Just a Matter of Prospect (Theory)? - The Ecological Rationality of the Traditional Accounting Principles
AbstractThe principles characterizing the traditional revenue-expense approach to accounting have never been “invented.” They are an institution that is the result of social evolution, not of human design. Therefore, the efforts to defend them against the balance sheet approach endorsed by standard-setters have encountered severe difficulties. The latter is based on a coherent model of the economy, namely neoclassical economics. This paper argues that a solid basis for explaining the rationale of the traditional accounting principles can be found in behavioral economics, especially in Prospect Theory. If one combines this result with a market process view of the economy, the revenue-expense approach turns out to be congenial to the organization of the market economy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal) in its series TUC Working Papers in Economics with number 0012.
Length: 23 pages
Date of creation: 2014
Date of revision:
Contact details of provider:
Postal: Julius-Albert-Str. 2, 38678 Clausthal-Zellerfeld, Germany
Phone: +49 5323 727625
Fax: +49 5323 727639
Web page: http://www.wiwi.tu-clausthal.de/abteilungen/volkswirtschaftslehre/
More information through EDIRC
Financial Accounting; Prospect Theory; Fair Value; Historical Costs;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- M48 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ACC-2014-03-30 (Accounting & Auditing)
- NEP-ALL-2014-03-30 (All new papers)
- NEP-CBE-2014-03-30 (Cognitive & Behavioural Economics)
- NEP-HME-2014-03-30 (Heterodox Microeconomics)
- NEP-HPE-2014-03-30 (History & Philosophy of Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vernon L. Smith, 2003.
"Constructivist and Ecological Rationality in Economics,"
American Economic Review,
American Economic Association, vol. 93(3), pages 465-508, June.
- Smith, Vernon L., 2002. "Constructivist and Ecological Rationality in Economics," Nobel Prize in Economics documents 2002-7, Nobel Prize Committee.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janis Kesten-Kühne).
If references are entirely missing, you can add them using this form.