Line-item budgeting and film production - OpenArchive@CBS ...

Abstract:
Line-item budgeting and film production – Exploring some benefits of
constraints on creativity and aesthetic value creation
Thomas Frandsen, Ivar Friis, and Allan Hansen*)
Solbjerg Plads 3
2000 Frederiksberg
Copenhagen Business School
Denmark
*) Corresponding author: ah.om@cbs.dk
Early work – Please do not quote without the permission from the authors
Paper to be presented at the workshop on
Creativity and Control
Sponsored by Accounting Organizations and Society
4–5 April 2011, Barcelona, Spain
1
Marts, 2011
This paper explores the role of budgeting in the Danish film industry and seeks to illustrate the
positive effects a line-budget might have on the creativity and innovativeness in film production. In
our analysis we provide illustrative examples of the enabling and facilitating role of budget
constraints on film production from the Danish film industry in general as well as from a case study
of the process of making the Danish film “The Island of Lost Souls” in particular. We draw on
Elster (2000)’s constraint theory and suggest that the constraints imposed on agents by line-item
budgeting under some circumstances lead to situations where ‘less is more’ as line-item budgeting
might be used to focus creative behavior as well as pre-commit the agent against passion and time
inconsistency.

I. Introduction
The dysfunctional consequences of constraints imposed by budgets on agents dealing with
uncertain, complex or dynamic organizational settings have been discussed in research for decades
(Argyris 1952; Burns and Stalker 1961; Bruns and Waterhouse 1975; Merchant 1981; Brownell
1985; Shields and Shields 1998; Frow et al. 2010). In reference to cybernetic (Anthony 1965),
mechanistic (Ansari 1979), diagnostic (Simons 1995) or coercive (Ahrens and Chapman 2004)
controls the drawbacks of binding the agent to predefined standards, rules, incentives, or procedures
have been appointed and it has been discussed how these bureaucratic characteristics happens to
prescribe behavior which often turn out to be less desirable for the organization than alternatives not
recognized or present when the budget was planned, reduce the agent’s autonomy and degrade his
or her skills which in combination are portrayed as having a negative impact on innovativeness and
creativity in organizations (e.g. Adler and Borys 1996). This paper, however, illustrates that the
same type of constraints, in other instances and for other reasons, might have the opposite effect
when it comes to creativity and innovativeness because lack of information and reduced autonomy
may not necessarily be a cost for the creative process but rather a benefit.
Drawing on Jon Elster’s constraint theory (Elster 2000), this paper seeks to extend the analysis of
the consequences of the restriction imposed on agents by budgets. Although research has already
recognized that budget restrictions and prescriptions is not only negatively related to coping with
uncertainty and complexity (e.g. Marginson and Ogden 2005), knowledge on the benefits of
constraints is still limited. Consequently, this paper seeks to contribute to the discussion of the
positive sides of budgeting by suggesting two additional reasons for complementarities between
behavioral constraints and creativity. First, budgeting limits the agent’s opportunity set which in
some cases stimulate creative processes because it prevents agents from being overwhelmed by
opportunities. Second, from a self-control perspective budget constraints might be desirable as
restrictions and prescriptions may function as a pre-commitment device which can mitigate
unfortunate consequences of passion and time-inconsistency for the agent. Both imply that under
certain circumstances ‘Less is more’.
These two functions of constraints have been presented at a more general level (Elster 2000).
Nevertheless, they seem to create useful perspectives on relationships between budgeting and
creativity at a more specific level. Less is more in situations where there are benefits from having
fewer options rather than more. Elster (2000) emphasizes that this idea must be seen in the light of
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the standard case, in which the exact opposite is true: more is better. It prevents the agent from
being overwhelmed by opportunities which can be quite destructive as emphasized by Francis Ford
Coppola:
’We were in the jungle, there were too many of us, we had access to too much money, too
much equipment, and little by little we went insane.’ (Francis Ford Coppola on Apocalypse
Now in Bahr and Hickenlooper 1991).
Furthermore, constraints might benefit the agent in situations where the agent may want to restrict
his or her own freedom of choice in order to protect themselves against passion, preference change
and time-inconsistency which may otherwise cause the agent to deviate from plans crafted in a
cooler moment (Elster, 2000, p. 7). Both types of constraints are coercive by nature, however, they
happened to enable decision making and facilitate creativity basically through the reduction of the
agent’s autonomy. This paper explores the role of budgeting in the Danish film industry and seeks
to illustrate the positive effects budgets might have on the creativity and innovativeness in the
process of film production. In our analysis we provide illustrative examples of the enabling and
facilitating role of budget constraints on film production from the Danish film industry in general as
well as from a case study of the process of making the Danish film – “The Island of Lost Souls” –
(TILS) in particular. Film production is a distinct domain in which the quests for aesthetic value
often portrayed as a matter of artistic freedom and creativity. However, the process is also
permeated with constraints dealing with issues of costs, time and dead-lines (Elster 2000, Hjort and
MacKenzie 2003). Hence, film production is an arena in which tension often arise in clashes of
artistic and administrative and economic concerns. Nevertheless, what intrigued us was that
bureaucratic constraints often turned out to have quite positive consequences for the directors and
producers both when it came to their creation of the artistic vision as well as in the implementation
of the vision.
Budgets constrain agents’ decision making in multiple ways. In this paper we address a particular
aspect of budgeting – line-item budgeting – which refers to “budgets that authorize the manager to
spend only up to the specified amount on each line item” (Zimmerman 2009: 252). Line-item
budgeting is extensively used in Danish film industry as the Danish Film Institute (DFI), which
funds approximately 20-25 motion pictures in Denmark each year (DFI annual report 2009) coerce
producers and instructor funded by DFI to use a sophisticated budgeting and accounting system for
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the planning and control of film production containing a quite tight budget control in terms of lineitem
budgets. .
