Doxic sunglasses: A response to “Green accounting and Green Eyeshades: Twenty years later”

This article, in responding to Thornton's (this issue) depiction of how accounting might be extended to incorporate environmental issues, offers a critique of mainstream understandings of the accounting function. Specifically, we argue that Thornton's arguments are developed within doxic, or taken-for-granted, parameters regarding what accounting is and what it can be. Expanding the accounting domain whilst staying within these parameters leads to something more than the mere reproduction of the status quo; it leads to intensified commodification of the biosphere.     

GARCH in question … and as a benchmark

GARCH models of volatility are ubiquitous. Over the past twelve years, the GARCH industry has produced an almost infinite number of volatility time series from an extremely wide range of return series. The main purpose of this paper is to revisit the notion of volatility. Although we stop just short of questioning the necessity (and certainly the success) of GARCH, we demonstrate that for at least one type of data—long term interest rates—it is possible to essentially reproduce GARCH volatility time series with simple moving averages of deviations from mean return. We also demonstrate (empirically) a functional relationship between GARCH(1,1) parameters and the optimal moving average window width. At the present time these results are based on the utilisation of GARCH volatility as a benchmark against which we select the optimal number of terms in the simple moving average representation. One possible avenue of research that might lead to the removal of this requirement is suggested. An interesting applied result that emerged from our analysis is this: from 1952 to the present, USA interest rate volatility has the highest overall cross-correlation with the interest rate volatilities of other countries.     

Tracking exchange rate management in Latin America

One way to track exchange-rate deviations from its long-run value is to examine numerical patterns in exchange rates to see if those patterns appear to have been subjected to some degree of policy management. We apply Benford's Law to exchange rates in Latin American countries, computing and comparing the distribution of exchange-rate observed values with those of Benford's Law. For most cases we find that the exchange rate for the US dollar does not satisify Benford's Law, however this law holds when the euro is considered. This result may be explained by the fact that these countries are characterized for having different degrees of dollarization and intervention in the US dollar forex market while there is almost no policy intervention in the euro forex market. Our approach is an alternative view of how these characteristics play a role inducing deviations with respect to an implied equilibrium exchange rate.     

Panglossian accounting theories: The science of apologising in style

Dr. Pangloss's comment about, “the best of all possible worlds”, is widely remembered, but what we tend to forget is how unpleasant his world really is. Candide's life is marred by pillage, murder, rape, war, torture and natural disasters. The only relief Voltaire provides Candide after each disaster is a bizzare re-iteration of Pangloss's absurd refrain that, “this must be the best of all possible worlds”. Voltaire's Candide warns us about scholarly self-deception and wishful thinking. This warning extends to theorizing about large organizations and corporate accountability: that monopolistic and oligopolistic elements may be underplayed: that the disciplining effect of market competition may be overrated; that managerial self-aggrandizement may be idealized as entrepreneurial heroics, and that research may be trivialized in the quest for objective results and tractable theories. This paper uses Agency Theory and Transaction Cost Theory to spell out the dangers of Panglossian theorizing. It rejects the notion that theories are dispassionate reflections of reality; instead, it views them as materialistically grounded in social conflict — as intellectual terrains on which social interests struggle to re-present and control their realities. In focussing on Agency and Transactional Cost Theory, three types of re-presentational distortion are considered here: those emanating from failing to acknowledge the constituitive potential of theorizing (stressing instead its natural and law-like character); those arising from overstating the empirical validity of theories, and those emerging from neglecting the interests that benefit from research. The implications of the paper are analogous to lessons that Voltaire teaches us through Dr. Pangloss: we may pay a high price if we listen to “simplifying assumptions” and “analytic approaches” of the Pangloss's of accounting thought. Their intellectual pollyannaism frequently promotes social causes that, after some reflection, we might prefer to dissociate ourselves from. Only by explicating the social underpinnings of accounting practices — contemporaneously and historically — and by investigating the social allegiances of different forms of theorizing, do we give ourselves the opportunity of such social self-awareness.     

Back to basics: What do we mean by environmental (and social) accounting and what is it for?—A reaction to Thornton

This paper seeks to explore whether mainstream financial accounting when it appears to genuflect to the ‘environment’ actually has anything substantive do with – or to say about – the natural world. It seems important to remember that conventional financial accounting is a predominantly economic – and not very internally logical – practice which has no substantive conceptual space for environmental or social matters per se. It has no space for what Thielemann calls ‘market alien values’ – values such as environmental concern. The paper re-examines why we might account at all and revisits why accounts which explicitly recognise environmental (and social) issues can be potentially very important indeed. What seems clear is that whilst any account that sought to reflect environmental and social exigencies might choose to use the technologies of accounting – notably debits and credits – there is no essential reason why they must do so. If we wish to account for an environment, we almost certainly would not start with the somewhat bizarre and tortured foundations of conventional financial accounting.     

