Accounting calculation and the shifting sphere of the economic

Anthony G. Hopwood London School of Economics and Political Science

ABSTRACT The paper examines some aspects of the interrelationship between accounting and economics. Noting that much of the significance of accounting stems from the coupling of relatively routine procedures with wider understandings of the functions which they can serve, the paper examines how economic discourses have provided contexts for accounting elaboration and change. Reference is made to two case examples. The mutual interrelationship between accounting and economics is emphasized in the paper with particular consideration being given to the ways in which accounting calculations facilitate the construction of spheres of economic activity. Accounting has come to be seen as a phenomenon of some economic significance. Although still implicated in the recording of transactions, the reconciliation of statements and the balancing of the books, a more pervasive potential for organizational improvement is now quite readily attributed to the accounting craft. Accounting is seen as giving rise to both economic magnitudes and insights that have a significance in the economic governance of industrial, commercial, governmental and even international institutions. Keeping the records, a stewardship of the technical practices of accounting and the compilation of the accounts themselves are still very important parts of accounting. Indeed, it could not function without them. But they are now aspects of accounting that seemingly are less emphasized - at least in certain national settings. In countries such as the United Kingdom, the technical practices of accounting increasingly have come to constitute the taken-for-granted world of accounting, the accounting background. In
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the foreground we now hear more of the accountant's roles in economic monitoring and control, in providing relevant information for decision making, in pursuing organizational efficiency and effectiveness, and in facilitating the management of the interdependencies that characterize modem organizational and economic life. In such settings the functions which are claimed on behalf of accounting are now seemingly of more significance than the calculative practices and procedures which constitute accounting itself. It is as if accounting has been caught up within a complex web of roles, potentials and significances. In the process, bookkeeping became accounting. But accounting then became a source of management information. And management information is now in the process of becoming a strategic source of intelligence, a proactive means of both knowing and doing, something that is seen as enabling a wider control, governance and indeed adaptability of the organization and the network of institutions with which it is involved. As the functions attributed to accounting have grown in number and importance, so has the significance attached to the accountant. Indeed in countries such as the United Kingdom it is as if the accountant often has more significance than accounting itself. Although so many of the techniques remain simple and repetitive, readily incorporated into clerical routines, computer programs and processes of mass education, the occupational structures that have emerged around them are ones that are no longer populated with clerks but rather with executives, managers and indeed professionals. Rather than reflecting the routine and predictable nature of many aspects of the accounting craft, the organizational and social positionings of its practitioners have been influenced by the wider meanings and significances which are attributed to it and the ways in which these enable and empower different forms of organizational and economic governance. Accountants in the United Kingdom now seemingly stand above the practices which they once merely performed. As accounting has become imbued with an ever expanding set of purposes, its practice has become interdependent with a whole array of other organizational, economic, social and legal practices and bodies of knowledge which both sustain and shape, and, in tum, are shaped by the procedures of the accounting calculus. Accounting thereby has come to be much more than an isolated technical endeavour. Whilst having a procedural specificity, accounting's current meanings and significances have emerged in the context of a complex nexus of practices, procedures, institutional arrangements, and bodies of knowledge (see, for instance, Burchell et al.. 1985; Miller, 1991). Many of the interconnections and interdependences between accounting and the wider contexts in which it operates go unobserved and are seldom articulated, having become part of accounting as it is. Constituting the silent realm of accounting, their salience becomes apparent only when

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more radical discontinuities puncture the world of accounting, raising questions about the adequacy of prevailing conceptions of the craft. Changing organizational forms can disturb the nexus of other practices in which accounting is embedded, suggesting the need for new couplings and linkages (Hopwood, 1987). New modes of financing and their accounting representations have brought attention to accounting's dependency on legal presumptions of the boundaries of the enterprise. Even the consideration of the possible accounting implications of new manufacturing technologies is highlighting the complex network of organizational knowledges and procedures within which the technical practice of accounting functions (Kaplan, 1983; Miller and O'Leary, forthcoming). The array of other practices, presumptions and knowledges which tether accounting to its organizational and economic context both shape and constrain the form that accounting can take. They rarely determine it, however. Rather they facilitate some possibilities for change and restrain the influence of others. Accounting change is therefore never an unproblematic endeavour but rather a process that occurs amidst a complex of other influences that sometimes provide the possibility for such change and sometimes constrain the possibility of it. In the United Kingdom in the 1970s, for instance, exogenous changes in price levels were seen by some as pointing to the problematic nature of accounting valuation and measurement practices (Tweedie and Whittington, 1984). However, prevailing accounting and economic theoretical discourses were also seen as being capable of providing a basis for identifying conceptually derived innovations in the technical practice of accounting that could reflect changing prices and still be compatible with the dominant legal and social presumptions and discourses that play a role in defining the nature of the enterprise, those who have rights in it and thereby the possibilities for the accountings that are made of it. Both the old and the new accountings could operate within a similar context. The reported surplus merely would have been a different one and different magnitudes would have been associated with the resources of the enterprise. A recognition of the importance of exogenous changes in technologies and knowledges that undermine the skills of the work-force would have had a very different set of accounting implications. The rights of the workforce in the enterprise are quite narrowly circumscribed by both law and convention in most industrialized countries, something which then constrains a practical accounting response. Without the intervention of the State to create new organizational responsibilities and therefore, in accounting and economic terms, possible costs, such a different set of disturbances from without would seemingly be more suggestive of employment changes than shifting forms of accounting representation. The need