Thus, the research question of this paper is to explore to what extent Elster’s general ideas about
beneficial constraints applies to line-item budgeting and the ways in which line-item budgeting
might function as pre-commitment devices and stimulate creativity by reducing agents’ opportunity
set in the making of the script as well in the making of the film. Thereby the paper questions the
extent to which tight budgetary control necessarily result in negative effects on creativity.
The paper concludes that, the restrictions imposed by the DFI line-item budgeting on instructors
and producers in the Danish film industry in several cases had quite positive effects on decision
making and stimulated creativity in the film production process. In particular, restricting the
instructors to spend only a specified amount on a given item at a specified stage in the production
process coerced the instructors use their imagination and exploit the given opportunities to the
extreme which in many circumstances complemented their overall aspiration to maximize aesthetic
value creation. Furthermore, we illustrate how the beneficial constraints affect decision making at
various stages of the decision making process. Drawing on the four-stage model of organizational
decision making (Fama and Jensen 1983) we distinguish between initiation, ratification,
implementation and monitoring, and we argue that the less is more relate to both the initiation and
implementation stages of decision making.
This paper contributes to the literature in four ways. First, the paper supplements the analyses of the
costs of budgetary constraints by developing perspectives on the benefits of these constraints.
Whereas prior research has reported how beneficial constraint may play a significant role in terms
of sustaining personal comfort in situations with uncertainty and ambiguity, we suggest that
constraints also have significant roles in simplification and self-control which happens to be
valuable ingredients in a strategy striving for creativity. Secondly, the paper adds to the discussion
of what it means that accounting systems are enabling. Ahrens and Chapman (2004) have illustrated
how the enabling side of accounting has to do with its facilitation of repair, local transparency,
global transparency and flexibility which have been portrayed as an antithesis to coercive use of
accounting. However we add that coerciveness by reducing the possibility of repair and flexibility
in some cases might enable organizational decision making, since decision making can also be
enabled by reducing the opportunity set and by ensuring that the rational agent remains rational
even in situations where he or she is exposed to passion and time-inconsistency. Third, the paper
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contributes to the literature on constraints in film production. Whereas much research has been
carried out on film production and constraints (Elster 2000, Hjort & MacKenzie 2003, Phillipsen
2008, 2009) not much attention has been directed towards the role of budgeting in this process until
now. In general financial constraints have been discussed but the particular consequences of
restricting the spending of funds to specific items has not been discussed yet. Although it is a very
specific constraint it is a quite significant one at least in the Danish film industry. Finally we add to
the discussions in agency theory in accounting research (for reviews see Baiman 1982, 1990) on the
way in which constraints are incorporated to deal with agency problems. We argue that
opportunistic behavior is not exclusively a problem for the principal. It might also be an issue for
the agent experiencing that the agent him- or herself at some point of time act against his or her
interests in some other point of time. In this case the agent at some point in time wants to constrain
him or her-self to prevent him or herself from acting his or her own interests defined at an earlier
(cooler) point of time.
The remaining part of the paper is organized into five sections. The next section outlines a theory of
constraints and illustrates how Elster characterizes the benefits of constraints in situations where
less is more and pre-commitment devices are needed. Section three present the methodology. In
section four the episodes from the Danish film industry in general and the individual film project in
particular are outlined to illustrate the enabling aspects of the line-item budgets for the film maker
(producer and director). In section five results and implications for theory are discussed and
conclusions presented.
II. Contraint theory
In this section we discuss and develop theories to understand how administrative devices like
budgeting are functioning as constraining devices. The section aims to put perspective on the
constraining role of line-item budgeting by introducing constraint theory (Elster 2000). We begin
the discussion by characterizing how budgeting in general and line-item budgeting in particular has
been portrayed as constraining agents in terms of their decision making. Drawing on Fama and
Jensen (1983)’s model of organizational decision making as a four-stage model we illustrate how
constraints affect the initiation as well as the implementation stage. Next we describe how a number
of theoretical approaches facilitate analyses of the effects of constraints. What they have in common
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is that they focus mostly on the (negative) effects of constraints especially in the implementation
stage. We end this section by presenting Elster (2000)’s constraint theory, which adds perspectives
to the benefits of constraints both in the initiation and implementation stage of decision making.
Constraint theory highlight that reducing the agent’s opportunity set in some situations can further
creativity and protect against passion and time-inconsistency which are sometimes essential for the
success of creative processes.
Budgeting, constraints and organizational decision making
The constraining role of budgeting has been emphasized by many scholars. In this paper we define
a constraint, according to Elster (2000), as a restriction of freedom of choice either by prescribing
what should not be done or what should be done. We use the notion of constraint in the same way
as control is used in the management accounting literature: ‘Management control, then, includes all
the devices or systems managers use to ensure that the behaviors and decisions of their employees
are consistent with the organization’s objectives and strategies (Merchant & Van der Stede, 2007, p.
5). Budgeting constrains behavior because it specify for the agent how funds should be spend on
given purposes or activities at a particular level of detail. Line-item budgeting is a design choice
that act out such constraints as it authorize the agent to spend only up to a specified amount on each
line item (Zimmerman 2009: 252) and thereby clearly reduce the agents freedom of decision
making.
In order to facilitate the discussion of how line-item budgeting constrains the agent in his or her
decision making we draw on Fama & Jensen (1983)’s characterization of an organizational decision
making process. They argue that decision making in organizations can be portrayed as a four-stage
process involving initiation, ratification, implementation and monitoring. These four stages are
illustrated in figure 1 below.
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Decision management Decision control
Initiation:
The agent initiates proposals for a
decision
Implementation:
The decision is implemented by
the agent
Figure 1: The four-stage model of organizational decision making
(based on Fama & Jensen 1983)
Fama and Jensen’s model of the decision making process can be used to enrich the discussion of
how constraints take on different roles in decision making processes in organizations. Fama and
Jensen (1983) use the framework to discuss different types of ownership structures (professional
partnership, open corporations etc.), but Lazear & Gibbs (2009 p. 124) emphasize that almost any
decision-making process can be framed in accordance to Fama and Jensen’s model (1983). This is
also illustrated by Zimmerman (2009) who decomposes a number of management accounting issues
including budgeting using the four stage model.
