second edition of his Theory of Political Economy, Jevons shows how conscious he was in line 1973, Jevons reshunting Ricardo (Jevons, p. 166). has a much the 1879, At the quoted car of economic onto 2nd the ed.; science wrong Dobb, work, which had redirected Preface, beginning theory
In the provided
following
the basis for a new value theory, influences preference) labor as the
of his of value:
Ricardos
socially
vides the basis for the marginalist Repeated the reflection novel on utility economy and inquiry opinion, that somewhat
and determinant
of value.
theory of value
Marginaksm
entirely the
The marginalist
transition view
from of value
the
Ricardian
to
ed to treat
was completed
by the
elaboration of two catenations of ideas. The first related to the directional flow of the causal influences that and Smith determinants termed the of value. not from Wealth Under marginof labor but of was alism value originated from the consumers expressed the fund
pain (Jevons, 1871, p. 2). Space precludes a comprehensive exegesis on the various criticisms that have been levelled at Jevons in value criticisms claim to that three utility Rather, areas is the central we of will specific moment our concern: theory. confine
of Nations
utility-based, subjective preferences of final goods. This reorientation in a shift away from
criticisms of the relevance of utility, the nature of utility and its existence as an aggregate function, Ricardo arguing challenged the relevance of utility by that it was effective demand not merely
macroscopic
problems of the economy-at-large towards a microscopic emphasis on the behavior of individuals. These were not the individuals in the Ricardian or Marxian sense, however, as they were stripped completely of their social class origins and thus of their unique standing in relation to property or natural resources. The second aspect attempt to remove of the transition was to issues
utility, which affected the level of production and the distribution of resources, thereby underscoring the need for a theory of income distribution. Ricardo, like Marx, understood that, in a very real sense, distribution preceded everything else and therefore an economic distribution sociology was essential affected into effecthas
been
to show how social and property income ive demand. The existence
challenged by
relations
a number
of social policy
from the agenda of economics, mainly by expunging politics and sociology from political economy. This was achieved by confining economics to the study of the sphere of market exchange;
utility
(Boulding,
several
1969;
29 Marxs theory of value is one of the richest (and currently one of the most controversial) contributions to the literature. The omission here of any detailed discussion of this value theory should not be taken as an indication of its lack of relevance. Rather in our opinion, it offers one of the most promising sources of radical thought. For a summary of the current controversies surrounding Marxs value theory, see Elson (1979) and Steedman & Sweezy (1981). 3o Stigler describes Jevons as the forerunner of neoclassical (marginalist) economics (1946, pp. 13, 135).
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
183
to the of utility
utility
as a criwithout of
that the
would
be
social
efficiency,
employed
an equilibrium Keynes
as a theory
The concept
of aggregate
social labor value of value) individual entity. could be labor beThe same
multiple
equilibria
were possible,
(as a criterion for a theory justified on the grounds that comes into additive a specialized cooperative
not necessarily at the full employment level.j3 Jevons notions of utility-based Value Theory, diminishing tendencies marginal returns behavior and the equilibrating by economic agents of economies, gave rise to the assump-
and homogenized
as labor evolves
cannot be made for utility: the utils of consumers are not socialized into an whole, and they remain disparate, (therefore) non-additive as conceived incom(Kay,
tion that maximizing (i.e. entrepreneurs, the maximization deduction how the the distribution
laborers, and consumers) led to of the social welfare - an invalid is contingent example Jevons Both on of and of income intrudes (a further itself).
