If all the human actions can be explained in terms of principle of utility maximization then
it is no explanation. There is no financial transaction, human action or interaction that does
not result in utility maximization for the concerned individuals. As pointed out by Sterling,
irrespective of whether a firm uses lIFO or FIFO, the explanation would be the same, namely,
lIFO (or FIFO), maximizes the utility of the practitioner who made the selection. The basis for
research would also be the same. It would guide the positive researcher to look for ways in
which lIFO (or FIFO) maximizes the practitioner’s utility, for example, see if lIFO (or FIFO)
maximizes reported earnings and if the manager’s earnings are tied to reported earnings thereby
maximizing the manager’s utility. … It cannot be used as an explanation because it explains
too much. Since all behavior is explained by utility maximization—the fireman will be said to
have maximized his utility by his heroic charge into the inferno to save the child and by his
cowardly refusal to enter the inferno—it in fact explains no behavior. In that respect, it is
similar to explanations that invoke fate, destiny, God’s will and the like (Sterling, 1990).
The logic seems to run like this – whatever has to happen, will happen. Any control is redundant.
Government is redundant. Let’s go back to the jungle rules, or rather beginning of civilization,
as even in jungle, there are some rules
If all the human actions can be explained in terms of principle of utility maximization thenit is no explanation. There is no financial transaction, human action or interaction that doesnot result in utility maximization for the concerned individuals. As pointed out by Sterling,irrespective of whether a firm uses lIFO or FIFO, the explanation would be the same, namely,lIFO (or FIFO), maximizes the utility of the practitioner who made the selection. The basis forresearch would also be the same. It would guide the positive researcher to look for ways inwhich lIFO (or FIFO) maximizes the practitioner’s utility, for example, see if lIFO (or FIFO)maximizes reported earnings and if the manager’s earnings are tied to reported earnings therebymaximizing the manager’s utility. … It cannot be used as an explanation because it explainstoo much. Since all behavior is explained by utility maximization—the fireman will be said tohave maximized his utility by his heroic charge into the inferno to save the child and by hiscowardly refusal to enter the inferno—it in fact explains no behavior. In that respect, it issimilar to explanations that invoke fate, destiny, God’s will and the like (Sterling, 1990).The logic seems to run like this – whatever has to happen, will happen. Any control is redundant.Government is redundant. Let’s go back to the jungle rules, or rather beginning of civilization,as even in jungle, there are some rules
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