In the initiation stage, a set of options are proposed. This stage is probably the most crucial for
creativity and innovation (Lazear & Gibbs, 2009, p. 124) and is sometimes considered as
brainstorming. The second stage is ratification, where a proposal for implementation is decided
upon or where one of several options is chosen. In business terminology this is where the strategy is
defined and in a film-setting, where the final script and budget is approved. The third stage is
implementation, where various types of devices are used to implement what has been decided upon.
Management accounting techniques such as performance measures, cost allocations, transfer prices
and budgets are often emphasized as having a prominent role in the implementation stage. The final
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Ratification:
The decision is ratified by the
principal.
Monitoring and reward:
The implementation is monitored
and rewarded by the principal

stage is monitoring and reward deals with to what extent that the implementation complies with
what has been ratified.
Since initiation and implementation often are undertaken by employees (agents) whereas decision
control is carried out by their managers (principals), and because conflict of interest is more or less
taken for granted, decision control is to a large extent about constraining the agent, so that he or she
acts in accordance with the firm’s strategy and goals. Budgets play an important role in this process.
A budget and especially a line-item budget would be functioning as a constraint in the
implementation stage irrespective of how the budget has been initiated and ratified. Zimmerman
(2009) even argues that ‘[l]ine-item budgets provide an extreme form of control. The manager does
not have the decision rights to substitutr resources among line items as circumstances change’
(ibid.: 262).
Even though a line-item budget’s constraining role is most obvious in the implementation stage, it
does not imply that budgeting has no role when it comes to initiation. A significant stream of
accounting research going back to Simon et al.( 1954)’s discussion of accounting systems’ attention
directing effects and including more recent debates on the interactive use (Simons 1995) or the
enabling role (Ahrens & Chapman 2004) of accounting are focusing on the inspiration that
accounting provide for organizational decision makers which have a clear linkage to the initiation
stage. In the following we will pay particular attention to Ahrens and Chapman’s discussion of the
enabling role of accounting and illustrate how it can be related to the various stages of
organizational decision making suggested in the four stage model.
The enabling role of accounting
In their analysis of the more positive sides of accounting Ahrens and Chapman ( 2004) contrast the
constraints of accounting with the support of accounting and illustrate how “management control
systems might be used to support rather than constrain operational management” (Ahrens &
Chapman 2004). Drawing on Adler and Borys (1994)’s characterization of two forms of
formalization, the supportive side of accounting is portrayed as enabling whereas the constraining
as coercive.
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Ahrens and Chapman (2004) conceptualize the supportive side of accounting by drawing on Adler
and Borys four system design characteristics: repair, internal transparency, global transparency and
flexibility. Repair in an enabling approach means using equipment as input to dialogue. In two-way
communication, understanding advances partly through the repair of misunderstanding. Internal
transparency refers to internal functioning of the equipment or procedure as used by employees.
Enabling procedures provide users with visibility into the processes they regulate by explicating its
key components and by codifying best-practice routines. They provide users with an understanding
of the underlying theory of this process by clarifying the rationale of the rules. And they provide
users with feedback on their performance by providing metrics that help users assess their
performance against historical standards. Global transparency refers to the intelligibility for
employees of the broader system within which they are working. In an enabling approach to
procedure design, by contrast, employees are provided with a wide range of contextual information
designed to help them interact creatively with the broader organization and environment. An
understanding of the review process and the ability to identify the status of a given suggestion under
review is considered essential to motivating continued participation. When it comes to flexibility an
enabling procedure manual assumes that deviations are not only risks but also learning
opportunities. In one organization that Borys studied the engineering change process-a very complex
procedure for making minor changes to existing product designs-was redesigned along these lines
(Adler and Borys, 1994).
The enabling side of accounting described by Ahrens and Chapman is related to the initiation stage
as well as the implementation stage of organizational decision making. First, accounting plays a
significant role for the initiation of ideas related to improving and changing organizational
processes and products. For instance, Ahrens and Chapman (2004) illustrate how global
transparency rendered through accounting plays a significant role in terms of presenting good
practice and explaining to restaurant managers “how existing divisional systems could be used to
understand and actively manage the reconciliation of centrally determined standards and objectives
with emerging local contingencies”(ibid.: 292). Furthermore, Adler and Borys (1996) in more
general terms emphasize that global transparency helps agents to “interact creatively with the
broader organization and environment” and that systems may be designed to encourage a large
number of suggestions (ibid.: 73).
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Second, the enabling side of accounting also relates to the implementation stage. Ahrens and
Chapman (2004) illustrate this in their description of how waiters in the restaurant chain that they
studied were informed about the margins for menus by means of ‘bingo cards’ which enabled the
waiters to achieve the restaurant chain’s profitability goals (ibid: 292). Furthermore, Ahrens and
Chapman argue that the nature of coercive formalization (in contrast to enabling formalization) lies
in its imposition of its logic on organizational members. Such coercive systems are analogous to
traditional models of cybernetic organizational control in which the focus is on policing adherence
to preplanned objectives and standards. (Anthony 1965). Enabling formalization, in contrast designs
organizational rules that reckon with the intelligence of workers so that formal procedures need to
be designed to make the work process foolproof. Instead they can be designed to enable employees
to deal more effectively with inevitably with contingencies (Ahrens & Chapman 2005, p. 279).
Thus, a decisive aspect of the enabling role of accounting is that it gives the agent freedom to cope
with the inevitable contingencies in order to act in the interest of the organization. However,
constraints are not only problematic from a coordination point of view hindering decision making
adapting to unforeseeable contingencies (circumstances). Constraints might also affect the agent’s
motivation negatively due to reduced autonomy (Adler & Borys 1996). Following the lines of
reasoning from psychological motivational theories like job characteristics theory (Hackman &
Oldham,1976) and the theories of intrinsic motivation (Ryan & Deci, 2000) Adler and Borys argue
that constraints under these circumstances would have damaging consequences not only for
implementation but also innovativeness and creativity in general.