by Jevons because of
overlooked support
this qualification
in their
Dobb notes how both its ambiguous form. Marshall and Pigou acknowledged that utility was ambiguous because desire was used to represent satisfaction. Thus Marshall said: We fall back on the measurement the motive, which economics supplies and of we or moving force to action,
social order
(Steedman, 1972, pp. 48-49; Walras, 1954, pp. 125, 255). The most flagrant claims for the natural justice and order of capitalism (that marginalist J. B. Clark: natural output law, of theory What what industry legitimatized) a social (Clark, it contributed were made by class gets to the pp. 1899, is, under general 46-47,
make it serve with all its faults, both for the desires which prompt activity and for the satisfactions that result from them. (Marshall, 1920, pp. 92-93; Dobb, 1937, pp. 27-28). Jevons further contributed to the development of marginalism by utilizing the principle of the equilibrium seeking tendencies found in the study of Statical Mechanics3 This turned out to be a particularly prophetic analogy as it led to a manner of thinking (i.e. that an economy tended toward equilibrium) that contributed to the
323-325).34 What Jevons theory lacked was a comprehensive scheme for showing how the prices of goods and in various Menger parts of the this economy framework were Wieser by determined. and his two disciples, provided
Bohm-Bawerk,
conceiving of an economy in terms of goods arrayed in various stages of production, whose values are imputed directly and indirectly from the
31 Boulding has indicated further problems, especially those related to the lack of realism in marginalist utility analysis. For instance, it is assumed in general equilibrium theory that utility functions of consumers are independent of each other (thereby excluding the affects of greed and envy that intertwine the utility functions of individuals) (Boulding, 1969). An equally unrealistic assumption in this analysis is that production and consumption decisions arc independent, thus implying that the advertising industry and production decisions that attempt to condition consumption choices may be safely overlooked (Graaf, 1975). Dynamic considerations are therefore neglected by marginalist methods because it is just assumed that economies will gravitate to an equilibrium state. Unfortunately the path of movement that an economy follows in this equilibrating process is undefined, as is the time-frame in which it takes place (Dobb, 1973, pp. 168, 173). 33 Sir John Hicks has cautioned that economists are so used to the equilibrium assumption that they are inclined to take it for granted, yet there are market forms, not necessarily unrealistic or unimportant, where the mere existence of an equilibrium, even in a single market, is doubtful, and perhaps more than doubtful (1965, pp. 15 et seq.). attempt to bless the existing orderof-things was subsequently disowned by Stigler (who remarked that Clark was a made-toorder foil for the diatribes of a Veblen) but the approval bestowed by marginalism was still allowed to linger in many texts (Stigler, 1946, p. 297).
34 This crude
32
184
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
preferences of consumers for final goods. That is to say, all resources and intermediate goods were valued in terms of their marginal productivity towards final consumer goods. Bohm-Bawerk were Austrian school, for socialist doctrines was (as it was also with Mengers imputation
employed
which
requires
quantity
measures
of
factor inputs (e.g. labor hours, acres). (See for instance, Arrow et al., 1961.) In such an analysis, heterogenous capital goods and tools of production are conventionally measured by present value methods. However, in assuming the discount rate needed for the present value calculations, one is also assuming a distribution of income; but this is what the analysis assume at the outset sequently, nomys profit In and their particular rents) is supposed to derive, not of the calculation.36 Conto show that an eco(wages, begins have income is optimal, work, rate distribution marginalism marginalists
Menger, Weiser and members of the so-called whom the criticism of something of a preoccupation Pareto). Weiser developed theory socialist
expressly as an answer to supposedly claims that property income represented of labor; and Bohm-Bawerks theory
in its attempt
exploitation
of interest and capital, elaborated along Jevonian lines, was intended as an answer to Marxs theory surplus-value. scribed much the so that bourgeois The Austrians of the are dubbed (Dobb, were but frequently system, p. only deso 193; fully Bohmof abas apologists Marx existing 1973, not
by assuming assumed
Schumpeter
Bohm-Bawerk
Some researchers have simply used the prime rate prevailing in the market at a point in time, thereby assuming (rather internal This showing rates than demonstrating) In other rate expected latter that, of return of return practice that that this rate have is inherent to a stock of has been there disare is in equilibrium. used capital credited many assets directed of the in the cash flows goods. by internal cases, researchers to accrue
Schumpeter, 1954, p. 846). Weiser and Bohm-Bawerk aware backlash Bawerk of the to in work appraising of Marx Lassallean
propaganda. Lassalles
stinence as an explanation the popularity of abstinence to its superiority nick of time attacks that as a theory, to support
of profit, attributed theory, not so much as that it came in the against the severe on it (Bohm-Bawerk,
in general, associated
(Pasinetti, ability,
1969,
interest
It is important
1880, pp. 277,286). Marginalist value theory was expressed as a general equilibrium model of a capitalist economy by Walras, in which nomic interpretations Jevons and representation marginalists he embodied and causal the same ecoimplications as
explain and appraise the existing discount rate or rate of profit. It may be that the real rate is indeed growth; optimal (in employment; terms of, say, economic inflation etc.), however the
Menger. This model contributed a of society at large that enabled to claim to be pursuing policy pre-
significance marginalism,
of the indictment lies in the fact that as a theory, totally fails to demonMoreover, the theothat invalidate it as a
strate this social optimality. retical flaws of marginalism macro-economic theory, intellectual dependents ample, problem factory ing to firms
scriptions that are consonant with the social interest.3s The Walrasian system shares the same problem that confronted Menger, Weiser and all subsequent marginalists. In order to assess whether the distribution of income in an economy is at a social equilibrium, a production function analysis is
also contaminate such as accounting. For exaccounting consider a management of appraising an investment in a new in an area of high unemployment. Accordsome versions of rationality, not only the best interests but also those of society
3sAn exhortation to apply general equilibrium theory to social choice issues facing accountants may be found in May & Sunden (1976) and American Accounting Association (1977). 36 For the readers who are interested in exploring these issues see Sraffa, (1960) for an economic analysis and Tinker (1980) for a discussion of the accounting implications.
