Journal Article Notes on Utility Theory and Demand Equations Get access Edwin B. Wilson Edwin B. Wilson Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 60, Issue 3, May 1946, Pages 453–460, https://doi.org/10.2307/1880681 Published: 01 May 1946
The Review of Economics and Statistics194628(3), 146
IT might at first seem a little odd that there should be any hesitation or embarrassment in suggesting to academic colleagues in another country advisability of investigations, which might ultimately issue in practical action, along lines rather different from those which on their own initiative they seem disposed to pursue. But there is one important sector of economic analysis, of far-reaching general interest, which has hitherto been largely neglected and which it is now peculiarly appropriate to press upon attention of American economists. And it also happens'that effective action in this sector would make much easier at least a partial solution of other problems which have been mentioned and of whose pressing importance we are all so painfully aware, while it is without any doubt within setting of American economy that a scientific examination of this sector could now most hopefully be undertaken. Let us suppose that by some miraculous accident we had an absolutely free hand to determine critical point within American economy upon which in immediate future whole resources of creative thought of that country were to be directed. In such unexpected and highly improbable circumstances what should our decision be? Many would undoubtedly vote for a still closer concentration of attention upon techniques of full employment, while others would urge a still more penetrating study of significance of United States commercial policy for establishment and maintenance of world equilibrium. A plausible case could, however, be made out for view that problem which now most urgently calls for attention and solution of which would incidentally go far to meet requirements of those who are most concerned to see effective action taken in regard to these two obvious great outstanding isues is to be found in a field to Which so far little more than passing notice is usually given, a field, moreover, which at first sight might appear exclusively, or at least mainly, one of merely domestic concern. The general principle of international economic interdependence is now a commonplace, though its formal acceptance is still no guarantee that concrete policy will not in certain important respects be based upon deeplyrooted prejudice that it may be dangerous to allow peoples of other countries to become prosperous, especially if their prosperity seems dependent upon expansion of lines of production in which we ourselves already have a lively concern. To maintain national product at a level commensurate with our capacity to produce, it has been said, the American people will have to advance their standard of living as a whole by somewhere around 50 per cent. 1 And it is most direct and immediate interest of people of other countries that this unique objective should be realized with minimum of friction and delay. Its expeditious attainment will not, indeed, by itself either afford complete protection against risks of violent employment fluctuations in United States, prospect of whose repercussions elsewhere frequently cause so much alarm, or guarantee a speedy reorientation of United States tariff policy. Probably, it is in nature of things that yearnings for complete protection must always be disappointed, but if United States succeeds in reaching high standards of living postulated, employment fluctuations will probably be less violent than they might otherwise be; and even if awkward fluctuations persist, shifts of national income above and below a highlevel may still permit a demand for exports of other countries sufficiently great to prevent repercussions elsewhere from being overwhelmingly embarrassing. The vested interests which
In making an approach to the problems connected with the correlation of costs to financial statements, it might be pertinent to give some thought to the evolution which has occurred, over the course of many years, in the concept of the principal function of accounting. However, the emergence of the industrial era, with the resultant broadening of capital risk attendant upon the formation and operation of large industrial enterprises, marked the beginning of a new concept of the use of accounts. As the corporate form of enterprise, often comprising a large number of stockholders became more prevalent, there was consequently created a class of investors were not active in management of the business in which they had invested their capital. Thus was evolved the practice of the periodical statement of earnings, usually covering, as a matter of convenience, a period of a year, and supported by a statement of financial condition, or balance sheet, as of the end of the period for which the report of progress was made.
Accounting is not a science; it is an art. The general ledger of an accounting system is a picture of a business enterprise in action, but it is not a photographic picture. Rather it is cubistic or surrealistic, and therefore symbolical in nature. It visualizes, for the management and others, one link in the chain of economic activity whereby man makes his living. Put all accounting systems together in a chain, and the totality of economic effort would spread like a mighty mural before our eyes. There sometimes is a look about the eyes of accountants that has mistakenly been compared with the cold stare of a fish. It does not come from eye strain from unemotionally looking too hard at figures. Instead, it comes from mentally seeing far-off places and far-off activities. For accountants look with an inner eye at commerce and industry-a scene which is one of the mightiest and most complex to be viewed by man. The accountant can glimpse the whole panorama. The pen, the ledger the ink are his artist's brush, canvas, and paint with them he captures some phases of each dramatic movement of the scene.
This article focuses on statistical controls applied to financial statements. Most top executives, except controllers, are not specifically trained in accountancy. Yet the top executive spends much of his time on the financial aspects of his business and in the interpretation of accounting records. Sometimes he finds himself studying detailed and massive accounting reports, trying to find in them the clues to his problems. When the analysis of past data has been completed, top management can use the charts for setting goals or objectives in the future, and can follow month by month the progress made toward each goal. It might be argued that these effects of the end of the war would have been realized by top management without the aid of the chart. That is undoubtedly true, but the strength of action charts is found in a number of factors, in their graphic appeal to understanding through the eves, in the power they have to sell all levels of supervision on the necessity and wisdom of management policies, and in the completeness and clarity with which they enable the men at the top of a business to trace the effects of such external events as war, peace, price changes, booms, and depressions.