Whereas local and global transparency underline the importance of formalization making sense to
the agents ‘repair’ and ‘flexibility’ both highlight that formalization should be liable for a
reinterpretation in the implementation stage, if contingencies not foreseeable in the initiation and
ratification stage arise. In that sense rules are not to be taken too literately and thereby the
constraining feature is less dominant.
Budgets and role clarity
But even the constraining function of budgets can have a positive effect even seen from the
perspective of the employee. Marginson and Ogden (2005) thus emphasize the more positive,
comforting role that budgets play in the individual’s work experience. However in contrast to
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Ahrens and Chapman, they focus on the positive aspects related to the constraints that the budget
provide. They argue that budgets help individuals in clarifying their organizational role which is
important from their own comfort and well being in organizations. Experienced role ambiguity is an
unwanted psychological state, which occurs when the person is concerned or ‘stressed’ by lack of
clarity and structure to the role (King & King, 1990; Siegall, 2000; cited in Marginson & Ogden,
2005). Marginson and Ogden (2005) argue: “Doubts about how others evaluate us, about how
satisfied they are with our performance, are frequent and deep-seated sources of anxiety. As a
result, those who experience role ambiguity must confront it in some way, usually by invoking
‘coping strategies’. These are attempts to regain clear, orderly and meaningful cognitive
experiences”. Marginson and Ogden (2005) suggest several reasons why budgets offer a useful
coping strategy. First, “budgetary control is organizationally ‘good citizenship’. Those who are
controlling their costs are benefiting the firm.... Moreover, because of the visibility of accounting
information, the manager can be seen to be an organizationally ‘good citizen’.... Those who
experience role ambiguity may therefore value the budget for the comfort and security it offers. But,
such psychological return is conditional upon the achievement of targets; there is little comfort to be
gained from exceeding preestablished targets or missing the budget” (p. 442). Marginson and
Ogden’s (2005) role clarity approach stands in stark contrast to Adler and Borys (1996) and Ahrens
and Chapman (2005), since they emphasize that the budget can play a positive role beyond reducing
agents opportunistic behavior, because even the agents well being, implemented by defining the
role of the employee, can be improved by the constraining feature of the budget. A line-item
budget being extremely specific, defines the role of the agent very unambiguously. Less is more, in
Marginson and Ogden’s perspective, means that less discretion and ambiguity provides more
comfort to the agent.
When less is more
Whereas Marginson and Ogden (2005) primarily focus on the psychological well-being of
individuals subject to constraints, Elster adds to the positive sides of constraints through his
analyses of how constraints help the decision maker to create aesthetic value and reduce the risk of
the decision maker indulging in harmful passion and time inconsistency in the form of hyperbolic
discounting. At a very general level, Elster (2000) illustrates the proposition that ‘sometimes less is
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more’. There can be benefits from having fewer options rather than more. This idea must be seen on
the background of the standard case, in which the exact opposite is true. Elster states that:
‘Prima Facie it would seem that nobody could have a motivation for discarding options,
delaying rewards, or imposing cost on themselves. And in most of everyday life this intuition
is obviously correct. Most people would rather have more money than less, more occupational
options rather than fewer, rewards sooner rather than later, a larger range of potential
marriage partners rather than a smaller one, and so on. Much progress in human history has in
fact taken the form of removing material or legal restrictions on choice.” (Elster, 2000, p.1).
Nevertheless, Elster discusses the nonstandard case in which the “more is better” assumption is
invalid. It can be so for one of two reasons. On the one hand, the individual might benefit from
having specific options unavailable. On the other hand, the individual might benefit just from
having fewer options available, without the desire to exclude any specific choices (Elster, 2000, p.
2). Furthermore these constraints can have different types of origin. One type of constraints called
incidental ‘benefit the agent who is constrained but [that] are not chosen by the agent for the sake of
those benefits’ (Elster, 2000, p. 4). These constraints can be a fact of life (the need to shoot films in
black and white before the invention of color photography), can be chosen by the agent for some
other reason, or chosen by some other agent. Thus any constraint defined by a principal, such as a
line-item budget, which creates benefits for the agent, is an incidental constraint. Secondly,
essential constraints’ are constraints that an agent imposes on himself for the sake of some expected
benefit to himself (Elster, 2000, p. 4). As we will elaborate below film production, and maybe
especially Danish film production is well known for using self-imposed (essential) constraints.
What is the function - the ‘more’ - created by these constraints?
Constraints might enable creativity by directing creativity in certain directions. These types of
constraint works:’….to stimulate creativity…the main idea is simply that having too many options
works against creativity. (Elster, 2000, p. 209). Furthermore, Elster argues that “[T]he process of
artistic creation is guided by the aim of maximizing aesthetic value under constraints. … Creativity
is the ability to succeed in this endeavor.” (Elster 2000: 200; emphasis added). Our empirical
analysis will illustrate how the Danish film industry has embraced this idea.
Another function of the constraints is according to Elster to protect against passion and timeinconsistency.
An essential metaphor in Elster (2000) constraint theory is the story of Odysseus,
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who ordered his men to bind him to the mast of his ship so he would not be tempted to wreck his
ship being seduced by the sirens beautiful song. Odysseus’ act illustrates the key point in Elster’s
constraint theory, since Odysseus bind himself in order to avoid the temptations of the Sirens. His
theory takes a point of departure in the assumption that the agent sometimes is irrational and that
the agent knows it. This is the reason why agents often voluntarily (in a cool moment) bind
themselves/constrain themselves in order not to act in an irrational way in the future. In Elster
(2000)’s approach passion is the antonym of rational self-interest and the passionate part of one’s
personality works counter to one interest formulated in cooler moments. Passion is simply an
irrational and opportunistic part of our personality that destroys the interest of our self.