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
185
would
be furthered value
by rejecting from
if and
Our theories
discussion is summarized
of
the
evolution of the
of two
compares
contrasts
characteristics labor-based
theory. However, as the previous discussion has shown, the basic ingredients of a present value calculation (the discount or profit rate and the
TABLE 1. Differences between
utility-based
The first row of Table 1 contrasts the of real historical time and dynamic
theories of value
the marginalist
and classical
Characteristics
Criterion variable(s)
Marginalism
Classical
theory
Studies
analysis
equilibrium of movement of
of factors; price
system
variables
through
expectations
are examined
Focuses
economies
are governed
and oligopoly
Causality (a)
assumptions
theory creates
theory
of value:
value
is
concerning
the
through
effective
demand
is a function which
of the distribution
decisions
of income
(advertising
is insignificant
Quantification (a)
in models
(a)
Measures quantities
(a)
Measures quantities
are
in terms
of
total
(b)
Individuals
(b)
and class
and producers)
are arbitrary
or indeterminate Thus,
quantithe
in marginalist
theory.37
although
of management accounting may adinterests of capital in such circumcartainly have no authority interests. to claim with Societys
under marginalism and the classical Under marginalism, historical time is using comparative statics and
they
rational expectations, the future is instantaneously and effortlessly transformed into a present-time equilibrium. Classical labor theory (in contrast)
to be harmonious
37 This does not mean that these quantities are arbitrary in general. Several theories (particularly exploitation theories) have been put forward to explain the level of profits relative to wages: Kalecki for instance emphasized the degree of monopoly; others have stressed the degree of unionization or the monetary policy of the state (Dobb, 1973). The point is that, unlike marginalism, these exploitation theories do not attempt to relate to the existing distribution of income between profits and wages with the colorful language of efficiency; equilibrium; optimality; justice, etc.
186
ANTHONY
M. TINKER.
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
deals
directly
with economic
dynamics
by tracing
1971,
1980).
of con-
the paths of movement variables through real librium models situations (Kregel,
are readily
attention
theories38 - Historical Materialism shows that theories emerge and decline, not merely in the context of sociai struggles but as inextricable parts of them. The recurring lesson from our history of Value Theory is that social theorizing is subordinated, not to a quest for absolute truth, but tinual control. the conflicts, to materialist molding for Our and the focus conditions remolding purpose on Value of and of that require a conconand the that of the social social Theory social order
marginalism explains production and distribution in terms of factors while the classical labor theory appeals to the specific social relations underlying the factors that uniquely define capitalism direction approaches Table puted (under ized tion to as of a social causal derives system. movement of the utility from The of third and theory origin the row and two in is imwhile special-
is the factors
subject
sciousness
1; value classical
underlines history:
by marginalist
dialectical
pressures
labor theory)
it is socially
antinomies
contradictions
labor (the physical manifestaof development of Societys forces) measurement that embodies systems. and differ Marginrelative obtain classical derivato be the two approaches first differences, etc.) (not that to their tend
spring from social conflicts (Amin, 1978). These provide the momentum for change, not only in the social structure but also in the ideological apparatus through which social order and control is achieved. accounting refuted historical price obsolete by In this fashion and the change. of other facts Thus therefore, are not Value was of economic, so much by Theory rendered capitalisn; obsolete theories
Finally, with
of their
behavior
of social atoms
as rendered Canonist
In contrast,
the conventional
uses absolute
variables
Ricardian Socialism was refuted by the ideological developments of capitalism and currently, the revival of classical political economy appears to be a response to the difficulties of late capitalism (Mandel, 1975). Truth in this view is not an
lesson
from
review and
theories
absolute that is to be discerned by logic and/or facts, but a social truth that only embraces those social theories ideology. that are in tune with the prevailing this materialist view accounting and as an In focusing
viewed
theoreticians,
said to foster the social of capitalism (Katouzian, Lowe & Tinker, 1977;
1980;
and changeable.
