THE UK ECONOMY: ANALYSIS AND PROSPECTS

In this section of the review, Oxford Economic Forecasting providesan analysis of the current economic climate in the UK and abroadas well as setting out the main features of its latest forecast.In Section II the UK forecast up to 1988 is described. In SectionIII, following the theme of this issue, we analyse the effectsof changes in trend productivity growth on the UK economy.     

Book Reviews

Official Reserves and Currency Management in Asia: Myth, Reality and the Future: Geneva Reports on the World Economy 7 by HANS GENBERG, ROBERT McCAULEY, YUNG CHUL PARK and AVINASH PERSAUD (London: Centre for Economic Policy Research, 2005), pp. 128, £25.00 paperback, ISBN 1 898128 90 1. Growth, Inequality and Poverty: Prospects for Pro‐Poor Economic Development by ANTHONY SHORROCKS and ROLPH VAN DER HOEVEN (eds.) (Oxford: Oxford University Press, 2005), pp. 283, paperback, ISBN 0 19 928824 2. Competition and Growth: Reconciling Theory and Evidence by PHILIPPE AGHION and RACHEL GRIFFITH (Cambridge, MA: MIT Press, 2005), pp. 104, £18.50 hardback, ISBN 0 262 01218 9. The World Trade Organization. A Very Short Introduction by AMRITA NARLIKAR (Oxford: Oxford University Press, 2005), pp. 175, £6.99, paperback, ISBN 0 19 280608 4.     

Avoiding Accounting Fixation: Determinants of Cognitive Adaptation to Differences in Accounting Method*

Much research over the last 30 years has provided evidence that individuals display accounting fixation; that is, their cognitive process does not appropriately adapt to cross‐sectional or temporal differences in an accounting method. This paper presents the results of a quasi‐experimental test of the hypothesis that cognitive adaptation to a change in accounting method is an ordinal interactive function of three person characteristics: relevant accounting knowledge, general problem‐solving ability, and intrinsic motivation to appropriately engage in the decision task. Based on a product‐pricing decision task in which participants are provided with product costs reported by two generally employed product‐costing methods (activity‐based costing [ABC] and volume‐based costing), the results show that the majority of participants did not change their cognitive behavior when there was a change in the costing method. Further, those participants who did adapt to the change in accounting method, and thus avoided accounting fixation, did so by debiasing costs reported by volume‐based costing but not by ABC. Finally, these adapters generally exhibited high values for all three of the person characteristics compared with those who did not adapt.     

Professionalization in Action: Accountants' Attempt at Building a Network of Support for the WebTrust Seal of Assurance*

This paper examines the attempts by the North American accounting institutes to develop a new market in e‐commerce assurance based on their claims to professional expertise through the WebTrust project. Employing actor‐network theory in an in‐depth longitudinal field study, we investigate how WebTrust was originally developed and promoted as a seal of business‐to‐consumer assurance, which largely failed to generate support in the marketplace. Proponents were subsequently able to generate more interest in the eyes of managers of online organizations by reshaping WebTrust as a flexible set of principles and criteria for systems advice and business‐to‐business assurance. Our analysis suggests that attempts to expand the accounting profession's domain of expertise reflect a trial‐and‐error process where the outcome achieved may be far from the vision that motivated the institutes into undertaking the project in the first place. We further show that the initial network of support for such projects can be quite fragile and dynamic as various actors reposition themselves around the shifting meanings attributed to the project.     

JIT Adoption: The Effects of LIFO Reserves and Financial Reporting and Tax Incentives*

Using matched samples of JIT adopters and nonadopters, we examine the association of JIT adoption with firms' financial reporting and tax incentives, earnings‐management histories, and LIFO reserve levels. We find evidence that adoption decisions are influenced by the interaction of firms' LIFO reserves with their income smoothing, debt covenant, and tax incentives. We also find that adoption is less likely for firms historically engaging in high degrees of earnings management, particularly when such firms have no substantial LIFO reserves. Our study extends earlier research demonstrating a relation between inventory valuation method and year‐end inventory transactions, and documents a relation between earnings‐management incentives and a fundamental supply‐chain design choice.     

A Labour Monopolies Commission to Reduce Unemployment

Mr Tebbitt's proposals to reduce union obstructiveness have not taken account of their power as monopoly suppliers of labour. A pressing priority for the current session of Parliament should be the introduction of legislation to eradicate legal privilege which does not reflect market reality.