Elster uses passion in “an extended sense that covers not only the emotions proper such as anger,
fear, love shame and the like but also states such as drunkenness, sexual desire, cravings for
addictive drugs, pain, and other “visceral” feelings’ (Elster, 2000, p. 7). According to Elster (2000,
p. 8-9) passion is unfortunate for the agent for several reasons: (i) Passion may distort our thinking
about the consequences of the behavior, (ii) The passion may be so strong as to crowd out all other
considerations, (iii) inducing weakness of will, and (iv) a person in a state of passion may weigh the
consequences of behavior differently from the way he does in a calmer mood.
Another rationality problem is hyperbolic discounting, which is a type of time inconsistency that
‘occurs when the policy currently planned for some future period is no longer the best when that
period arrives’ (Elster, 2000, p. 24). Discounting is a well known behavioral logic in economics.
When individuals plan their behavior over time, they typically discount future welfare to a smaller
present value. In general there are two main views about the exact shape of the discounting
function. Neoclassical economists usually assume that discounting is exponential, in the sense that
the welfare t units of time into the future is discounted to present value by a factor of r t . Elster
(2000, p. 25) and with him several psychologists (Ainslie 1991, Ainslie & Monterosso 2003) and
behavioral economists (Thaler & Shefrin 1981) argue that discounting is hyperbolic, so that welfare
t units into the future is discounted to present value by a factor of 1/(1+kt), with k>0.
The difference is important because in hyperbolic discounting the passing of time changes the
preference of the individual doing the discounting. A simple example will illustrate the point. A
person having to decide Friday evening whether to rise early Saturday morning to do some exercise
(e.g. jogging) is making a cost benefit calculation where the benefit of jogging – being in better
shape, better health etc. – all long term benefits have to be discounted to match the short-term cost
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of jogging Saturday morning – raise early instead of staying in bed, enduring exertion and so forth.
Using exponential discounting, a person, who discount future benefits very heavily, will choose not
to jog Saturday morning, whereas a person, with a lower discount rate, will choose to jog Saturday
morning. In exponential discounting the decision taken Friday evening will be the same Saturday
morning. In hyperbolic discounting the mere passing of time can change the decision. The person,
who Friday evening chose to run Saturday morning, can decide not to jog Saturday morning
because the discounting of the future benefits is changed, as Saturday morning is getting closer.
As with passion hyperbolic discounting is often considered harmful for the decision maker. This
problem can also be conceptualized as principal-agent problem between a rational, time consistent
(farsighted) planner and a hyperbolic discounting doer (Elster, 2000; Thaler & Shefrin, 1981), and
therefore it is important to safeguard against hyperbolic discounting as well as passion. A large part
of Elster (2000) is about how to commit against passion and hyperbolic discounting. This can be
done through an advice as well as a device. An example of an advice is counting to ten, if getting
caught by anger, or reminding oneself about the cost of staying in bed Saturday morning instead of
jogging. In general Elster (2000, p. 12-13) is skeptical against advices, because the efficiency of
advices assume that people are rational. A person a drift in rage cannot make himselves count to
ten, and a person, who discount hyperbolic is difficult to convince not to do so. Much more focus is
on devices, which works much more direct on the person. The agent got several devices for precommitting
him or her-self against passion and hyperbolic discounting: (i) Eliminating options,(ii)
imposing costs, (iii) creating delays (Elster, 2000, p. 6).
A person with a passion for alcohol can eliminate the option of drinking alcohol by simply not
having alcohol in the home. An alcoholic can take disulfiram (Antabuse), a drug that has the effect
of making the person taken it seriously ill (Elster, 2000, p. 68), and thereby impose costs on oneself.
The game theorist Barry Nalebuff designed a game show for the television network ABC called
‘Primetime’, where imposing costs was a central part of the arrangement. Cindy Nascon-Schecter,
who had gained forty pound with the birth of her second child, wanted to lose weight, and realizing
that advices, she knew how to lose weight, did not work for her, she accepted an arrangement,
which would raise the cost of not losing weight. On December 9, 2005 she had her picture taken in
bikini, and signed a contract with ABC that if she lost 15 pounds over the next two month, the
picture would be destroyed, if she didn’t lose weight that is she indulged in a passion for food and
dispassion for exercise, the picture would be shown on national television (Dixit & Nalebuff, 2008,
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p. 14-15). People trying to lose weight are also known to sign a contract with a therapist where a
certain amount is paid, or repaid because the client often did the deposit, to the client each time the
person reach prescribed weight losses (Elster, 2000, p. 70). The examples are taken from Elster
(2000)’s analysis of commitment devices in addiction. He also analyses constitutions with the same
framework.
III. Methodology
In this paper we seek to unfold the ways in which line-item budgeting contributes beneficially to
decision making in the Danish film industry. We do this by providing examples from the field and
account for qualitatively how and why line-item budgeting has been experienced by agents in the
industry as a benefit rather than a cost. In this respect, we like others in research on budgeting (e.g.
Davila and Wouters 2005) are guided by aspirations of analytical generalization (Yin 1984: 21) (in
contrast to statistical generalization) and seek to illustrate how a concept - in this case line-item
budgeting - might be linked with benefits in new ways compared with how it has been portrayed in
the research previously. Consequently, the examples from the field are paving the way for new
theoretical propositions which will expand our general conceptualization of budgeting as a
constraint.
Line-item budgeting is according to Zimmerman (2009, p. 69) an extreme form of control which in
many ways makes up a critical case for understanding the relationship between control and creative
business processes as which many has characterized film production. Our aim of exploring the way
in which these constraints, to some counter-intuitively, might become benefits for the agents in
creative processes has affected the organization of our field study. First, we aim to explore how
constraints (other than financial) in some cases have been promoted as beneficial when it comes to
creative film production. The reason for exploring these issues are to provide a better understanding
of how constrained behavior in more general terms might lead to creativity in the field.