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for the enhancement of human skills is still seen as something that has no claim on the surplus account. Such a contrast suggests that even the possibilities for new accountings, let alone the practices of today, are shaped by socio-political values, legal presumptions, modes of bargaining, statutes and govemmental regulations and a whole array of other institutional practices and bodies of knowledge that tie accounting to the contexts in which it operates. Accounting is not an autonomous sphere of action and cannot be considered in such terms. However, rather than trying to focus on the wider constellation of forces within which accounting is embedded (Burchell et al.. 1985), the present discussion considers only one aspect, namely the nature of some of the relationships between economic discourse and accounting. The aim in so doing is to probe into both the ways in which the abstract generality of economic discourse can provide a context for accounting elaboration and change, and how, in turn, accounting can itself provide a specificity to conceptions of economics which enable it to infuse and change organizational and social affairs. For, whilst the ways in which accounting might strive to provide an operationalization of more general economic categories might be appreciated, the ways in which economics provides a directionality and functionality to the accounting craft are not.
ECONOMIC DISCOURSE AND ACCOUNTING CALCULATION

The idea of a relationship between accounting, as a form of economic calculation, and economics, a form of abstract knowledge about the nature of the economic, is now a longstanding and increasingly accepted one. Conceptions of the economic nature of such accounting categories as cost and income pervade accounting treatises and even policy-orientated discussions of the craft. Economic ideas of their essential nature are used to provide a basis for gauging the adequacy of accounting calculations and to suggest possibilities for their transformation and presumed improvement. Economics, so used, is seen as a means for helping accounting to become what it should be, but what currently it is not. Drawing on developments in economic thought, a more pervasive form of economic rationality started to enter into accounting discourse in the first half of the present century - the particular timing and form of the linkage varying in different national settings. As this happened, the economic categories of accounting came to be seen as part of a wider nexus of economic relationships and interdependences. More abstract economic functions could then come to be assigned to accounting practices. For example, accounting categories came to be seen as providing insights into the economic nature of institutional performance, thereby having a potential to mobilize and direct economic action. A more cognitive conception of economically orientated behaviour emerged in which emphasis

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was placed on the conscious thoughts and calculations of economic agents. The language of decision making thereby started to become a more prevalent one and in this context accounting practices were assigned a more general relevance - an informational potential. Accounting was seen as being at least one of the ways in which relevant information was provided for economic decision-making processes within and about the firm. In such ways the enterprise and the market came to be seen as sites in which rational principles of decision making and organization were applied. Economics, as a body of knowledge concerned with the illumination and study of such processes, could therefore come to be seen as a basis for evaluating accounting and steering the transformation of its practices in the name of a wider functionality and rationality. Economic theorizing of the enterprise has continued to develop, placing more emphasis on the nature and form of the intemal relationships which constitute the enterprise as an economic form of organization (Perrow, 1986). More explicit reference is now being given to potential conflicts of interests between organizational participants and to the roles which organizational practices, such as accounting, play in their resolution and in the orchestration of concerted economic action (Baiman, 1982). With economic action so characterized, more consideration is being given to the specification of organizational contexts for individual decision making and to the monitoring and assessment of the results in the name of a wider enterprise level objective. Concerns with organizational control have thereby come to be given as much, if not more, emphasis as decision making per se and, as this has happened, economics has also come to provide a basis for commenting on the control potential of accounting practices. Although economic understandings of the enterprise are still emergent, the potential relevance of the insights which they provide for both understanding and guiding the accounting craft has come to be an increasingly accepted one. But it is still far from being an unproblematic one. A restless tension still pervades so much of the dialogue concerning the application of economic ideas to accounting practices. On the one hand, economics provides a way of conveying a wider functionalism to accounting. Emphasis can be placed on its wider contribution to processes of economic decision making and control. On the other hand, however, economics also claims to provide a way of gauging the adequacy of accounting for such ends. And almost invariably, accounting, as it is, is found to be inadequate to what it could and possibly should be. Its practices are not infrequently seen to result in information that does not meet the test of economic relevance and its adequacy as an instrument of control often leaves much to be desired. It might be tempting to perceive such contrasts as solely reflective of the problems of accounting. From such a perspective, accounting fails