Double exposure forecasting lens

All forecasters face the same problems of reliability, validity and credibility. However, just improving the state of the science of trend gathering is not enough. That has to be supplemented by the state of the art of scenario, tout sheets and above all survivability solutions. The first two are more or less variations on the basic forecasting core. Not so the last. We have never been expected to do that. All we had to do was use data to scare our audiences into looking into the abyss and then walking away to intimidate another group. But we have been stopped in our departing tracks and told, “Hold on there. Not so fast. You brought us to this edge. Now at least say something about a way out.” Will we say something? Cross over where we have never been asked to be? Or remain aloof and paralyzed?     

Carpe the academy: Dismantling higher education and prefiguring critical utopias through action research

This paper engages with the challenge of re-imagining higher education. We start from the position that the ascent of the increasingly corporatized university is deeply problematic precisely because of the neoliberal realist position on ‘the future’ that it assumes and perpetuates: the view that there is no alternative to neoliberal capitalist market principles, that present and future realities can diverge only to the extent permitted by existing market forces and rationales (Amsler, 2011). In this context, ‘education’ takes the form of preparing and socializing the next generation of workers: a future focus severely limited in the possibilities it considers. Thus we are faced with a mutually-constitutive relationship where constrained visions of future needs and demands serve to constrain present educational offerings; a dynamic which becomes self-reinforcing and which admits little disruption. In this paper, we draw on the concrete body of practice known as action research to consider how we might prize open spaces for thinking much more expansively about what ‘the future’ might entail, and what forms of education and organization are necessary in the present to keep open, rather than shut down, diverse possibilities and democratic debate around this. We focus on critical utopian action research and systemic action research as illustrative of key qualities of prefigurative and critical utopian engagement with educational presents and futures. We conclude that the capture of the university by neoliberal logics can be resisted and challenged through radical methodologies, like action research, which explicitly set out to be ongoingly anti-hegemonic, critical, self-reflexive, pluralistic, and non-recuperative (Firth, 2013, Garforth, 2009).     

Why is management a cliché?

This article introduces the term demotics of management by asking why so much management literature reads like a cliché. Typically this question has been approached by seeing the cliché as strategic. This article instead views the cliché as symptomatic. It marks a growing problem—how can management track labor out of the workplace and into the realm of social reproduction, a realm that is increasingly, with the tendency of immaterial labor, directly productive. This problem has produced not only the explosion of popular management literature, particularly in the United States, in the last 20 years, but also what might be called a demotics of management. This term may be understood as the proliferation of places where labor-power might be found. But the term also names management’s growing limits when faced with the dispersion and intensification of what Marx called the social individual. Management cannot adequately measure the labor it finds, and therefore must resort to miraculating what it encounters, to use a concept from the collaboration of Gilles Deleuze and Felix Guattari. The crisis of measurement brought on by the growing dominance of what Marx named the General Intellect is a profound challenge not only to management but specifically to its recording-machine, accounting. With the mounting crisis in recording, the very frenzy of popular management discourse reveals more than ever the threat that social reproductive labor already possesses the sociality to value itself differently and independently. The demotics of management thus marks both the proliferation of management in daily life, but also the prior, or what C.L.R. James might have called the completed, organization of immaterial labor that management encounters. Left to repeat what is already completed management can only utter the cliché, however, manically. At the same time, the cliché in management literature does mark the accomplishment of the circuit of exchange value, as it has since Taylor, even as it hints at the possibility of the separation from capital of a mass intellectuality where socialized labor may come to account for itself.     

Price setting, price dispersion, and the value of money: or, the law of two prices

We study models combining search, money, price posting, and preference shocks. We show how these features interact to influence the price level and price dispersion. First, price-posting equilibria exist with valued fiat currency. Second, although both are possible, price dispersion is more common than a single price. Third, we prove that generically there cannot be more than two prices. We provide intuition for this law of two prices, show it also holds in some nonmonetary search models, and discuss variations of the assumptions under which it may not hold.     