Subsequently, we then move the discussions to financial constraints by exemplifying the role of
financing and budgeting in general and then end up in discussions of line-item budgeting in
particular. This idea of gradually increasing the level of specificity in the discussion of constraints
(from to non-financial constraint to line-item budgeting constraints) have been to more carefully
illustrate the role of constraints in the initiation stage as well as the implementation stage which we
15

elieved provide a stronger background for discussing line-item budgets as constraints with respect
to these two stages of organizational decision making.
In our study of the role of constraints in the Danish film industry we primarily focus on the role of
constraints for producers and directors (we define them as film makers). Naturally, constraints
affects all personnel involved in film production but our paper aims to explore how producers and
instructors in their decision making related to film production are affected by budgeting. Whereas
the producer is often portrayed as the one who uses budgeting for planning and controlling the
production process of a film, the directors is often described as the one with the role as creators
which is often said to be challenged by the bureaucracy of budgeting. However, as we shall see are
their role as film makers often overlapping and their perspective on budgeting similar.
In order to explore the benefits of nonfinancial constraints in film production and creativity we
focus upon some of the best-known Danish film production concepts “Dogma” and “Directors cut”
which all have been successful concepts and in many ways constituted on their positive attitude
towards constraints. Furthermore, we also draw on examples from the film industry more globally
for example in our historical account of ‘the Hayes code’ and from the Danish film history, which
also contains intriguing examples of the role of constraints in film production (Elster 2000).
Our study of the role of budgeting as a constraining factor is in particular informed by a case study
of the making of the Danish film “The Island of Lost Souls” which was directed by Nikolaj Arcel
and produced by Zentropa (the company that also produced the Dogma films). ). ‘The Island of Lost
Souls’ is especially interesting to study when it comes to the role of the detailed budget because
there were a lot of uncertainty, a contingency normally seen as working against a strict budget
control (Argyris 1952; Burns and Stalker 1961; Bruns and Waterhouse 1975; Merchant 1981;
Brownell 1985; Shields and Shields 1998). In a Danish context the film was expensive and interring
new terrain, which introduced a lot of uncertainty in the making of the film. The director explains:
‘It was what I have wished for ever since I was a child. Nothing this big had been done in
Denmark’. Especially the amount of special effects was unseen in Danish films. It was an explicit
ambition to make the film look like a Hollywood production with Harry Potter and Star Wars as
reference points.
Line-item budgeting practices in the Danish film industry are heavily influenced by the Danish Film
Institute (DFI) which plays a major role in financing Danish film productions. DFI requires that
16

films financed (or partly financed) by DFI also plan and control the production process through the
template for budgeting provided by DFI. The template is very detailed and consists of 892 potential
line-items. In the process of the making TILS, the line-item budgeting from DFI also played a
significant role because TILS was partly financed by DFI (25 % of the budget) and planning and
controlling of the project through DFI’s line-item budgeting template was required.
Multiple data sources have been applied for acquiring knowledge about the role of constraints in the
film production. Literature and information from the media on Danish film industry, Zentropa and
TILS have been used as input for the study. The commentary track on the DVD version of TILS on
which the director tells the story of the making of the movie and a documentary on TILS has also
provided us valuable insight information on the process of making the film. In addition, documents
from Zentropa and DFI like budgeting, spreadsheets, public documents have been applied.
Interviews have been conducted with key actors in they TILS project. Interviews have been
undertaken with Film Consultants and the Chief Controller from DFI as well as with a Development
Consultant from DFI. Three interviews have been conducted with the Producer on TILS from
Zentropa, and the Post Coordinator on TILS, also from Zentropa. Finally, our analyses have also
been informed by informal discussions with the project controller on TILS from Zentropa from
whom we have acquired invaluable insights to the process and research assistance in general.
IV. Case: Constraints in Danish film production
This section illustrates and discusses some benefits of constraints in the Danish film industry and
focus in particular on the role of line-item budgets. To set our analysis in a broader perspective, we
begin this section by outlining how directors are often constraining themselves and relate these
types of constraints to financial constraints in general and line-item budgeting in particular. We
show how the line-item budget is used as a complement to creativity by enabling ‘less-is-more’
constraints used in the initiation stage where the script is written and the story board produced.
Moreover we show how the line item budget is used as a pre-commitment device in the
implementation stage, where the budget constrains the film makers in engaging in passion and time
inconsistency, though in a slightly different manner than described in Elster (2000). In the first part
of the section, we focus on imposed and self-imposed constraints, and illustrate how these
constraints in fact improve creativity. In the second part of the section, we show how the line-item
17

udget functions as a beneficial constraint in both the initiation and in the implementation stage. We
include two types of constraints, those which function as an advice for the agent and those which
coercively prevent the agent from being exposed to subjecting to passion and time-inconsistency in
the implementation stage.
a. Artistic constraints
Film production is constrained by several imposed constraints of different types such as
technological, legal, artistic, financial and not at least budgetary constraints. In the following we
well briefly illustrate the consequences of the first-mentioned types before we consider in detail the
ones related to budgeting.
Technology has always been an issue in film production. Before the mid 1920s, there was no sound
in films, and before the mid 1930s color was not easily available. Even though film technology has
improved drastically since then there are still limits. Another constraining factor is deadlines which
are not only imposed by the production companies for their own sake but also due to tight schedules
for actors with productions succeeding each other without any buffers. Furthermore, censorship is
yet another constraint experienced by filmmakers, however, maybe more intensely in the past than
in the present. Intriguingly, many have argued that these constraints improved creativity. Elster
(2000, p. 228), for example, who discusses the Hays Code that regulated film production in
Hollywood from around 1930 until the 1950s especially concerning erotic features points out that
many commentators believed that the Hayes Code actually fostered creativity, because the filmmakers
had to circumcise the censorship, and create more indirect erotic pictures: ‘The need for
exquisite fine-tuning and indirection brought comedy, in particular, to new levels of sophistication
(Elster 2000, p. 230). Richard Maltby (1993) adds that the Hayes Code ‘operated however
perversely, as an enabling mechanism at the same time that it was a repressive one’ (cited in Elster,
2000, p. 229).
