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Perfect information freely available at no cost
As discussed in 1.2.6, the availability of perfect information is a central theme of the neoclassical model (Samuels 1990: 9, Ashton, Hopper and Scapens 1991:4). Marshall (1920:341) suggested that every dealer who has a perfect knowledge of the circumstances of the market expects the equilibrium price to be established.
When asked in questions 6.4, 6.5 and 6.6, how often they applied management accounting techniques that allow for risk, 64% of the respondents to this question indicated that they applied simulation annually or less often than annually, 58% applied sensitivity analysis annually or less often than annually and 64% used expected values annually or less often than annually. Simulation allows for risk by considering probability distributions for various factors that might affect the outcome of a decision, whilst sensitivity analysis takes risk into account by assessing how responsive the outcome of a decision is to changes in the variable considered (Drury 1992:404-405). Expected values are calculated by weighing possible outcomes by its associated probabilities, thus providing for risk (Drury 1992:322).
Minimal government intervention
Marshallian neo-classical economics expects the market process to ensure an optimal and equitable distribution of resources among all the members of society, whilst working towards their own individual interests (Oser and Brue 1988:214,272, Marshall 1920:712-3) (cf. 1.2.7).
When respondents were asked in question 12 what level of government intervention they thought would be best for society as a whole, 10% of the respondents to this question felt that no government intervention will be best, 72% felt that a minimal amount of intervention will be optimal, whilst 18% preferred a moderate amount of intervention. None of the respondents favoured extensive intervention.
Respondents were also asked in question 13 whether they think that the way resources are distributed by means of the free market is fair. 8% of respondents to this question thought that is was completely fair, 81% thought that it was mostly fair, whilst 10% viewed it as mostly unfair. Only 1% thought that it was completely unfair. It appears from the above results that the vast majority of respondents support the Marshallian neo-classical approach which suggests that government intervention should be minimal and that the free market will mostly result in a fair distribution of resources.
It appears from the response as if the management accounting practitioners deem a minimal level of government intervention as best for society as a whole.
Much free competition
The classical, marginalist and initial neo-classical economic approaches suggested that inefficiencies by organisations would lead to other competitors entering the market and driving out inefficient producers (Ashton, Hopper and Scapens 1991:7). Perfect competition in the market would thus lead to the optimal and appropriate allocation of productive resources. Marshall (1920:341) did not suggest “perfect competition”, but rather assumed a state of “much free competition” (Backhouse 1985:97-98, Reisman 1986: 127, cf. 1.2.8).
The design of question 14 takes into account that practitioners might not clearly understand the use of the phrase “much free competition” or the distinction between “much” and “perfect competition”. Instead they were asked to indicate whether they thought competition made a 1) predominant, 2) important 3) limited or 4) insignificant contribution to the functioning of the free market. 34% of the 131 respondents thought it played a predominant role and 63% deemed the role of competition to be important. Only 3% thought that it made a limited contribution, and no respondents thought it played an insignificant role. Although the results do not allow us to make a conclusion about Marshall’s “much free competition”, it appears that management accountants in South Africa do believe that competition plays an important, but not a predominant, role in the functioning of the free market.
Introduction
1 The characteristics of Marshallian neo-classical economics
2 The influence of Marshallian neo-classical economics on management accounting practice in South Africa
3 The influence of Marshallian neo-classical economics on the historical development of management accounting practice and theory
4 The influence of Marshallian neo-classical economics on management accounting theory
5 The influence of Marshallian neo-classical economics on management accounting education in South Africa
Conclusion
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