Is the Emphasis of Capital Budgeting Theory Misplaced?

Is the Emphasis of Capital Budgeting Theory Misplaced? (Received October 1973 ; revised August 1974) The Basis of Capital Budgeting Theory Since the early writings of Joel Dean [ I ] a large body of literature has developed on the subject of capital investment decision making. T h e majority of this literature [z] implicitly adopts as its foundation the scientific model of the decision-making process. The scientific approach, or as it has been variously called the synoptic, rational or comprehensive model, prescribes that all possible courses of action should be listed together with their consequences under each possible ‘state of the world’. The decision process is then seen to consist of choice from among the possible actions through evaluation of their consequences. Schon [3] considers that the scientific model of the decision-making process, the development of which can be traced through the writings of Plato, Aristotle, Locke, Hume, Bentham, Kant and others, owes its origins partly to the displacement of the concept of a balance. T h e most overt use of a metaphor stemming from this displacement of concept is probably the ‘scales of justice’ but other phrases have an obvious association with the idea that decisions are made by weighing the evidence. Examples http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Finance & Accounting Wiley

Is the Emphasis of Capital Budgeting Theory Misplaced?

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Publisher
Wiley
Copyright
Copyright © 1975 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0306-686X
eISSN
1468-5957
DOI
10.1111/j.1468-5957.1975.tb00923.x
Publisher site
See Article on Publisher Site

Abstract

(Received October 1973 ; revised August 1974) The Basis of Capital Budgeting Theory Since the early writings of Joel Dean [ I ] a large body of literature has developed on the subject of capital investment decision making. T h e majority of this literature [z] implicitly adopts as its foundation the scientific model of the decision-making process. The scientific approach, or as it has been variously called the synoptic, rational or comprehensive model, prescribes that all possible courses of action should be listed together with their consequences under each possible ‘state of the world’. The decision process is then seen to consist of choice from among the possible actions through evaluation of their consequences. Schon [3] considers that the scientific model of the decision-making process, the development of which can be traced through the writings of Plato, Aristotle, Locke, Hume, Bentham, Kant and others, owes its origins partly to the displacement of the concept of a balance. T h e most overt use of a metaphor stemming from this displacement of concept is probably the ‘scales of justice’ but other phrases have an obvious association with the idea that decisions are made by weighing the evidence. Examples

Journal

Journal of Business Finance & AccountingWiley

Published: Mar 1, 1975

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