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both to illuminate economic circumstances and to make people act in an economically rational manner. But there is also a case for seeing the contrasts between accounting practices and economic conceptions of them as suggestive of the difficulties of economics. For economic thought is in many senses a strange and restless phenomenon. Although claiming to provide insight into the way the world is, economics is also characterized by a profound dissatisfaction with the ways of the world. Even though it claims to provide a positive rather than a normative knowledge of the world, economics seemingly always wants to make the world more economic than it is. Market forces are not merely present but need to be shown to be so, and their presence extended. Economic incentives are not merely a feature of the world but need to be reinforced. In accounting terms, the rationality of costing needs to be enhanced in the name of an economic understanding of it. The world needs to be told what profit ought to be even though it apparently is orchestrated in the name of it. Seen in such terms, economic discourse is not merely a refiective phenomenon, providing insight into the way in which the world is, but it can also be a constitutive phenomenon, having the potential to play a role in forging a reality that is more in line with our economic understandings of it. As we have already seen, such thinking has now permeated much of accounting thought, not least academic accounting thought. In providing a discourse that can be brought to bear on the functioning of accounting, economics has provided one way of representing and articulating the aims, roles and practice of accounting in a way that cannot be reduced to technical practices that are independent of, and prior to, such a mode of economic characterization. A quite specific set of functions and roles is now attributed to accounting. A more pervasive logic and rationality are associated with the practice of the craft. Accounting is seen as being tied up with a consciously elaborated set of rules for the attainment of a set of economic objectives. A way of thinking about accounting in the context of wider institutional processes and objectives is thereby created such that accounting is seen as being much more than a mere collection of calculative practices and procedures. And so perceived, accounting can start to be interrogated in the name of its roles and functions rather than the internal consistency of its technical procedures. A new basis for assessing the adequacy of accounting can be created. Accounting thereby can start to be examined in terms of what it is not and often found wanting as a result. The relationship between accounting and economics is therefore a complex and uncertain one. One is not a simple reflection of the other. The present practice of the accounting craft cannot be deduced from economic conceptions of it and economic ideas for its change and reform, although often articulated, find it difficult to become entangled with a craft that appears to have an independence from what are seen as its essential roles.

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The relationship has been subject to relatively little examination, however. In the main, a relevancy has been presumed rather than justified. Arguing that more is at stake than this, the subsequent discussion will attempt to open up a few aspects of the interface between accounting and economics to further analysis. To facilitate the argument, consideration will be given to two episodes, one historical where the relationships are more apparent and one contemporary where they are still unfolding in not entirely predictable ways. However, both examples are illustrative of the early stages of the development of a relationship between economic discourse and accounting calculation. Although they differ in terms of their historical contexts and the institutional environments in which the forging of a relationship was attempted, together they can nevertheless serve to illuminate some of the processes at work when a relationship between accounting and economics has to be positively constmcted rather than merely revealed. For it is at such early moments of change that accounting can be seen as having a more complex relationship with the rationales in the name of which it is introduced. PUTTING ACCOUNTING WHERE ACCOUNTING WAS NOT: PART 1' To Wedgwood, the eighteenth-century English potter, cost was initially an idea but not a fact. Faced with a severe business depression in 1772 and wanting to maintain his sales so that he could retain his highly skilled labour force, Wedgwood started to analyse his business in economic terms. A man of scientific and analytical temperament, as well as acute commercial acumen, he was in contact with many of the intellectual developments of the time, including that of political economy. From this Wedgwood was aware that if he could lower his prices in order to stimulate demand, he might better survive the recession and prevent his skilled and carefully trained labour force from moving to his competitors. Moreover, Wedgwood was also aware that such a view was conditioned by the need to ensure that the price was still higher than the cost. And there the problem arose. For although a concept of cost entered into the discourse of commerce and trade, and could therefore mobihze action, there was no wellestablished practice for operationalizing the discursive category. Until then Wedgwood had made little use of accounting (McKendrick, 1973), particularly for what would now be seen as management purposes. Accounting information did not inform his product and pricing decisions or the selection of his methods of work, not least because his prices were so high that profits previously had been guaranteed. Wedgwood himself had admitted that he 'could do httle more than guess at cost' and 'further conceded that his attempts at total costings were out by a factor of two' (McKendrick, 1973: 49).

