Bus310 Accounting Theory and Accountability

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BUS310 ACCOUNTING THEORY AND ACCOUNTABILITY
WORKSHOP 1
SOLUTIONS
1) GHHT: Chapter 1: Theory in Action 1.1
The article describes how a particular theoretical approach has been replaced by another. Explain why one theory replaces another, and who, or what, determines whether an existing theory survives.

A theory is primarily meant to explain or predict an event, behaviour or outcome. Proponents of a theory look for evidence to support the theory. This evidence should be independently observed and consistent after repeated observations. Some theories are speculative or ideas or guesses floated to encourage researchers to undertake the observations required to prove or disprove the theory. The question often debated is what comes first — the theory or the observation? For example, did Darwin start thinking about different species and the idea of natural selection or did evolution enter his thoughts? Did he detail these thoughts as a testable proposition and then set out to observe? Or did he observe aspects of nature which led him to formulate a theory of evolution? The latter is much more likely and for most theoretical development, observations result in development of propositions which are tested over time.

2) Where the body of evidence in support of the underlying theory appears to be supported by observations, then the theory is accepted. But not necessarily by everyone. Why not? Some may not be satisfied with the methods adopted to test the propositions; others simply may not believe the theory explains or defines reality and propose alternative theories.

3) In the specific case of Bernanke’s theoretical choices based upon his detailed knowledge of the Great Depression, a similar process would be required and if the weight of evidence supported Bernanke’s propositions in explaining economic outcomes, then his theoretical perspective would supplant other theoretical perspectives. In the social sciences it is even more complicated than the...
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