Critical Perspectives on Accounting (1992) 3,99-l 07

PREDICTION AND CONTROL IN ACCOUNTING

“SCIENCE”
PAUL F. WILLIAMS
Department of Accounting, North Carolina State University

“Economists tell stories in their science, which is no complaint. Everyone

tells stories, the toddler telling about the scraped knee and the paleon-
tologist telling about the panda’s thumb. A story can be good or bad. When
it isbad in economics or other fields of expertise it can do damage. In the
worst case the storyteller views the story as “stylized facts” or “approxima-
tions of the good” or something else free from critical attention. The
uncriticized story is not worth living” (McCloskey, 1990, p. vii).

Introduction
Among accounting scholars and scientists, few (if any) have so unques-
tionably earned the right to speak about research as the three persons before
me. Respectfully, I offer my two-cents worth, not as critique, but as another
perspective on the issue(s) at hand. It is the hope of the editors that others will
join in and use the section “Critical Commentaries” as a place in which to
discuss our differences in a spirited, yet reasoned, way.
The exchange between Cooper/Zeff and Kinney represents a variation on a
debate, perhaps the debate, that has its counterparts in every other academic
discipline. (“Disciplines” are in turn a symptom of philosophy’s failure to
resolve that debate.) The debate, too often an argument, is about epistemol-
ogy or how a field, in our case accounting, justifies its knowledge claims. We
are all aware of the Popperian attempt to demarcate science from conjecture
through the use of the criterion of refutability (Popper, 1968; Christenson,
1983; Hines, 1988). This is one example of the general attempt by philo-
sophers to elevate some knowledge as scientific (and thereby credible and
legitimate) and other knowledge as non-scientific.
In its Statement on Accounting Theory and Theory Acceptance, the AAA
(1977) acknowledged that accounting researchers had as yet been unable to
adopt a single “paradigm” (a Kuhnian way to describe justifying knowledge
claims). Cooper and Zeff take issue with Kinney’s (1986) prescription for
justifying accounting knowledge claims as being too narrow. Their primary
complaint is that a narrow conception inhibits the development of new
hypotheses. Also, for them, appeal to positive science fails to address the
important issue for a profession of how to improve its practices. Kinney
responds by noting his intention was to write a tutorial on empirical research
planning, a more limited objective than that attributed to him by Cooper/Zeff.
But he does go on to add that empirical research designs prescribed by “well
Address for correspondence: Dr Paul Williams, Department of Accounting, North Carolina
State University, Box 8113, Raleigh,’ North Carolina 27695-8113, USA.
Received 7 7 March 7997; revised 30 July 7997, 28 August 7997; accepted 4 September 7997.
99
1045-2354/92/010099 + 09 $03.00/O @ 1992 Academic Press Limited
100 P. F. Williams

formulated” theories are useful for improving practice. Theories are tools to
solve‘practical problems.
The quote from Donald McCloskey at the head of this comment was
selected because it provides a perspective on two general observations about
the Cooper/Zeff and Kinney exchange that I wish to make. We accountants
talk in particular ways about ourselves and about the world we all inhabit,
And the way we talk (our rhetoric), particularly in the academy, has changed
over the years. The essence of the debate between Cooper/Zeff and Kinney is
a disagreement over how accountants in the academy should tell accounting
stories. Cooper and Zeff prefer an older way of speaking, filled with the idioms
of business and accounting practice and respectful of the experiential
knowledge of practitioners. Kinney prefers more modernist or scientistic
language, a language McCloskey (1985) describes in his book titled The
Rhetoric of Economics. Indeed, Cooper/Zeff refer rather explicitly to this
quality of Kinney’s rhetoric when they note (p. 89): “The theory referred to
is “substantive theory” as exemplified by variants and derivatives from the
‘rational man hypothesis’ in economics.” And Kinney’s reply is replete with
adjectives that describe scientific activity as “economical” and “cost
effective”, implying even perhaps an economic theory of accounting science.
At the origin of economic science, accounting was its metaphor (Klamer &
McCloskey, 1989). Ironically, accounting science appears to have opted for an
economic metaphor in a variation of the old child-becomes-the-teacher story.
The language of modern, “scientific” economics, the assumptions of that
economics, the theories of that economics, and the methods of scientific
economics have intruded themselves extensively into accounting discourse.
Cooper and Zeff argue that a consequence of this intrusion is the substitution
of rigidity for rigor with a corresponding loss in the ability to be creative in our
approaches to improving the practice of accounting. Cooper and Zeff are
criticizing a modernist view of science. This view of what makes an activity
scientific is the prevailing one in the social sciences, not just economics. My
comment is directed at describing two additional considerations not explicitly
mentioned by Cooper and Zeff or Kinney, though perhaps implied, that need
to be made explicit in order to appreciate more fully what is at stake in the
debate over validating claims to accounting knowledge.
In Table 1 are, verbatim, the Ten Commandments of modernism as
described by McCloskey (1985). These “rules of science” describe the view of
science Kinney espouses in his 1986 article (Arrington, 1990). My comments
pertain primarily to commandment one. There are two potential problems for
accounting in a control view of its “science”. One is practical, the other
ethical. These problems are described in turn.