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That situation was to change when the depression of 1772 brought the expansion of his business to an abrupt end. Faced with a crisis and being able to conceive of a discursive mode of analysis based on cost, Wedgwood set out to discover the facts of costing. As he noted to Bentley, his business partner in London: It will deserve serious discussion whether we should not lower the prices of Pebble and Gilt Vases very considerably, for this purpose I am forming a price book of Workmanship etc. which is to include every expence of Vase making as near as possible from the Crude materials, to your Counter in London, upon each sort of Vases, of this we will send you a specimen & you will then be able to judge better what we can do in this respect, what will be most prudent is the next question for our Consideration. (McKendrick, 1973: 49) The task was not an easy one. No established procedures were available for observing the inner workings of the organization through the accounting eye. The organization could not be readily penetrated. The facts of costing had to be laboriously created rather than merely revealed. I have been puzzling my brains all the last week (Wedgwood wrote to Bentley on 23 August 1772) to find out proper data, and methods of calculating the expence of manufacturing. Sale, loss &c to be laid upon each article of our Manufacture & a very tedious business it has been, but what is worse I find what I have done is wrong - somewhere, very essentially so, but do not know where or how to amend it though I shall not give up being sensible of the importance of the enquiry, and what I now send you is only to shew you what steps I have taken & the grounds I have gone upon, & to desire you will sit down some morning & consider the subject and try to put me in a better way, for it will be of the greatest use for us to establish some such scale as I have now been attempting to examine all our new articles by, that we may not fix the prices so high as to prevent sale, nor so low as to leave no profit upon them. (McKendrick, 1973: 49) Such endeavours resulted in the construction of an increasingly detailed account. Still, however, Wedgwood was not satisfied with his efforts. Some of my difficulties I have laid before you, but what perplexeth me most is, that although I am very positive what I have allowed for the expences of making & selling our goods is quite enough yet it appears from comparing this expence of Manufacture for a year, with the amount of goods made, to be little more than half the real expence attending the making & selling so many goods. (McKendrick, 1973: 53)

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Shortly thereafter, however, he was to obtain some itisight itito some of the reasons for his uneasiness. Comparing his financial accounts with his emergent costings, he found that the two did not agree. This Ace is very exact as to the whole but we cannot make it agree with its parts viz the separate pieces - It agrees with the small Vases very well but those we sell at 2 or 3 Gs do not appear to cost us 1/10 of that money. We are now taking a stock & shall then try another method. ^ (McKendrick, 1973: 61) Being of a curious disposition, Wedgwood soon discovered why the various parts of his accounting experiments did not mesh together. His inquiries revealed 'a history of embezzlement, blackmail, chicanery, and what Wedgwood called "extravagance and dissipation" ' (McKendrick, 1973: 61). His head clerk, Ben, about whom he had 'long been uneasy on this account being fully perswaded [sic] that matters were not right with. . . . His Cash accts being always several months behind, & yet to jump exactly right when he did Ballance them' (McKendrick, 1973: 61), had had his hand in the till. On further investigation, Wedgwood found that 'the plan of our House in Newport St.', where the clerks resided, 'is rather unfavourable to Virtue & good order in young men', 'that the housekeeper was frohcking with the cashier', 'that the head clerk was ill with "the foul Disease" and had "long been in a course of extravagance and dissipation far beyond anything he has from us (in a lawfuU way) wd. be able to support" ' (McKendrick, 1973: 61). Only after such revelations as to the sources of accounting inconsistency did Wedgwood feel confident in his newly fledged facts. As he went on to report: Our House may be looked upon as unfixed, & afioat, the first Clerk and Cashier being remov'd, it seems that properest time to introduce any new regulations we may think proper, or to change the whole plan if we can adopt a better . . . now we know that all goods sold for money & not brought to account must appear as increase of stock in stateing the accts & we have such strong reasons for suspecting our Head Clerks fidelity such an amazing increase of stock is an alarming circumstance & I shall not be easy 'till the stock is taken to clear my doubts in this respect. (McKendrick, 1973: 61) Immediate steps were taken to correct the matter. A new clerk was installed and, in order 'to put the necessary business of collecting into a way of perpetual motion' (McKendrick, 1973: 62), a routine of weekly accounts implemented. The birth of Wedgwood's accounts had been difficult and laborious. There had been no easy relationship between the idea of costing and a