Stock repurchasing and corporate social responsibility

Stock repurchases are controversial. Researchers often view the positive association between free cash flow and the volume of the stock repurchases to be in the shareholders’ interest and the positive association between executive options and stock repurchases to be in the managers’ interest. Using firms’ corporate social responsibility (CSR) ratings as a measure of ethical culture—one that increases the cost of self-serving behavior for managers— we examine whether a firm’s CSR rating is related to its stock repurchase decisions. Although the baseline regression shows a positive association between CSR and repurchases, we find that CSR amplifies the positive association between free cash flow and stock repurchases and lessens the positive association between executive options and stock repurchases. These results indicate that ethical culture might play a role in repurchase decisions: it may encourage repurchases aligned with shareholders’ interests and discourage those primarily in managers’ interest. Furthermore, we also find that high CSR firms are associated with a greater completion rate of announced repurchase programs and receive more favorable stock market reaction to their repurchase announcements.     

Accounting in Babel? Constructing social accounting as a multi-logical performance

All social practices reproduce certain taken-for-granteds about what exists. Constructions of existence (ontology) go together with notions of what can be known of these things (epistemology), and how such knowledge might be produced (methodology)—along with questions of value or ethics. Increasingly, reflective practitioners—whatever their practice—are exploring the assumptions they ‘put to work’ and the conventions they reproduce. Questions are being asked about how to ‘cope’ with change in a postmodern world, and ethical issues are gaining more widespread attention. If we look at these constructions then we often find social practices: (a) give central significance to the presumption of a single real world; (b) centre a knowing subject who should strive to be separate from knowable objects, i.e. people and things that make up the world; (c) a knowing subject who can produce knowledge (about the real world) that is probably true and a matter of fact rather than value (including ethics). Social practices of this sort often produce a right–wrong debate in which one individual or group imposes their ‘facts’ (and values) on others. Further they often do so using claims to greater or better knowledge (e.g. science, facts …) as their justifications.We use the term “relational constructionism” as a summary reference to certain assumptions and arguments that define our “thought style”. They are as follows: fact and value are joined (rather than separate); the knower and the known—self and other—are co-constructed; knowledge is always a social affair—a local–historical–cultural (social) co-construction made in conversation, in other kinds of action, and in the artefacts of human activities (‘frozen’ actions so to speak), and so; multiple inter-actions simultaneously (re)produce multiple local cultures and relations, this said; relations may impose one local reality (be mono-logical) or give space to multiplicity (be multi-logical). In this view, the received view of science is but one (socially constructed) way of world making, as is social constructionism, and different ways have different—and very real—consequences.In this paper, we take our relational constructionist style of thinking to examine differing constructions of foot and mouth disease (FMD)¹ in the UK. We do so in order to highlight the dominant relationship construction. We argue that this could be metaphorised as ‘accounting in Babel’—as multiple competing monologues—many of which remained very local and subordinated by a dominant logic. However, from a relational constructionist point of view, it is also possible to argue that social accounting can be done in a more multi-logical way that gives space to dialogue and multiplicity. In the present (relational constructionist) view, accounting is no longer ‘just’ a question of knowledge and methodology but also a question of value and power. To render accounting practices more ethical they must be more multi-voiced and enable ‘power to’ rather than ‘power over’.     

On the time series measure of conservatism: a threshold autoregressive model

In this note we propose an alternative test specification for Basu’s (1997) time series measure of conservatism that is related to the threshold unit root test of Enders and Granger (1998). We argue that a regression of changes in earnings on the lagged levels—rather than lagged changes—, including an interaction term for negative values, has three conceptual advantages compared to the conventional setup: (1) a smooth, non-oscillating impulse-response pattern to an unexpected shock in earnings (2) a more efficient estimate of persistence in the long run and (3) it can be extended to higher order autoregressive processes. We apply both approaches to a common dataset of firms from the S&P500 index. We confirm the conventional finding that negative shocks are transitory and display stronger mean reversion than positive shocks. However, while most of the literature reports mixed evidence on positive shocks, we find clear evidence that positive shocks are transitory as well. In a Monte Carlo simulation we explain this finding by documenting that larger standard errors in the Basu specification can lead to incorrect inference when the decision between persistent and transitory shocks is close.     