A Practical Problem with Modernist Accounting

The practical problem with the prediction for control view of accounting
science is a very simple, yet probably devastating one, namely, we can’t
predict. Many social sciences have adopted the same philosophy as the
natural scientist, meaning social science theories should have the same
logical form as theories from the natural sciences. If this is the desideratum,
 Prediction and control in accounting “science” 101

Table 1. The Ten Commandments of modernism (quoted from McCloskey, 1985, pp.
7-8)

1. Prediction and control is the point of science.

2. Only the observable implications (or predictions) of a theory matter to its truth.
3. Observability entails objective, reproducible experiments; mere questionnaires interrogating
human subjects are useless, because humans might lie.
4. If and only if an experimental implication of a theory proves false is the theory proved false.
5. Objectivity is to be treasured; subjective “observation” (introspection) is not scientific
knowledge, because the objective and the subjective cannot be linked.
6. Kelvin’s Dictum: ‘When you cannot express it in numbers, your knowledge is of a meagre
and unsatisfactory kind.“.
7. Introspection, metaphysical belief, aesthetics and the like may well figure in the discovery of
an hypothesis but cannot figure in its justification; justifications are timeless, and the
surrounding community of science irrelevant to their truth.
8. It is the business of methodology to demarcate scientific reasoning from non-scientific,
positive from normative.
9. A scientific explanation of an event brings the event under a covering law.
10. Scientists-for instance, economic scientists-ought not to have anything to say as scientists
about the oughts of value, whether of morality or art.

the social sciences are without distinction. As Maclntyre (1984, p. 88) puts it so
succinctly about all of the social sciences: “For the salient fact about those
sciences is the absence of the discovery of any law-like generalizations
whatsoever.“.
Economics is in no better position than any other social science as far as its
predictive capabilities. Thurow (1983, p. 19) has stated flatly that economics is
not an experimental science. Chastising his fellows, he observes (p. 20): “If
economists are to be charged with any crime, it is not that of knowing too
little relative to what they can know, but with the crime of being too certain
about what they think they do know.“. McCloskey also argues (1985, p. 15) that
economics is not a predictive science. And Georgescu-Roegen (1971) claims
that economics is not even a theoretical science because the phenomenon
with which it deals is driven to a large extent by novelty. By novelty,
Georgescu-Roegen means those phenomena that have never happened
befdre and will not happen again, e.g. the invention of television. His
castigation of his fellows is less generous than Thurow’s, i.e. (p. 325), “The
egregious sin of the standard economist is of another kind. Because he denies
the necessity of paying any attention to the evolutionary aspects of the
economic process, he is perforce obliged to preach and practice the dogma
that his theory is valid in all (emphasis in original) societies.“.
If accounting researchers assert they are using theories as tools to solve
accounting problems, they have a rather serious problem at the start if they
also contend that the tool is being used predictively, since the predictive
power of these theories is so small. What role do the theories guiding
accounting research play if not to increase the power to control through
prediction? Their role may be largely rhetorical; they are believable stories.
The implicit behaviour of accounting researchers is not inconsistent with the
story-telling quality of theory use in accounting.
Accounting science is largely experimental; it is empirical research. And,
experimental science is the testing of theories. Empirical accounting seldom,
102 P. F. Williams

