The influence of Marshallian neo-classical economics on management accounting in South Africa

Abstract

This study investigates the influence of Marshallian neo-classical economics on management accounting in South Africa and considers the impact this might have on the relevance of the subject. The investigation finds that whilst emerging management accounting theory is not based on Marshallian neo-classical economics, more traditional perspectives are. This observation results from a review of literature in the English-speaking world. Management accounting practice in South Africa appears to be based on Marshallian neo-classical economics. This conclusion is drawn from empirical work undertaken amongst management accounting practitioners from companies listed on the Johannesburg Stock Exchange. The inquiry indicates that South African management accounting education is based on Marshallian neo-classical economics. This finding emerges from an analysis of the textbooks and syllabi prescribed by South African education institutions. The investigation into the nature of Marshallian neo-classical economics reveals its shortcomings as a basis for management accounting practice. This form of economics accepts premises of limited government intervention and much free competition in the market, and assumes that decision-makers are rational, utility maximising individuals with access to perfect and freely available information. The focus of Marshallian neo-classical economics is limited. It disregards social, cultural and historical circumstances and restricts decisions to a moment in time. Such assumptions are unrealistic and cannot be used as a basis for a subject that aims to provide relevant information for decision makers in today’s business environment.