Some problems connected with the calculation of stop loss premiums for large portfolios

Abstract

Experience will not, as a rule, be sufficient to permit a direct empirical determination of the premium rates of a Stop Loss Cover when the portfolio to be reinsured is a large one, and when the treaty runs on such terms that there is only a small probability of the total amount of claims exceeding a stipulated limit. In such cases we have to fall back upon mathematical models from the theory of probability—especially the collective theory of risk—and upon such assumptions as—insofar as they cannot be empirically grounded —may be considered reasonable with regard to the nature of the problem.     

Poverty or preference: what do ‘consensual deprivation indicators’ really mean?

Consensual deprivation indicators assume that there is a broad consensus on what goods/services families should be able to afford, and that an inability to afford those items can measure deprivation. Using data from two British surveys in 1999, this paper makes two arguments. First, there is only limited agreement about which items families should be able to afford. Secondly, different social groups are more (or less) likely to say the absence of a ‘necessity’ is due to choice. Families who cannot afford two or more ‘necessities’ invariably have a number of ‘nonnecessities’, often many. Their patterns of preferences (and spending) are not typical and they are choosing to buy other goods – through preference rather than poverty. Simply checking whether people lack items for any reason provides results empirically as reliable, but subject to similar criticisms.     

Straddling between paradigms: A naturalistic philosophical case study on interpretive research in management accounting

This paper analyses interpretive research in management accounting from the perspective of naturalistic philosophy of science. We focus on the relation of interpretive research to the subjective/objective dichotomy appearing in the methodological literature of the social sciences. In management accounting research, it is often routinely assumed that interpretive studies, following the reasoning by Burrell and Morgan [Burrell, G., & Morgan. G. (1979). Sociological paradigms and organisational analysis. London: Heinemann], are based on subjectivism only. The major purpose of this paper is to give flesh to the existing debates around the nature of interpretive research with the help of in depth analysis of one example of such research in management accounting. Since abstract and general philosophical arguments are often used merely to cloud more relevant case specific issues concerning the focus of explanation and the nature of empirical evidence offered, our analysis aims at providing conceptual tools for articulating with greater precision what is being asserted in a given study. The specific target of the examination is the interpretive study by Dent [Dent, J. F. (1991). Accounting and organisational cultures: A field study of the emergence of a new organisational reality. Accounting, Organisations and Society, 16, 693–703], which is one of the highly appreciated and extensively quoted pieces of research picked from the interpretive management accounting literature. Our analysis indicates that though there certainly are, and needs to be, unique subjectivist features in interpretive studies as compared to more ‘objectivist’ approaches, there are also important similarities, and that the view of sociological paradigms as necessarily mutually exclusive does not hold water. Hence interpretive research straddles between paradigms. As we argue that interpretive studies, in addition to including subjectivist elements, also encompass objectivist features, we invert the typical social theory critique of ‘scientific’ (management) accounting research that it cannot be an objective ‘mirror of reality’ by claiming that interpretive studies cannot be exclusively subjectivist and still they remain theoretically relevant. Our philosophically tuned analysis explicates how concepts from different paradigms, such as interpretations, understanding meanings, and causality, can successfully co-exist and co-operate within a single study.     

Parisian ruin probability with a lower ultimate bankrupt barrier

The paper deals with a ruin problem, where there is a Parisian delay and a lower ultimate bankrupt barrier. In this problem, we will say that a risk process get ruined when it stays below zero longer than a fixed amount of time ζ > 0 or goes below a fixed level ?a. We focus on a general spectrally negative Lévy insurance risk process. For this class of processes, we identify the Laplace transform of the ruin probability in terms of so-called q-scale functions. We find its Cramér-type and convolution-equivalent asymptotics when reserves tends to infinity. Finally, we analyze few explicit examples.     

The role of annual reports in gender and class contradictions at general motors: 1917–1976