38 For instance Popper views the origins of theorizing as a problem of psychology (Popper, 1959). Thomas Kuhn comes closer than Popper in acknowledging that, when a scientific paradigm is in a state of crisis, the crisis is usually reflective of a larger ideological crisis in the social system of which the scientific community is part. Kuhn fails to pursue the implications of this point, however, and concludes by attributing the origins of a theoretical crisis to the buildup of unsolved puzzles (Kuhn, 1970). In this respect, Kuhn and Popper share the same basic view of the multitude of discarded theories that litter history: that they are no more than the gropings of early scientific explorers who, in the quest for objective truth, exemplified the very best of the scientific tradition (Weiner, 19.50; Allen, 1975; Shaw,
1975).
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
187
the the
reduction status of
theo-
from Historical
mercenaries
special problems
Positivism of Watts & Zimmerman (1979). To the careless reader it may appear that the two views hardly differ - for Watts & Zimmerman acknowledge that as the underlying (2) accounting interest groups rest3 (ibid: literature knowledge accounting (1) accounting research factors change (ibid: changes p. 274);
Watts & Zimmermans own theorizing. Are we to regard their work in the same manner as they suggest that we view that of others? Should we follow their general exhortation and dismiss their theory (of excuses) as nothing more than a selfserving excuse? Apparently not: man claim to have miraculously scientific theorizing Excuses accurate arguments, law of Theory and that, all they other is put Ironically Watts assert, earthly forward therefore, representation Watts & Zimmertranscended the applies scholars. to the Their
is not that
pp. 274-27.5); and (3) the accounting the simple accumulation of results in progressively better in Instead it is a literature
practices.
truthful
which the concepts are altered to permit accounting practices to adapt to changes in political issues and institutions (ibid: p. 289). The differences between the views become recognizes the undialectical, than class) and economic of their among (ibid: individuals Watts people character petition power fers relations analysis. apparent, when one individualistic (rather than sociological) on comtransignore that In focusing to achieve and with
ing theorizing.
& Zimmermans
a single counter exception to to a refutation that (according philosophy) beliefs should cause revise their or drastically
Popperian
(rather
for the use of coercive wealth property & Zimmerman MARGINALISM Our review of AND ACCOUNTING Value Theory suggests that
economics is not a closed book. The acute difficulties of economic management together with the lively intellectual tournaments among economists throughout the subjects history should have taught accounting scholars that nothing has been settled. Yet if a Martian consulted the accounting literature in order to form an opinion as to the substance for ing theory: of economics, that exhibit economists there far Marginalism. he/she could be forgiven accountthan economic assuming scholars was only greater one economic unanimity
corporations) underlying the supply and demand data that form the starting point of their analysis, Watts & Zimmerman fail to provide any insights into the historical and social processes from which these institutions spring originate and perpetuate lying plained. factors alluded objectives of their Without paper or the class interests that them. Thus, the underthey in fact, set out never the exare,
to when
an explicit
analysis clapping
of society,
their theory
of one hand
professional theory.
We find two emphases running through the history of accounting thought that have maintained the subjects commitment to Marginalism.
3g Clearly self-interest is also present in a dialectical process: what distinguishes the latter is that it articulates and subordinates individual self-interest into a class structure that eventually impedes further development of productive forces. The dynamic contradiction or antagonism between the social structure and the development of the productive
forces is the fundamental dialectic in Historical the eventual deposal of feudalism by capitalism. Materialism: it is exhibited in the overthrow of slavery by feudalism and