if ever, is engaged in testing accounting theories. It is, instead, mainly

engaged in applying theories from other social sciences, mostly economics, to
phenomena that can be loosely labeled “accounting”. None of the major
theoretical tools Kinney mentions are accounting’s own; they belong to other
discourses. This is true of efficient market theory, agency theory, information
economics, behavioural decision theory and assorted other less popular (with
accountants) theories imported from other social sciences.
So the question arises whether empirical researchers in accounting are
actually testing theories. The answer is, for the most part, no. Empirical
research in accounting is not aimed at some kind of Popperian falsification of
theories for the primary reason that accountants are not a significant part of
the community of scholars whose theories and discourses they are borrow-
ing. Accountants are not part of those conversations. It is unlikely that any
study done in an accounting context will produce a revision in any of the
theories informing those accounting studies.
What then are accounting researchers doing when they conduct empirical
research? Mainly what they do is use theories to interpret their results, to
explain what their observations mean. For example, the use of principal/agent
theory in accounting to explain managers’ choices of accounting procedures
has produced rather unimpressive results for the theory as a predictive one.
Such experimental results in the physical and biological sciences would likely
prompt some efforts at theory modification. But accounting scientists seem
unperturbed; results always fit the theory because the theory is not being
tested, but is instead being used to shape the empirics into a coherent story.
Indeed, the theory, simply by virtue of its importation into accounting as a
“tool” to help solve practical problems, becomes “confirmed”. To be a useful
tool, the borrowed theory must be believed. It is already a true story for, if it
isn’t true, the experimenter is unable to provide any coherent explanation of
his/her results. In accounting, theories play almost exclusively a rhetorical
role. They do not provide explanations based on the ability to predict. They
explain because they appear to a lot of us to be plausible stories.
The practical danger with conducting all empirical research this way is that
the theories can all too easily turn to dogma. Since they are always “true”,
they are stories we can never criticize. And if we are not permitted to criticize
them, they can seriously inhibit our ability as a practice to create new stories,
to invent new images of what accounting is or can become. The academic
side of accounting threatens to disable the practicing side because it stands in
judgement over how practice describes itself, all without any “scientific”
authority to back it. Accounting academics’ stories are not necessarily any
better than practitioners’ stories. Evaluating the goodness of a story should
probably not be the sole province of either group. Perhaps more effort is
required by academics and practitioners to intermingle as equals and be
willing to abide more forthcoming, even if acrimonious, conversation.

The Ethical Problem with Modernist Accounting

In addition to the consideration of the practical difficulties of the control view
of science, there is also an ethical one. Natural sciences aim to understand
 Prediction and control in accounting “science” 103

nature, at least partly to control it. If the image of natural science is the image
adopted by most social scientists, what do they intend to control? Since the
subject matter of social science is humanity, humanity is what the social
scientist must intend to control. This places upon the social scientist an ethical
burden heavier than that on the natural scientist since the effects of his/her
work always have normative implications. It is this ethical bind which gives lie
to the distinctions between “positive” and “normative”.
The peril of a prediction for control view of accounting science is that it
creates the illusion that accounting can be thought of in strictly technica!
terms. McCloskey (1990) characterizes this peril as follows:
“The experts claim that their stories are ‘positive, not normative,’ ‘is’
instead of ‘ought,’ the way things are as against how they should be. The
claim is at the center of modernism. But stories carry an ethical burden.
Concealing the ethical burden under a cloak of science is the master move
of expertise, the secret ingredient of the snake oil” (p. 135).

The importation into accounting of the scientific discourse of economics

exposes accounting as a practice to the potentially bad side effects of
ingesting the snale oil in large doses. I have elaborated on some of these
dangers elsewhere (Williams, 1987). The particular consideration relevant to
this comment is the problem posed for accounting as an ethical practice by
our taking the economic stories so seriously that we begin to act them out in
“real-life”.
The philosopher Stephen Toulmin (1986, p. 130) has described a distinction
between scientific judgements and ethical ones as follows:
“The function of scientific judgements is to alter one’s expectations; that of
ethical judgements, by contrast, is to alter one’s feelings and behavior”.

