Musings on Accounting Research by Steve

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Why economics theories are not behavioral . . . . .

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Every now and again I get papers submitted to BRIA that are based on agency theory, signalling theory, and other microeconomic theory that is tested based on publicly available archival data.  Rarely, I get challenged by authors you say, “you examine these in the experimental lab in BRIA, why not archival???”

A perfectly fair question.  In my mind the answer is in two parts. First, BRIA is foremost about human behavior, it is not about theories of human behavior based on a set of assumptions that even their creators admit are significantly oversimplified.  The school of Milton Friedman et al evaluates the success of these theories based on their predictive validity in actual settings and state the assumptions about human behavior in their theories do not matter if they can predict well enough (albeit “well enough” seems a very slippery concept to me).  BRIA and similar journals respect that tradition, but it is not he basis for articles that we are interested in publishing.  There are many other outlets for such papers.

Second, why does BRIA publish experimental economics pieces?  While I cannot speak for all concerned, the difference between archival publicly available data and laboratory experiments reduces substantially  the number of steps one has to take between the theory and the actual human behavior.  Experimental economics allow us to examine the factors that need to be in place in order for actual individuals to respond to economic incentives in those theory settings.  In other words, it stripes away the veneer that these simple assumptions about human behavior in economic theory are easy to implement and that they invoke a whole set of assumptions about the context where the decision is made.

Anyhow, that is my take on the issue.


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