In many western countries, including Denmark, censorship is not as influential a constraint today as
it once was, but it does not imply that constraints are not used in modern film production to enable
creativity. In fact, the Danish film industry has established a reputation for successfully using selfimposed
constraints in the making of films (Hjort & MacKenzie, 2003). The best known set of
constraints is Dogma 95, which is ten rules formulated as a ‘Vow of Chastity’, concerning light,
sound etc., that film makers must comply with to have the film entitled a ‘Dogma film’ (see Dogma
95 Manifesto in Hjort & MacKenzie, 2003, p. 199). The Dogma rules were defined by the Danish
18

directors Lars von Trier and Thomas Vinterberg. Each of them has made their own Dogma film -
The Idiots and The Celebration respectively, which received several awards and massive publicity.
In particular the latter - also the first Dogma film - earned much international recognition for
example by an Oscar nomination in 1998 and the Jury’s Prize at the Cannes Film Festival also in
1998. The Dogma rules were widely considered as part of the reason for the success of the Danish
film industry in the 1990s and beginning of the 2000s. According to Phillipsen (2008; 2009) the
development of Dogma 95, should not be seen as an isolated incident, but as an idea steaming from
the teaching methods from The National Film School of Denmark from which both Vinterberg and
Trier have graduated. The Film School uses constraints to foster creativity in many different waysan
important example being the pen test, which each coming graduate performs 8 times during the
study program (Phillipsen 2009, p. 4). In a pen test each student is asked to write a script within
defined rules e.g. there must only be two actors in the script, it must only be five pages long etc.
The constraints are meant to foster creativity and are to a large extent welcomed by the students.
Philipsen (2009, p. 5) quote a screenwriter student arguing:
I love constraints. I might be a masochist or something. [..] But I just think that then you
do not have to decide a lot of things. If I know, it has to be five pages long, and there are
three characters, and the alliance alters between those three, and God knows what.., then
it is fantastic, then [..] some things are decided already, and I think that it is a great
relief, because it offers an exercise to your imagination.
The Danish film makers fascination with constraints is maybe most visible in the film ‘The Five
Obstructions’ (which is not a Dogma film) created in collaboration between director Jørgen Leth
and Lars von Trier. In the film Trier defines five obstructions to Leth’s retake of five of the scenes
in his short film from 1967 ‘The Perfect Human Being’. The obstructions are carefully chosen to
challenge Leth’s traditionally way of making films. In one of the scenes Leth, who usually uses
very long settings, is ordered to use no more that twelve frames per clip, and another scene is to be
made as a cartoon, a type of film which Leth is well-known for disliking. Though often complaining
over the obstructions when given to him, Leth afterwards recognizes that the obstructions were a
gift that helped him create something creative. The important role of constraints in the creative
process is underlined in the scene where Trier, not satisfied with Leth’s second short film, argues:
‘I’ll have to punish you .. I’ll have to ask you to work without any rules, an assignment without any
constraints is apparently the most vicious I can ask you to do’. Leth was upset and only reluctantly
19

accept the challenge. However, he eventually came up with a result that both film makers found
creative.
When it comes to advancing creativity through constraints, Elster (2000, p. 2) argues that it is all
about making fewer options available to the film maker and that the constraints are more or less
arbitrary chosen without excluding any specific options. In contrast, Elster asserts, the constraints
imposed on agents to protect them from passion and time-inconsistency are oriented toward
eliminating specific options. Nevertheless, when it comes to Dogma 95 and ’The Obstructions’, it is
clear from the analysis above that the constraints are actually chosen to exclude specific options
(Hjort and MacKenzie, p. 34-35). In addition, some of these constraints for instance promoted in
Dogma 95 also to meet financial constraints.
Obviously censorships like the Hayes Code and the constraints in ‘The Five Obstructions’ are not
related to financial constraints. The purpose of the Hayes Code is to isolate the fragile population
from direct erotic scenes, and the five obstructions in ‘The Five Obstructions’ is meant to challenge
the film-maker Jørgen Leth to go beyond his normal procedures. In fact, the character of the
obstructions in ‘The Five Obstructions’ did not lead to a cheaper film. In contrast, many of the
scenes had to be filmed at expensive locations (for example Cuba and Bombay). However the
constraints in Dogma 95 relate more directly to financial constraints. In an interview, Trier clearly
suggests that Dogma 95 can be seen as response to the globalization of American films and their
huge budgets (Rundle, 1999). In fact, it is a way of getting back to basic. Trier emphasizes
especially rule no. nine (the film must be Academy 35 mm) 1 as essential for meeting financial
constraints and preaching ‘less is more’:
‘Mainly it [rules number nine, ed.] has made the process much cheaper which of course
also pleases me. And it has led to a movement around the world where people start
making these cheap Dogma-films. They might not be completely according to the rules,
but if it means that people who used to be limited by rigid ideas of how a proper film
should be made are now making films – then I think it has a certain quality’
Actually, Development Consultant argued that Dogma 95 first and foremost was created due to
financial constraints:
1 Academy 35 mm is a cheap way to make and distribute films (see for example Hjort and MacKenzie, 2003, p. 39)
20

“Lars von Trier and Peter Ålbæk (producer from Zentropa) had many new and
exciting ideas adding up to around DKK 13 million, but only half of it was could be
financed. So they decided to cut the budget 50% and actually succeeded in making
film. In fact, they made twice as much film as they were used to – for the same money.
This was the way in which the Dogma concept was born”
b. Constraints caused by the financing of the film
The financial constraints and the way it influences creativity comes in many forms. One type of
constraints on the making of the film arises from the financing of the film. Since Denmark is a
small country with a little audience for films made in Danish, film production is subsidized. A large
part of the financing for most Danish films comes from The Danish Film Institute (DFI), a
government owned organization, which support Danish film making. DFI also supported the
particular film project that we studied: “The Island of Lost Souls” (TILS). Of a budget on DKK 40
million about DKK 10 million was financed by DFI. As with the major part of other Danish films
additional sources of finance were TV stations and regional funds. When regional funds finance
part of a film it was often a part of the deal that a certain amount should actually be spent in the
local area. In fact, TILS received funds from regional funds in Germany, Sweden and Denmark.