In other words, science is concerned with questions of the form “What

should one expect?“. Ethical questions take the form “What is the right thing
for one to do?“. The discussion in the previous section leaves us less than
sanguine about our ability to answer questions about what to expect.
Accounting as a science has not been particularly successful in prediction
using the tools it has borrowed. But what of the ethical questions accounting
must answer, for it certainly has some.
That there are ethical questions in accounting is beyond dispute. For
example, William Beaver and Joel Demski (1974, p. 184), commenting on an
article by Gonedes and Dopuch (1974), rather matter-of-factly note: “Of course,
none of this research will-in and of itself- resolve the fundamentally ethical
question of how preferences should be weighted across individuals in
determining financial reporting policies.“. Financial reporting is fundamentally
an ethical problem (as are most other accounting problems), since what is
involved are choices and any choice is ethical in that it involves the values
that are to be “maximized”. But the economic stories that academic account-
ants are telling that claim to be positive, that claim to tell us the way the world
is, are making it increasingly more difficult for us to deal with our ethical
questions. They do ‘SO by more than just begging the question, but by
depriving our ethical language of its force in the following way.
One fundamental assumption of economic science concerns human nature,
104 P. F. Williams

i.e., what is it to be a human being? Accounting scientists have adopted the

one provided by economics: we are self-seeking wealth maximizers. When
accountants tell stories about themselves and others, the characters are all the
same. They are creatures described as follows (Schwartz, 1986, p. 313):
1. The things that people value are individual, idiosyncratic, and
incommensurable.
2. People always value and want something.
3. People can express preferences among all commodities.
4. They prefer more of something to less.
5. They prefer low prices to high ones.
6. They have relatively stable preferences.
7. They have transitive preferences.
8. Their preferences obey the law of diminishing marginal utility.
9. They choose with complete information.
10. They always choose that set of goods available that maximizes their
preferences, subject to the constraints of their resources.
In short, they are homo-economicus, the rational economic man.
This image of humans is indispensible to many versions of accounting
science. But accounting scientists are also the educators of accountants and it
is this assumption about humans which students learn about themselves and
others when they study accounting in the academy. Myths, parables, sagas,
etc. are important devices used by cultures to provide members of that culture
with an identity. Professions are cultures which inculcate members with an
identity partly through use of these same devices. In a substantial way, we are
the stories we tell about ourselves. The way in which accounting’s assump-
tion about human nature deprives accounting of its ability to ask ethical
questions about itself is by depriving its language of ethical meaning. The
following example will illustrage the point.
The philosopher Alisdair Maclntyre (1984) has described and attempted to
explain the dissolution of ethical language in contemporary society by taking
us back to the classical world within which ethical language had meaning.
Maclntyre claims that ethics resides in virtues and that virtues are meaningful
within the context of what he calls practices. He defines a practice as
,, . . . any coherent and complex form of socially established cooperative
human activity through which goods internal to that form of activity are
realized in the course of trying to achieve those standards of excellence
which are appropriate to, and partially definitive of, that form of activity,
with the result that human powers to achieve excellence, and human
conceptions of the ends and goods involved, are systematically extended”
(p. 187).
Such practices are sustained by virtues.
Francis (1990) has argued that accounting is just such a moral and
discursive practice with certain virtues as its internal rewards. Does account-
ing really have such virtues, or at one time believe it did? At least at one time
in the past it appears that accounting did believe in its virtues and one of the
pre-eminent ones it believed it understood was independence.
Thirty years ago, Mautt and Sharaf (1961) published The Philosophy of
Auditing. In it they devoted an entire chapter (Chapter 8) to “Independence.”
They quoted a number of sources in an attempt to define or describe what
 Prediction and control in accounting “science” 105

independence meant. Many years later, Rick Antle (1984) attempts to provide
a more precise definition of independence relying on formal economic models
because, the “. . . lack of a useful definition of independence stems from the
fact that previous attempts at definitions were not made within the context of
formal, articulated models.” (p. 2). If we contrast these two discourses on
independence, the effect of the modern way to tell accounting stories on the
ethical meaning accountants can give to what they do is evident. Table 2
contains a juxtaposition of the descriptions of independence Mautz and
Sharaf provided and those provided by Antle.
The notable feature of the descriptions offered by Mautz and Sharaf is that
they are of a quality, a character trait that is possessed by an individual
accountant. Independence is a defining characteristic or “virtue” of the good
practitioner.
Antle evokes the standard assumption of economics about human nature
that permits the construction of models that are alleged to provide the more
precise definition of the concept sought by Antle by linking independence
with economic self-interest. The most important thing to be noted about
Antle’s depiction of independence is that a more precise definition of
independence has not been provided. Instead, the very idea of independence

Table 2. Descriptions of independence

Mautz and Sharaf (1961) Antle (1964)

E. f3. White
It is a requirement unparalleled in any This lack of a useful definition of
other field. It places such demands on the independence stems from the fact that
integrity of the accountant that there are previous attempts at definitions were
those who doubt that it is or can be not made within the context of formal,
achieved, yet the very prestige of the articulated models (pp. l-2).
accounting profession today is evidence
that it is achieved fp. 204).