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specific programme of intervention in the organization conducted in the name of that idea. One was not a mere reflection of the other. Costs had had to be constructed rather than merely revealed. An organizational economy grounded in a domain of accounting facts had to be forged painstakingly rather than merely exposed. Once constructed, however, Wedgwood had a powerful instrument for observing the organization in economic terms. His strategic conception of the role which records could play in the management of crisis had resulted in a means by which he could penetrate the inner workings of the organization. A new visibility had been created. The organization had been colonized by economic facts (Patton, 1979). A calculative means had been found for conceiving the functioning of the organization in different terms. An accounting eye had provided Wedgwood with a new means for intervening in the organization. And intervene he did. As we have seen, the administration and control of the financial records was reformed. More substantially, during the depression, prices were actively changed in the name of the new knowledge of costs and profits (McKendrick, 1964, 1973). A basis for a more systematic consideration of marketing policies was created (McKendrick, 1960, 1961, 1973). The newly emergent facts of the economic provided a basis for reappraising the organization of the manufacturing processes, the advantages of large-volume production, and the calculation of piece rates, wages and bonuses (McKendrick, 1960, 1961, 1973). The inner workings of the organization had been made amenable to a new form of economic analysis. Wedgwood's discovery of the advantages of large-scale production illustrates this well. Faced with his newly emergent costing facts, Wedgwood noted that: If you tum to the columns of calculation & see how large a share. Modeling and Moulds, & the three next columns bear in the expence of Manufacturing our goods, & consider that these expences move like clockwork, & are much the same whether the quantity of goods be large or small, you will see the vast consequence in most manufacturers of making the greatest quantity possible at a given time (Wedgwood's italics). Rent goes on whether we do much or little in the time. Wages to the Boys and Odd Men, Warehouse Men & Book-keeper who are a kind of Satalites to the Makers (Throwers, Turners &c.) is nearly the same whether we make 20 doz of Vases or 10 doz per week & will therefore be a double expence upon the later number. The same may be said in regard to most of the incidental expences . . . We now have upwards of 100 Good forms of Vases, for all of which we have the moulds, handles & ornaments & we cd. make them almost as currently as useful ware, & at half the expence we have hitherto

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done, provided I durst set the Men to make about 6 to 13 doz of a sort; perhaps (as the first expence of all these apparatus's is over, & our Men in full practice, and many have some fears of losing a good branch of business) at much less than half. The first expence will be all sunk if we do not proceed in the business this apparatus is adapted for. The Great People have had these Vases in their Palaces long enough for them to be seen & admired by the Middling Classes of People, which Class we know are vastly, I had almost said, infinitely superior in number to the Great, & though a great price was, I believe, at first necessary to make the Vases esteemed Ornament for Palaces, that reason no longer exists. Their character is established, & the Middling People wd. probably by [sic] quantitys of them at a reduced price. (McKendrick, 1973: 55) As McKendrick (1973: 54) notes, Wedgwood's costing 'had other more permanent repercussions on his business management'. In often unanticipated ways, the organization was changed in the name of the knowledge of it. For 'by his own persistence, by an unfailing attention to detail, by founding, if not creating, the traditions of a foreman class and equipping it with rules and regulations, he transformed a collection of what in 1765 he called "dilatory, drunken, idle, worthless workmen" into what ten years later he allowed to be "a very good sett of hands" ' (McKendrick, 1961: 43-4). Such personal observation and supervision could start to be complemented by the exercising of control at a distance, both in time and space. Wedgwood now had available to him the basis of a more anonymous and continuous means of surveillance. Although born amidst crisis and doubt, the consequences of Wedgwood's accounting system started to be quite profound. Initiated to reveal what had been presumed to be there already, once established, it provided a basis for significantly changing, if not eventually transforming, the functioning of the enterprise. The newly established accounting system enabled a different set of dynamics to be set into motion. The fine details of the production process could now be related to the aims and performance of the organization as a whole. Policies created at the top of the organization could be related to specific aspects of organizational functioning. The organization could be observed and managed in terms different from those in which it functioned. Attempts could be made to coordinate and plan divergent parts of the organization in the name of the economic. A quite specific organizational economy could start to be emergent.