188
ANTHONY
M. TINKER.
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
The first is the emphasis on individualism the individual owner or the corporation person) about part which has served play in to preempt class the class affiliations accountants 1971). of individuals
went unliterature,
most criticisms were modest relative to the kinds of concerns raised in this study. For instance, in the 1960s and 1970s we find accountants mildly questioning the relevance of Fishers individualistic focus to a world of large corporations run by managers Rayman, who are not the owners 1972; Sprouse & (see for instance Moonitz, 1963;
conflicts
pherson,
The second
emphasis
in account-
and confining
market prices (historical and current). As we show subsequently, this image of the accountant - often as a disinterested, innocuous historian the responsibility - stems from a desire to deny that accountants bear for
Edwards, 1962; Lee, 1974, 1975; Taylor, 1975; Sterling, 1970; Chambers, 1971). Such questioning of Fishers hardly matched the assumptions criticisms of economists such as Veblen who contended that the concentration of corporate control created a differential advantage that favored the vendibility of capital relative to the vendibility of goods and services (Veblen, 1904, p. 146). Instead of viewing social radically accountants reincarnated, corporate sponsibilities.42 Accounting ed the separation (for 1922; itself given accrue power example, Sweeney, level to had of the and the rise of corporatism power that income individual its own who as a shift was capable between in of political redistributing out being of
shaping subjective expectations which, in turn, affect decisions about resource allocation and the distribution of income between and within social classes. vides This a veneer attachment to claim Fisher (1906, that to historical they merely facts that record proallows the cost, of of pseudo-objectivity
in - social conflicts. p. 70 ff), underscored cost in writing is a market that: of both on historical of purchase, an individualistic focus and an estimate
shareholders,
theorists Paton
explicitly
future earning power.40 As such, he continued, it can be assumed to reflect expected future returns to a specific individual.41 of the individual This owner view of the sovereignity was adopted
and management 1918; that command income unless level of Edwards the
82 Stevenson, to maintain
had a right
by Sprague (1908), Hatfield (1909) and Canning (1929), who simply ignored the separation of ownership individual and management by focusing Neither Fishers on the view owner-manager.
stockholder/owner
productive
capacity been
purchasing
4o The attraction of subjective accounting income concepts is reflected today in contemporary GAAP and FASB rules where present value procedures are used in valuing leases, pensions, goodwill, bonds, fixed assets (where payment is deferred) and oil and gas reserves. Irving Fisher (1906), a self proclaimed Marginalist, has had considerable influence on the works of early accounting 1918). Cannings acknowledgement to scholars (e.g. Canning, 1929; Rorem, 1928; Paton, 1922; Paton & Stevenson, Fisher was explicit I need not declare my obligation to Professor Fisher for the influence of his writings upon my thought - that obligation appears throughout this book (1929, p. iv). The influence of Canning can be seen in Vatter (1947) and subsequent funds flow theorists. The utility-based foundations of Fishers work, as articulated by Hirshleifer (1970) and Fama & Miller (1972), are also widely acknowledged in the accounting literature, even the standard teaching texts. Thus for instance, we find open acknowledgements to this intellectual heritage in Hendrikson (1970); May et al. (1975); Edwards & Bell (1961); Parker & Harcourt (1969). 42 For a discussion of the evolution of legal thought from the 19th century perceptions of corporations as artificial beings subject to regulation, to the 20th century extention of individual rights to corporations, see McClurdy, 1979, pp. 307 ff. See also Miller, 1969, pp. 13 ff, who characterized natural order legal theory as affirmative action to promote monopolistic advantage.
41
THE
NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
189
provide
a further
reconciliation marginalist
between found-
of accounting; of objectivity its authority It is in the attachment of objectivity Couchman argued that
the professional
image
accounting
impartiality
and undercutting that the long to historical Kester (1919), (1928, 1929) was trace un-
First, they espouse a concept of accounting and profit that they claim best approxi-
mates subjective present value (op. cit. pp. 48-56); and second, they propose that the corporate should retain sufficient resources to personage allow the maintenance pp. 31-109). The second accounting of physical in the capital (op.
cit.
development
of
factual evidence, in and out of the (1928, pp. 148 ff) went further in cost and value were in fact un-
thought
Accountants, he wrote, deal only with related.44 the supply side of economics, cost that furnished the limiting tended, who resort Littleton concepts accounting. Littletons of the matcher rationale of was wrote that factor value to price. Value, he consubjective. utility Citing Bohm-Bawerk, in the last products,
classes.