This paper argues that studies of female exploitation frequently pay too little attention to the broader social context; particularly alienation and crises in the development of late capitalism. This criticism applies with equal force to the domestic labor/housework studies and labor process studies and labor process studies where male domination is often advanced as the primary explanatory variable in accounting for female oppression. Even where labor process researchers have emphasized mediating affects on partiarchial influences (technology and control processes for instance; c.f. Milkman, Politics and Society, pp. 159–203, 1983), we argue that the broader context of alienated capitalist social relations is frequently understated.Female subordination under capitalism is traced to two primary sources in this study: First, that part of the labor process where the existence of female labor facilitates surplus value appropriation by playing the part of an “industrial reserve army” (sometimes “latent”, at other times “floating”). Second, in times of overproduction and underconsumption, capital has invented a consumerist ideology about women to help resolve its crisis of realizing surplus value. Only by seeing these different instances of female oppression as part of a larger, mutually reinforcing configuration of “instances” — emanating from capitalist social relations — are we likely to begin to adequately comprehend the resilience of social ideology concerning women and develop effective political and social counter-strategies.In this research, the above considerations are explored using evidence from a longitudinal study of General Motors where the annual reports are used to monitor the evolution of managerial ideology vis-a-vis women over some sixty years. We see in this study how the manner of women's exploitation changes with changes in the crises facing capitalism.The implications of the study are severalfold: Firwt, we see how a socially “unreflective” view of “management” and “management control systems” may lead to practices that are oppressive and exploitative. Second, we find “the labor process” to be an important but insufficient conceptual terrain for understanding women's oppression; instead we propose that the starting point of any analysis should be capitalist alienation. Third, this work has implications for the various controversies about class essentialism and the primacy of class. (Wright, New Left Review, pp. 11–36, 1983; Giddens, Central Problems in Social Theory: Action, Structure and Contradiction in Social Analysis, 1979; Miliband, New Left Review, pp. 57–68, 1983; Tinker, Journal of Accounting and Public Policy, pp. 1–20, 1984). as well as the relation between male domination and class oppression (Fox-Genovese, New Left Review, pp. 5–29, 1982, Goldelier, New Left Review, pp. 3–17, 1981) in that it examines the interplay between class and other forms of domination. Lastly, we see how annual reports may contribute to a general “world view” that aids social appropriation and domination.     

The future of human consciousness

It is remarkable that few serious thinkers have speculated in public about the possible future forms that our species might take. A few Western philosophers and scientists—Nietzsche, ¹ Teilhard de Chardin ² and Yoneji Masuda ³—have touched on the next stage of evolution. In the East, others such as Sri Aurobindo ⁴ have interpreted contemporary transformations of society and culture as a cyclical manifestation of the upward spiral of human consciousness. The only genre of literature that seems to touch systematically on this matter has been science fiction—a professionally safe genre. There is no certainty of prediction required, only speculation about potentialities and possibilities—alternative futures and future alternatives. This article outlines a structural view that anticipates what may result from the complexification and reorganization of human consciousness.     

Optimal Annuitization Policies

Abstract

At, or about, the age of retirement, most individuals must decide what additional fraction of their marketable wealth, if any, should be annuitized. Annuitization means purchasing a nonrefundable life annuity from an insurance company, which then guarantees a lifelong consumption stream that cannot be outlived. The decision of whether or not to annuitize additional liquid assets is a difficult one, since it is clearly irreversible and can prove costly in hindsight. Obviously, for a large group of people, the bulk of financial wealth is forcefully annuitized, for example, company pensions and social security. For others, especially as it pertains to personal pension plans, such as 401(k), 403(b), and IRA plans as well as variable annuity contracts, there is much discretion in the matter.

The purpose of this paper is to focus on the question of when and if to annuitize. Specifically, my objective is to provide practical advice aimed at individual retirees and their advisors. My main conclusions are as follows:

? Annuitization of assets provides unique and valuable longevity insurance and should be actively encouraged at higher ages. Standard microeconomic utility-based arguments indicate that consumers would be willing to pay a substantial “loading” in order to gain access to a life annuity.

? The large adverse selection costs associated with life annuities, which range from 10% to 20%, might serve as a strong deterrent to full annuitization.

? Retirees with a (strong) bequest motive might be inclined to self-annuitize during the early stages of retirement. Indeed, it appears that most individuals—faced with expensive annuity products—can effectively “beat” the rate of return from a fixed immediate annuity until age 75?80. I call this strategy consume term and invest the difference.

? Variable immediate annuities (VIAs) combine equity market participation together with longevity insurance. This financial product is currently underutilized (and not available in certain jurisdictions) and can only grow in popularity.     

The demonetization of gold: transactions and the change in control

Three models of a monetary economy are considered, in order to show the effects of a gold demonetization: the first with a gold money, the second with demonetized gold but no central bank, and the third with demonetized gold, but with a central bank. The distinctions between ownership and control are discussed. Our results show a gain in efficiency (in the case of “enough money”) when a switch is made from a durable commodity money to a fiat money. This is due to players being able to enjoy both the full service value of gold and transactions value of money—something that cannot be done in the original model with gold money. When we further add in the central bank, there is a somewhat further efficiency gain in the case of “not enough money”. We close the paper with a discussion of the usefulness of central banks.