136 The European Accounting Review ECONOMIC AMBIGUITY AND ACCOUNTING SPECIFICITY

Accounting provides a way of giving an apparent precision to at least some of the general categories of economic discourse. It is a precision, however, that does more than merely reveal what is already there. The specificity introduced into the organization by accounting can create a basis for more fundamental changes. The organization can start, for instance, to be managed in the name of highly specific notions of cost and profit. What previously might have been presumed to be there but poorly revealed, once operationalized, can start to provide a way in which the organization can be changed. Indeed, the organization can start to become a very different one. A new world can emerge out of a particular knowledge of the old world. Such dynamics of change illustrate the tensions implicit in the relationship between economics and accounting. Being stated at a high level of generality and abstraction, economic categories are subject to a high degree of ambiguity. But to be infiuential in the management of organizational affairs, that ambiguity needs to be resolved so that a more specific calculus can infuse the intemal processes of the organization. There is, however, no one-to-one relationship between economics and accounting. Operationalizing economic concepts therefore becomes a process of construction rather than mere revelation, where the traditions, conventions and practices of accounting will play a positive role in shaping the form of the economic calculus. But, once so operationalized, the organization can start to be seen through economic eyes and economic notions of rationality can permeate the organization in very precise ways. So although accounting is not a mere revelation of economics, by giving a specificity to the previously general and ambiguous, it provides one way of enabling economic understandings and modes of thought to diffuse through the organization. In the process, accounting is quite capable of making the organization more economically orientated than it otherwise might have been. Of course the ambiguity of economics does not in and of itself constrain the practical use of economic concepts. The world can be changed in the name of profit without a precise operational understanding of the concept. Indeed the public sector in many countries is being changed in the name of efficiency and value-for-money without there being any precise and generally agreed definitions of those concepts (Hopwood, 1984). It might even be that the very ambiguity of the concepts provides one basis for their appeal, particularly in political circles. If we knew precisely what the concepts meant, they most likely would be far less capable of mobilizing political support. As it is, it is difficult to articulate publicly a belief in inefficiency and a lack of value-for-money. At some stage in the pragmatic use of concepts such as profit, cost

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and value-for-money, the speciflcs of operationalization do tend to be addressed, often by accountants. As calls are made for organizations to be changed in the name of the vocabulary of economic efficiency and rationality, demands will also emerge for the extension of modes of economic calculation to objectify and operationalize the abstract concepts in the name of which change is occurring. The ambiguity, generality and abstractness of economics must then be addressed and resolved. A precision must be given to the economic domain even though that precision can never have an unproblematic relationship to the concepts in the name of which it is introduced. To the extent that such forces are at work, it is always legitimate to ask questions about the precise effects of change, rather than presuming a mere realization of a prior intent. Discretion and choice pervade the accounting repertoire. With the lack of any direct and obvious relationship between economics and its operationalization in accounting, we must always look at exactly what happens in the name of particular economic categories, not least when the ideas are appealed to in political discourse. We must consider the effects that change induces rather than merely focusing on the seeming desirability of the intent that lies behind them because one is not necessarily a mere realization of the other. Equally, we must also be prepared to recognize how a realm of the economic can be positively created rather than merely revealed and the role which accounting and other sources of economic and financial information can play in that process. Just such processes of change can be seen at work in health care organizations in many countries of the world. To take our thinking a little further, we will therefore consider some of the ways in which accounting is being increasingly implicated in the British National Health Service and some of the possible consequences of this.
PUTTING ACCOUNTING WHERE ACCOUNTING WAS NOT: PART II

Until recently the National Health Service had not made a major investment in accounting. Of course, it prepared financial accounts and had the necessary systems on which to base these. There were related systems for the payment of invoices, for wages and for the management of major construction schemes. And over the years attempts had been made to introduce methods of budgeting. But the commitment to accounting had nevertheless remained a somewhat marginal one. The language and practices of accounting had only rarely infused managerial and clinician deliberations and decisions. Yet the financial performance of the Service could not be judged to be poor. The United Kingdom has one of the lowest national per capita

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expenditures on health care in the industrialized world. Whilst there are some areas of provision where the low level of resourcing makes an unfavourable impact, generally the health care outcomes of the Service have been perceived to be good ones gained at a relatively low cost. In the language of today, a measure of efficiency had apparently been achieved but without an investment in the practices of micro-financial control. There were few detailed economic and financial calculations and the administrative structure was very lean. The low costs had been achieved by a variety of more centralized macro-controls. Wages and salaries had been moderated by national agreements. Centralized purchasing had held down expenditures on drugs. Constraints had been imposed on major building programmes and a conservative approach to new technological developments had helped to hold back costs in an area which had the potential for major economic consequences. Even so, there had been a long history of growing concern with the financial consequences of national health care provision (Klein, 1983). It quite quickly became apparent that the dreams of at least some of the founders of the Service - that it would solve at least some of the problems of the national medical condition and thereby contribute to a reduction in longer-term expenditure on health care - were not to be realized. Public expectations were rising. Medicine was becoming a more comprehensive discipline and also a more costly one. People were living longer and the diseases of age were being found to be very costly. And in more recent times, demographic changes started to exaggerate such tendencies, resulting in an expectation of higher total expenditures on health care. In such ways, the economic, financial and management aspects of health started to be put on the agenda (Klein, 1983). Committees were established. Reports and analyses were commissioned. The language of management and efficiency started to be brought to bear on the National Health Service. One of the factors imphcated in such a transformation arose from a mutation in economic thought. In the post-war period increasing attention had been given to applying the modes of analysis of the economics of the market to non-market endeavours. Not emphasizing the difference in institutional context, intellectual ingenuity had created a conceptual vocabulary in terms of which areas such as education, defence, the law and, not least, health could be interrogated and examined in economic terms. Whilst not wanting to over-exaggerate the importance of just one such intellectual innovation, health economics nevertheless did provide a means for articulating more analytically the concerns which others felt about the financial aspects of health care. It thereby increasingly started to infuse policy discussions in the area, in the process coming to 'colonise' (Mulkay et al., 1987) the language of debate and the delineation of policy options.

