Budgetary Adjustment Research Articles

Profit Maximizing Behavior in Concentrated Industries

The traditional economic theory of firm assumes that maximization of profits is objective of firm. However, in recent years this point of view has been repeatedly challenged as not representative of actual behavior of large managerial firms. Morgenstern, for example, notes that the gap between theory of firm and reality is enormous [13, p. 1183]. The purpose of this study is to examine that portion of business behavior theory that assumes that a decisionmaker, when faced with two or more alternatives that will result in various outcomes, will invariably select alternative that will move firm to, or closer to, profit maximization. It is particularly concerned with behavior of firms experiencing adverse conditions such as failing to meet corporate goals. Adverse conditions in this context will take form of declining net sales or net income or both. The assumption of profit maximization has been challenged by R. M. Cyert and James G. March among others, who hypothesized that im perative of profit maximization in oligopolistic firms has been replaced by concept of an acceptable level of profits [8, p. 45]. Professors Cyert and March contend that budgeting and use of intermediate goals tend to eliminate need for a continuous reexamination of profit or other goals. Budgetary appropriations of one year tend to define departmental base goals for next period. They reason that since satisfaction of subunits in organization is a necessary cost of operation, downward budgetary adjustments are difficult to make. Opportunities frequently do not enter into a firm's perceptions until some form of shock (such as failing to meet its goals) forces a kind of search behavior on organization. Most firms do not look at all possible alternatives before developing their future plans. Apparently planning func tion is satisfied when a program that appears to be feasible can be devised. The area of budgeting and control may be used to illustrate this point. As a rule, forecasts of profit are made by striking a balance between sales, costs, and expenses. The forecasted profit is then compared with min imum acceptable profit which has been determined independently. Should forecasted profit be less than minimum profit, management will have to determine what additional steps must be taken to correct such a situation.

The Politics of Budget Execution

Until recently, political scientists focused on the approval of budget requests and ignored budget execution. This study counters the budgeting literature's almost single-minded concentration on legislative action. Existing studies which touch on budget execution in state and local governments are reviewed and five major techniques of budgetary adjustment are identified: (1) conservative special fund revenue estimates, (2) accounting legerdemain, (3) transfers, (4) reprogramming, and (5) juggling of special funds. The study concludes that additional research on budget execution is necessary before developing more effective theories about the "steering" of governmental institutions.

Exchange Equilibrium as a Budgetary Adjustment Process

Exchange Equilibrium as a Budgetary Adjustment Process

"Budgetary Adjustments" in Employment Security

Previous articleNext article No AccessNotes and Comments"Budgetary Adjustments" in Employment SecurityPDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Social Service Review Volume 28, Number 1Mar., 1954 Article DOIhttps://doi.org/10.1086/639534 Copyright 1954 The University of ChicagoPDF download Crossref reports no articles citing this article.