accountants
by marginal
historical objectivity as their dominant objective. Rather, the protection offered by appearing as mere historians, together with the desire to measure presented dilemma. income theory ducer for other subjective Fisherian-type income, have accountants with the twin horns of a On the one hand, Fisherian and Hicksian are faithful disciples of marginalist value in the way they install capital as a proof value and legitimize profit as the reward productivity the affiliations in production. of accounting On the to these hand,
argued that utility and value were mental based on desiredness and had no place in As finally (1940) accountant costs by which cost as (with decades incorporated allocation recorder, revenues) in Paton model classifier provided & and the cloakthe the and the view
ed in pseudo-objectivity,
marginal
subjective notions of value have drawn accounting into a number of bitter disputes about the way tion have the ors) accounting data influences income distribuwithin and between classes. Most disputes centered on redistributions of income within capitalist class (i.e. between groups of investthat accounting National Leasco-Pergamon data Student has and affected. the recent Equity Slateraffair Marketing,
In limiting the scope of accounting research, the theorists referred to above, ignored alternative perspectives that were available both in accounting and in economics. Scott (1933) for example, attempted to show that accounting theory based on marginalist premises, was biased and could be socially dysfunctional. cognized that subject vailing controls and tween
managerially
Scott (1925, p. 191) reto conditions fixed by preof the market income beof society.
conto
Funding, Walker,
determines
involving IOS and Arthur Andersen & Co. were all incidents that exposed the distributional impact
43 Veblen cept that promote to affect 44 Those that tions future and, Alexander (1904, was the pp. 132 ff) regarded on the of capital news) that the value and illusions of large, confidence
adjusts
interests
of investors. outpur,
(manipulating prices.
disseminating
false reports
or withholding
on exchange
In this manner
he anticipated
of income. the link between historical time of date, any cost future and subjective by consumption the cost. owners that from income possibilities implicit were did so by arguing rate) and, expectaas
to retain
at
the
purchase
discount
due to faulty
but merely
revisions
190
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
In 1933, he chastized his colleagues for uncritical acceptance of the market model, noting that it had a pervasive effect on theorizing, i.e. it did more than allow the theorist for measurement limiting viability decried to accept market valuations it justified of goods and services,
dualistic focus, it has precluded inquiries into the class underpinnings of economic phenomena; the role of accounting in regulating economic activity and the possibility competition resources of with along that (Scott, accountants their their implicit of income in the persistent contributions have shifted (i.e. the the of accounting to their accounting as the chief pp. to 1933, acceptance and data arbiter 225 has of ff). such to rethat superceded societys The prices sources) accountants More theory, from questions (and particular
role by assuming the by competition. Scott of accounting theorists to of competition the corporate a useless and later nature of criticizing monetary that under
reluctance
address
of market social
if accountants
hence
commitment notion
Similarly, Veblen Keynes (193 3) noted accountings accountants returns. nineteenth the peculiar Keynes, century for
theories
accounting knowledge fundamentally conceptions While the has replaced the (and utilitarian hence corporate questioned.
example,
have done
so without
logic of accountancy,
cities, because slums paid. Veblen (1904) recognized that the growing separation of ownership and control was transforming the character of business entities under managements interest capitalism. To Veblen, in the vendibility of
and narrow focus of the discipline. market of competing interest groups that of competing has been costs, individuals, extended remain and to inuncalculus ideological) These (1979) in which
transaction
assumptions
capital rather than of goods, resulted in a disharmony between the interests of capital and those of Society at large. One result of this disharmony reflected was value, that but exchange rather prices were no longer of a reflection
are vividly
& Zimmermans theory, implicit tions: ale for reporting competitive protect groups members capable are of that and
interpretation of agency are the following assump(and perhaps of contemporary the capital (and in the group utility that sole) rationfinancial that to that equally function; upon market;
existing power relationships terminology, was a reflection of income Although Brandeis in drafting Veblen
can be relied
by one class from another). was to have a direct work of Berle & Means (1934), a substantial Act of 1933) (Dorfman,
represented
process);
on the subsequent
of processing
information
and discerning
managements
(homogeneous)
1973, pp. 62 ff, pp. 138 ff), both Veblen and his student Scott were virtually ignored by accounting theorists. The consequence of this myopia for accounting is reflected in the questions that subsequent accounting theorists have chosen to ask,
that only government possesses coercive power; that all behavior is motivated by economic rationality; and that public interest arguments are always a sham to mask self-interest.45
45 For a critical assessment of romantic pluralism in political science, i.e. freedom accrues only to the individual while all government action is coercive, see McConnell, 1966, pp. 89 ff. There is, also, a substantial body of literature challenging the assumption that the leadership of any interest group protects the interests of its membership. Starting with Michels Iron Law of Oligarchy, delineated in the 1920s (see Michels, 1949, passim), there has been a wealth of sociological literature that suggests that leaders, once attaining power, are more concerned with preserving their own power than with protecting membership interests.
