Gary C. Biddle, [Discussion of Accounting Methods and Management Decisions: The Case of Inventory Costing and Inventory Policy]: A Reply, Journal of Accounting Research, Vol. 18, Studies on Economic Consequences of Financial and Managerial Accounting: Effects on Corporate Incentives and Decisions (1980), pp. 292-295

This study investigates whether associations consistent with LIFO-FIFO tax incentives exist between management choices to adopt or not adopt the LIFO inventory costing method and characteristics of firms' year-end inventories. Both pre- and postchoice characteristics are ex- amined. Because the LIFO-FIFO choice is voluntary, a postchoice association would be consistent with managers both anticipating future inventory characteristics when making a LIFO-FIFO choice and changing inventory management policies in response to that choice. Evidence consistent with the hypothesis that LIFO adoptions are associated with changes in inventory management policies would have important macroeconomic implications. Zarnowitz and Moore [1977] have argued that a failure to recognize the major shift in inventory costing methods which occurred in 1973 and 1974 (primarily FIFO to LIFO) resulted in an underestimation of inventory accumulations by the U.S. Department of Commerce. This underestimation resulted from the different procedures used under LIFO and FIFO to assign costs to inventory units. While this effect of LIFO-FIFO choices can bias macroeconomic measurements and forecasts, an associated change in inventory management policies by a large number of firms could directly affect underlying macroeconomic stocks and flows.

As a non-Walrasian system tracks through the phase space, the differential equations which govern its motion will typically change as the system crosses certain borders. This increases the complexity of the stability problem considerably. In the present paper we find that some straightforward modifications to Lyapunov's method render the problem tractable. These methods are derived, and their use is illustrated in the case of two different systems which have trading out of equilibrium. 1 . THOUGH ECONOMISTS HAVE BEEN INTERESTED in the stability on non-Walrasian systems at least since Clower's paper' over a decade ago, we have yet to get very far with the inquiry. There may be a number of reasons for this, but the most important seems to be that we have not yet fully appreciated the differences between the methods of analysis suitable for studying the stability of Walrasian and non-Walrasian systems. It is widely known that the primary distinction between the two systems is that quantities actually traded enter as arguments in the non-Walrasian excess demand functions. These quantities will sometimes be demand quantities and sometimes supply quantities, depending upon the overall state of the markets-but then this implies that the excess demand functions themselves will be changing as the system moves through time and that the system itself is not everywhere differentiable. Take, for example, an output supply function which depends upon the actual quantity of labor hired. If the actual quantity hired is the lesser of the quantities supplied and demanded, then under the usual assumptions the partial derivative of output supply with respect to the price of labor will sometimes be positive, sometimes negative, and sometimes non-existent, depending upon whether the demand for labor is greater than, less than, or equal to the supply. What we have in effect is a dynamic system which has its endogenous variables sometimes governed by one set of equations and sometimes by another, with the overall system lacking differentiability at the points of changeover. This much is fairly clear, but the methods which can be used to study such systems have, with few exceptions,2 yet to be seriously explored. In the present paper we are interested in finding modifications to Lyapunov theorems which will render them suitable for the study of non-Walrasian systems. Two such modifications are found and their usefulness in studying non-Walrasian systems is illustrated by means of some relatively simple economic examples.

[In his paper, extasciicircum1 Roth has used a three-person game example to illustrate certain difficulties connected with generalizations of the Shapley value for games without side payment. This note argues that cooperative solution concepts in general often give rise to similar difficulties, and that the best way of avoiding them is to analyze cooperative games by means of noncooperative bargaining models.]

[The fine structure of earnings is defined by a theoretically meaningful decomposition of the covariance matrix of earnings (or log earnings) time series. A three-element variance components model is proposed for analyzing earnings of young workers. These components are interpreted as the effects of differential on-the-job training (OJT) and differential economic ability. Several properties of these components and relationships between them are deduced from the OJT model. Background noise generated by a nonstationary first-order autoregressive process, with heteroscedastic innovations and time-varying AR parameters is also assumed present in observed earnings. ML estimates are obtained for all parameters of the model for a sample of Swedish males. The results are consistent with the view that the OJT mechanism is an empirically significant phenomenon in determining individual earnings profiles.]

Ned C. Hill, Bernell K. Stone, Accounting Betas, Systematic Operating Risk, and Financial Leverage: A Risk-Composition Approach to the Determinants of Systematic Risk, The Journal of Financial and Quantitative Analysis, Vol. 15, No. 3 (Sep., 1980), pp. 595-637

IN THE LATE 1960's, Richardson [18] and Sawa [20] derived the exact distribution of the two-stage least squares (2SLS) estimator in a structural equation (of a simultaneous system) that contained two endogenous variables and an arbitrary number of degrees of overidentification. Their results refer to the 2SLS estimator of the coefficient of the endogenous variable included on the right hand side of the equation and were obtained under the classical assumptions (to use the term employed by Sargan [19]) of normally distributed disturbances and nonrandom exogenous variables. Very little exact finite sample theory has been published so far for estimators in structural equations containing more than two endogenous variables. Basmann et al. [4] extract the joint probability density function (p.d.f.) of the 2SLS estimator in a just identified equation containing three endogenous variables. Basmann [3] quotes a result due to Richardson for the same set up but with an 2 arbitrary number of degrees of overidentification . In Basmann's notation, this last result characterizes the subclass