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But such an economic vocabulary found it difficult to grapple with the specifics of health care. For, as costly as the National Health Service might be perceived to be becoming, the particulars of health care almost invariably had no cost assigned to them. Accounting had not embraced the objects of either medical or economic concem. Whilst the use of drugs and the employment of nurses and doctors resulted in expenditures and thereby entered into the accounting records, these were not reclassified around medical or economic concems. The functions of accounting had been more narrowly concemed, being mainly administrative and fiduciary in nature. No wider vision had served to provide a basis for the orchestration of the records along more strategic lines. No mechanisms had been provided for thinking of the realm of medicine in terms of economic reasoning. Concems with costliness, efficiency and economy had not left their imprint on the accounting archive and, in the absence of this, a record of costs had not arisen. The costs of patients, diagnostic treatments and disease categories remained the vaguest of conceptual possibilities. They certainly were not facts. The growing significance of economic modes of analysis and the changing nature of political interests in health care provided a context in which pressures arose for this to be changed (Klein, 1983). For, without such an operational calculus, it was difficult for economics to infuse and shape the organization in its name. Economy and efficiency could not become bases for concerted organizational action. Change was not to be easy, however. The National Health Service had not invested in repertoires of uniform administrative statistics that could serve as building blocks for such an accounting reform. There also were quite basic doubts about the objects to which costs were to be attached. Was it to be patients, wards, individual clinicians, diagnostic categories or medical specialities? Each presented its own difficulties and each might enable different possibilities for economic control. It thereby started to be recognized that accounting could not be reformed in isolation. Any accounting solution required a quite specific interface with different administrative and managerial bodies of knowledge. And all such attempts to change accounting also had to face the questionings and challenges of the medical community. Initiated in the name of the social rather than the economic, the National Health Service had resulted in a delegation of immense powers to the medical profession, most of whose members claimed the right to make decisions on the basis of their own professional training and codes of conduct rather than in terms of any administrative plan or economic logic. Moreover they claimed the right to do this without acknowledging any administrative, economic or even medical accountability. The saving of lives was deemed to take precedence over pounds and pence. For these reasons real difficulties faced those who sought to establish a

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factual basis for connecting economic reasoning with the practice of health care. Experiments were initiated but often their outcomes appear to have served more as symbols of economic concem than as bases for constructing the reality of it (Meyer, 1983). When more careful attention was given to what had been done in the name of financial reform, not only did expectations for the time scale of change become modified but also it came to be realized that much more consideration had to be given to the sheer practical difficulties facing the task. Expanding accounting in the name of an expanded conception of its functions was not an easy endeavour. Professional politics and accounting shortcomings seemingly placed a barrier between economic conceptions of health care and their realization. Economic reasoning could not readily enter the organization and change the nature of its practices. Such barriers are not immutable or inevitable, however. Faced by the difficulties of inducing reform from within, the Government increasingly resorted to action from without. Although claiming to increase real expenditures on health care, the actual allocation of resources increasingly failed to take account of the higher levels of infiation in the medical area, the changing nature of medical practice and the changing demographic structure of the population. Increases in resources also began to incorporate the very efficiency gains whose realization was so difficult! The National Health Service therefore increasingly had to provide more with less real resources. Cuts had to be imposed. Services had to decline. A culture of financial scarcity had to be introduced into the organization. Faced with a reality of economic and financial difficulty, adaptive actions had to be initiated. Many were blunt and crude. Attention also now started to be given to the partial instruments of financial control already operating within the organization. Although the pace and nature of change varied a lot across sites and administrative units, the imperfect symbols of administrative efficiency slowly started to be used for thinking and doing medicine in managerial terms. A different instrumentality started to be attributed to budgets, albeit one induced byfinancialnecessity rather than economic conversion. Faced with the need to re-allocate and to restrain, at least some members of the medical community started to acknowledge the wider roles which such instruments of financial administration could serve. They started to apply themselves, what previously they had resisted. A basis for a new commonality of dialogue between the administrative and the medical communities could thereby sometimes start to emerge. Although the pace of change should not be exaggerated, the financial crisis had provided a basis on which connections between economic reasoning, the economic calculating practices of accounting and the provision of health care could start to be forged. For better or for worse, what planned change had failed to deliver was in the process of being realized by unplanned means. And those still concemed with planning