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
191
IMPLICATIONS This paper was motivated scholars that if accounting by the claims of some research was conducted it would be and promise
section a speculative
of
arguments
according to the tenets of positivism, blessed with a detachment, neutrality not enjoyed by normative vious sections we argued misapprehends the nature
contents. These speculations take on two forms: The first concerns the way radical accounting is conceptualized as a total area of study. Here our focus on Value Theory and our view of accounting as commensurate reciprocity in exchange, warn us against narrowly; construing especially for Such criticism to trade radical by reducing unions accounting it to (say) too ac-
approaches. In the prethat such a viewpoint of scientific knowledge it is produced. split emanates that, fails from to a rein We
and the social processes by which Specifically, the normative-positive from cognize social Shaw, a Realist the control 1975; position: a viewpoint perspective, sociology-of-knowledge partisan and social Mendelsohn
or corporate
accountits and
tendencies existing
theories 1977).
to new areas and overlooking accounting; accounting; accounting etc. part second where part organizational financial (Elson,
(Gouldner,
1971;
applicability management and behavioral international 171-174). involves torical analysis the
illustrated the process by which ideas are reified by using the history of Value Theory. This analysis illuminates of positive value-free the normative accounting (i.e. marginalist) theories. origins of The pretense
accounting;
The
function
of historical
theorizing is cultivated by taking market and universal and, at phenomena as natural the same time, by ignoring the institutional backthat defines the rules according to which behavior is played out. Thus marginalist
Materialism)
is an integral
ground market
theory and its fairyland of perfect competition, fails to consider institutional imperfections such as monopolies, cartels, labor unions, political lobbys and particularly, the division of income and property and the nature of property rights. In ignoring these sociological facts, marginalism attempts to confine its analysis to free markets of exchange. Ricardo showed that markets are not free but are conditioned by property ownership through cannot income distribution. that surface in isolation datum 1973; sociological Dobb, Other from Sweezy economists behavior aspects of 1904; have demonstrated be understood 1976; its underlying, Scitovsky, market
which,
valuable and well-intentioned, needs a unifying and underlying theory of social value to situate the research in an overall context of social conflict. (See for instance, Maunders & Foley, 1974a, 1974b; Cooper Transport and Jenkins, 1974.) & Essex, 1977; General Workers Incipient forms Cooper, Union, 1979; 1971;
of such a theory
of value may be found in the recent controversies between so-called neo-Ricardians and Marxists (see for example, 1981). to problems Elson, These 1979; Steedman of value at work & are and unSweezy, sensitive the concepts of alienation
(Veblen,
& Baran,
debasement
of work-life
to mechanical,
and its positive accounting variants: a neoconservative ideological bias that encourages us to take the free market and its implicit institutional
fulfilling routine (see, for example, Braverman, 1974; Ollman, 1976; Marcuse, 1964; Arthur, 1979; Elson, 1979; Sartre, 1960).46
46 It is not that we expect employers to be overwhelmed by humanitarian and philanthropic feelings when confronted with a new theory of value. Our proposals are longer-term in nature and extend beyond the workplace to the activities of professions, business schools and other institutional spheres where concepts of value (marginalist and others) are inculcated. The first step could be to break the strangle-hold that Marginalism has on accounting education and research.