John L. Carey
It is a part of professional integrity. No Since auditor independence concerns
self-respecting physician, lawyer or cer- the relationship between the auditor
tified public accountant will subordinate and manager, this modeling of the
his professional judgement to that of the auditor and manager is necessary to
client of anyone else. It is part of his address meaningfully the concept of
professional duty to assume responsibility auditor independence. The crucial
for the advice, the opinions, and the re- issue is the extent to which the audi-
commendations which he offers, and he tor cooperates with manager in pur-
cannot shift this responsibility (p. 205). suit of their self-interests (p. 2).

It is important that the CPA not only shall The auditor is strongly independent
refuse to subordinate his judgement to (emphasis in original) if s/he plays the
that of others but that he be independent Nash equilibrium most preferred by
of any self-interest which might warp his the owner in the subgame defined by I
judgement even subconsciously in report- (p. 8).
ing whether or not the financial position
and net income are fairly presented (p. The auditor is independent (emphasis
206). in original) if s/he is willing to play
any dominant strategy in the sub-
game induced by I fp. 9).

The quotes of E. 6. White and John L. Carey that appear are all as they appeared in
The Philosophy of Auditing. The original sources are given by Mautz and Sharaf.
106 P. F. Williams

has been radically transformed by the modernist discourse of economics.

independence no longer refers to a virtue possessed by a practitioner; it is
now a commodity disembodied from any particular practitioner at all. As
Mautz and Sharaf appeared to understand it, possessing independence is to
be a professional accountant; possessing independence in the sense in which
many in the academy now understand it is to be maximizing some expected
value. Independence is no longer something to be committed to, no longer
something one is; it is now something one calculates. The new economic tale
we tell about independence strips the concept of its imperative force. How
does one instruct an accounting student to “Be independent!” when the new
conception permits the rejoinder “But how much?“.
When doing accounting science, as the above example illustrates, account-
ants must be very careful to avoid the unconscious substitution of a term from
a theoretical domain into a practical one. Terms and assumptions of theories
needn’t be descriptively valid. If a theory constructed to predict auditor
behavior vis-a-vis their manager clients requires certain assumptions and
alternate use of common language, so be it. But, in the classroom, it can
become all too easy to teach the assumptions as an ethic. We can make the
assumptions desciptively valid by not providing alternative descriptions to the
people learning to become accountants.

Conclusion
The purpose of this comment is to identify a couple of additional considera-
tions suggested by the exchange between Cooper/Zeff and Kinney. The moral
is that accountants be careful with the stories they tell because knowing the
truth is not anyone’s exclusive province. This moral is particularly important
for those who are powerful. In the academy it behooves journal editors (who
act as gatekeepers for new accounting knowledge) to be a bit more modest
and broad in their conception of good research because their odds of knowing
the “truth” are so low. It behooves teachers of accounting to persuade
students that self awareness, curiosity and tolerance are important qualities
for accountants. And, PhD students need to appreciate that empirical account-
ing research can take a variety of forms and that all endeavors, including their
own, have important ethical components.
I opened this comment with a quote from McCloskey; somehow my urge
for symmetry suggests I also close with one:
“What is good for science now, to recur to an earlier theme, is good
scientists, in most meanings of ‘good.’ A rhetorical criticism of economics
(substitute accounting) can perhaps make economists (substitute account-
ants) more modest, tolerant, and self-aware, and improve one of the
conversations of mankind” (1985, p. 53).

The paper by Cooper and Zeff was first circulated in January 1987, however, because
Bill Cooper was Director of Publications of the American Accounting Association
between August 1987 and August 1989, the paper was withheld from submission to
avoid giving the impression that it represented the views of that office. The paper
should in no way be construed as a reaction to the recent spate of recantations by a
number of luminaries in the accounting academic field.
 Prediction and control in accounting “science” 107
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