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change have also re-evaluated their strategies. Increasingly recognizing the vital role which economic calculation plays in the reality of inducing economic change, emphasis is now being placed on obtaining the administrative and accounting infrastructure which will enable economic reforms to penetrate more readily into the organization. Careful attention is being given to detail. Information system capabilities are being recognized as essential prerequisites for economic change. The enabling role of accounting is now being quite explicitly acknowledged by those who aspire to shift the boundaries of economically orientated action. CONCLUSION Accounting is not imbued with purpose but it can be made to be purposeful. Many of the wider roles and functions of the craft are not therefore inherently associated with its practice but rather emerge from the intermingling of accounting with other discourses, practices and institutional forms. In such ways a range of quite specific significances and meanings can come to be attributed to accounting. Not an autonomous technical practice, accounting can be appealed to in the name of wider aims. The craft can be given an instrumentality and often a strategic direction. A basis for accounting mobilization can be provided. Economic discourses can provide one influential basis for such a mobilization of accounting change. By immersing accounting practices within a wider set of rationales and objectives, accounting can be acted upon in the name of organizational aims that have no prior and essential relationship to the craft. In this sense economics does not reveal what already is there. Rather it provides a basis for the attribution of new meanings and roles to accounting, albeit including some that have now come to be taken for granted. The relationship between accounting and economics is not a unidirectional one, however, as the cases of Wedgwood and the National Health Service have illustrated. Just as economic discourses can provide a basis for empowering and changing accounting so accounting, in turn, can be implicated in the very construction of a sphere of economic endeavour. On its own, economics operates in a conceptual domain. Many of its concepts are articulated in non-operational forms. Indeed the field of economic praxis is one that has been subject to relatively little examination. That does not prevent appeals being made to the practical and policy relevance of economic discourses. Very often, however, such appeals do little to specify the set of empirical processes and practices through which economics might be operationalized. For the discipline is not a self-contained one. It cannot operate solely on its own terms but rather must appeal to other bodies of knowledge and sets of practices, including those of accounting. To be realized, the economic potential

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needs to invest in modes of observing and recording, a quite specific visibility and an array of calculative practices. A practical economy needs to be positively forged rather than merely revealed. Not being mere revelations of an underlying economic potential, accounting practices can possess an autonomy and power of their own. They can thereby often enable more substantive transformations of organizational affairs than sometimes is envisaged, even by their designers. Just as Wedgwood's discovery of a pragmatics of costing enabled a wider diffusion of economic rationality and logic through his enterprise, so in the National Health Service, an investment in accounting has at least the potential to result in a significant shift in organizational visibilities and concerns, and managerial orientations. Seen in such terms, the economy that an investment in economic calculation can enable is one that is not merely complementary to a set of social, technical or medical concerns but rather one that has the potential to compete with them. For the bounds of the economic are not fixed. With prior investments in theoretical and conceptual elaboration, the realms of what can be regarded as economic can shift. And with a prior investment in calculative practices and modes of economic and financial visibility, the operational sphere of economic practice can also be subject to moderation. Accounting thereby has the potential to be quite an infiuential practice, with a significance that depends on the wider network of practices and discourses in which it is set. It is not merely a revelation of a prior truth. Accounting can be implicated in the active construction and transformation of both organizational and social institutions, and the economic truths that are associated with them. If the economic is as likely to result from accounting as it is to induce it, then there are limits to the extent to which it is meaningful to explore the underlying and enduring economic truths of accounting. That, however, is an implication of our analysis that requires a more extended examination. NOTES I wish to acknowledge the many helpful comments and suggestions made by Ed Arrington, Peter Miller, Brendan McSweeney, Michael Mumford, Michael Power, Alistair Preston and Stephen Wood. The paper has also benefited from comments made at seminar presentations at the Universities of Edinburgh and Warwick, and at a public lecture in the Department of Sociology and Anthropology, University of Keele. 1 This section is based on Hopwood (1988).

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