192
ANTHONY
M. TINKER,
BARBARA
D. MERINO
and MARILYN
DALE NEIMARK
The importance of giving due weight to the social context of accounting becomes even more apparent counting rations ordinating The based theory) critical behavioral some regard; jects helpful if we recognize that, to date, when achas affected the work-lives of employees, so overwhelmingly and planning areas of on behalf of corpocoand employers. Budgeting, within cost and motivating, organizations. management approaches from and with in this sub-
an accounting
court
(Briloff,
1972)
or function
as to
a countervailing institution (Galbraith, 1967). In parallel with the quest for global solutions corporate a steady Examples Telephone tion (New York Funding (Bryer York City
it has done
accountability in the 197Os, have been flow of localized, grass-roots activity: include (Sloan, et al., the critical appraisals Steel of Bell Corpora1976); 1981); British Conference & Debrul, 1975);
are methods
for control-
of people
American
University (Newfield
(together industrial
Collective,
and organization
have social
literature
provides
(Komanoff, 1981). As with the proposed global solutions referred to above, each of these case studies most implicitly complex attempts problems to confront facing one of the value modern
theorists: what constitutes commensurate reciprocity in exchanges between large corporations and Societyat-large? heart of the Lucas instance) that was (value) gram. Such a question Aerospace Workers is at the plan (for
in a socio-historical perspective (see Pollard, 1965; Bogomolova, 1973; Clegg & Dunkerley, 167-242; Fredricks, 1960; Shaw, 1975;
Leavitt, 1964, pp. 55-71; 1980, Gouldner, 1971, pp. 1970; Burrell torical historical social Krupp, 1961; Baritz,
plan was developed greater social worth militaryqriented that attempt proto or Con investithat
& Morgan, 1979; Edwards, 1979). Hisstudies in this area do not merely add a dimension, that conditions they create shed light on the and sustain a discould serve in proinformation
Similarly,
show that the services of Bell Telephone Edison are overpriced imply that the gators enables had in mind them a notion of social to judge that an unequal
value
cipline in its present form. The role that Value Theory viding systems financial vigorous ment, in general et al., a framework for is also illustrated
exchange
counter
was taking place between these institutions and These investigative studies, together Society.47 with the general proposals for greater corporate accountability, accounting envisage a similar social role for - that of an interpreter and articulator in social struggles,
reporting. The 1970s was a period of criticism of the Accounting Establishfinancial reporting Steering Green
et
behavior Nadar
1976a, 1976b; Lowe & Tinker, 1977). The proposals that emerged in this period however, typically ignored the social roots of corporate power in that they proffered voluntaristic solutions. Most critical in this regard is their common assumption that the State is an independent and well-meaning body that can act freely to establish a licensing system (Nadar et al., 1976),
illustration is the study of disclosure regulation and public policy by Merino & Neimark (1982). The study finds that, in the three decades preceding the passage of the securities acts in the U.S., the concept of disclosure helped to reconcile the growing contradictions between a belief in individualism and market competition and increasing economic concentration and the separation of
became embodied in the prices of other goods customers) who may be subject to unequal exchanges.
THE NORMATIVE
ORIGINS
OF POSITIVE
THEORIES
193
from
control. and
be
gained
from here
a critical
social
history.
The
Merino
Neimark first,
example
is a study,
by Hoogvelt
& Tinker
precepts:
for assessing the disclosure system is whether it has improved the pricing mechanism for securities; second, that the existence of voluntary disclosure prior to 1933-34 is evidence that existing mechanisms were sufficient to ensure an optimum level of disclosure (for investors) (e.g. Phillips & Zecker,
(1978), of the African multinational, located shows post how colonial that the early periods
subsidiary of a U.K. based in Sierra Leone. The study colonial, were late colonial and distinguished relied by their
prevailing methods
methods
to reproduce
1980; Wallace, 1980; Watts & Zimmerman, 1978; Ferguson, 1978; Benston, 1969, 1973; Friend & Herman, accounting dramatic delivered Marxists between playing (Amin, relevant 1964; Stigler, offer changes sharp who, the different 1964). and for rebuke nations international radical Samir for by and Amin Western downare acMultinational accounting opportunities in words he argues, races accounting. of and perpetuate character
1978; Tinker, 1980). Differences in the methods of repression and exploitation were manifest in the income Moreover, statements for each of the three about eras. the if Marginalist assumptions
correlation between corporate and (international) social efficiency are rejected, then it becomes impossible assessing sketch search to ignore tried the practice) exploitative in this implications social relations section non-marginain to rea multinationals out (and performance. concluding for accounting
exploitation of exploitation
We have
world-wide
of alternative,
counting research because although it is in international exchanges that the greatest inequality takes place (i.e. exploitation of one nation state trade) vision lation; by another through the relative terms of accountants of research controlling have managed to curtail their to problems of currency transoverseas divisions of multithe globe accountprovides that can
list concepts of value. We have also illustrated the important role of critical social history in understanding and cesses (Held, development changing 1980). contemporary social proBy tracing the historical of value, for example,
of the concept
we have illuminated the social ideology that underlies marginalist economics and thus dominates accounting forms theory. The thought. question It is this social ideology origin that of positive this insight that the normative accounting raises for
nationals; moving cash balances around in an optimal manner and harmonizing ing practices The area an additional in different illustration nation states.48 accounting of international
accountants
of the insights
what kind of value theory should we create as our contribution to social development?
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ANTHONY
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BARBARA
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THE NORMATIVE
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