’Film Fyn’ (Film Funen), a local fund to support regional industry, for example made a deal with
the producer that they supported the film with DKK 2 million, and in return for that DKK 4.5
million was spend in that area. The financing of films and the impact it has on creativity is an
excellent example of the complexity of the ‘less is more’ statement. Both the Film Consultant and
Chief Controller at DFI mention that a large budget involving many sources of finance from
different countries constrains creativity, since many of the participants demand to have a say on the
manuscript to take into account local taste, censorship etc. the Film Consultant argues in line with
the Dogma concept that smaller budgets mean more freedom.
One example from the Danish film industry of how financing constraints and the creative artistic
process interact is the new generation of low priced animation films. This example was mentioned
by all three consultants. One example is the artistic as well as box office success ‘Terkel in Trouble’
(2004). The film was produced for DKK 10 million, which would have been impossible just a few
years before, where an animation film like ‘Terkel in Trouble’ often had a budget between DKK 50
and 100 million. In ‘Terkel in Trouble’ it had been decided that the film should be done at no more
21

than DKK 10 million, among other reasons to maintain creative autonomy. To reach that target each
scene had been broken down into very specific elements and choice of animation effects had to be
chosen according to it’s value to the film. The hard budget constraint led among other things to that
all the figures in the film had Playmobil hair, because real hair is very expensive to make. The
general opinion – at least in Denmark – is that even though ‘Terkel in Trouble’ due to the
constrained budget situation does not use the most advanced technology, it’s still when it comes to
style and narrative creativity as good or even better than much more expensive productions. In the
specific case of ‘Terkel in Trouble’ and some of the other low-priced animation films the narrative
creativity is characterized by a very direct language and ‘non-political correct’ scenes, which would
not have been possible if many countries tastes should have been taken into account.
But even the constraints caused by huge budgets can enable creativity. The Post Coordinator on
TILS, at the one hand felt, how frustrating it often was, if choices were constrained e.g. with whom
she should interact, whom she should be hiring etc. She mentioned for example that due to the
finance partners, all post production work were to be carried out in Germany which she considered
to be a negative constrain, since it could be done cheaper elsewhere. However, on the other hand,
she also mentioned that there were a positive enabling side of this constrain. Since the situation
could help to create new and creative solutions, which would not come up if the work always was
carried out the same place. Though off course the process off the overall financing of the films
impose a lot of constraints on the filmmakers, in the rest of the paper we will focus on the line-item
budget functions as a constraining factor in both the initiation (the process of making the
manuscript) and in the implementation (the process of shooting the film) stage.
c. Constraints caused by the budget
’Had DFI not asked us to prepare it [the budget] we would have done it ourselves’ (the
Producer of ‘The Island of Lost Souls’).
In this section we illustrate how the line-item budget mobilized by the Danish Film Institute (DFI)
works as a control mechanism for DFI and how it create a platform for self control for ‘the film
maker’ in the process of creating the film ‘The Island of Lost Souls’ (TILS). We simplify the
analysis by including only two actors involved in the project: DFI which finance the project and
‘the film maker’ who execute the project. The film maker is an analytical construction merging the
director and the producer into one actor which is of course a simplification as the producer and the
22

director on some issues have different points of view. Nevertheless, the film maker in many other
instances represent the director as well as the producer as they often speak with one voice providing
us with informative accounts of the budgets role from a creator’s perspective.
Our analyses of the two actors’ translations of the role of the budget are summarized in table 1
below. We differentiate between the two actors’ view of the role in the initiation stage (script
writing, the making of story boards and development of the film in general) and the implementation
stage (shooting and post-production of the film) and point out how the budget template work as a
traditional control mechanism for DFI controlling the film maker, but also how the template is
adopted by the film maker and used as a self control mechanism protecting the film maker from
passion and time-inconsistency and working as a mean to cope with uncertainty and
unpredicatability in the process.
Actor
DFI
The film maker
Decision stage
Initiation Implementation
1. Control of specific items.
a. Payments to directors and
producers.
b. Transfer prices e.g.
technical equipment.
2. Advice: transparency of the link
between aesthetic value
creation and available.
Resources available (funds).
a. Raw film.
b. Post production.
1. Self control: Transparency of
the link between aesthetic
value creation and available
resources (funds)
a. Understanding cost
consequences of specific
scenes and ideas within the
script writing and the
production of story board
(prioritization)
23
1. Control of specific items.
a. See initiation.
b. Expropriation/manipulation.
of ’contingency’.
2. Control of the overall budget.
a. Variance.
b. Leading indicators: Raw film.
1. Self control: Transparency of the
link between aesthetic value
creation and funding – used for
self control in moments of
passion and complexity.
2. Understanding cost
consequences of
uncontrollable/unpredictable
events affecting the budget.
Table 1: The role of the constraints provided by the budget for two actors

In the following, we elaborate on the conclusions summarized in the table and illustrate how and
why the constraints prescribed by the budget benefitted the financer as well as the creator. We start
by focusing on the budgets role for the financer and subsequently the creator.
The role of the line item budgets the initiation stage
A Development Consultant at DFI appoints that it is absolutely essential that scriptwriters and
directors are able to produce their story within a realistic budget and see the limited resources as a
creative challenge instead of a limiting obstacle. She argues:
”Film production costs a lot of money. There is never enough money. That is an
irritating fact, but those directors, who can relate creatively instead of whining to this
basic condition, are the ones, who accomplish most artistically’ (Development
Consultant, DFI)
In fact, these ideas are considered to be instituationalized in the Danish Film industry. It is often
emphazised, for example by DFI representatives, that education at The National Film School of
Denmark promotes the idea that the budget’s constraints should be taken into account as early as in
the writing of the script and preparation of the production (see the analysis above on constraints at
The Danish Film School. Film Consultants at DFI notes that the students are taught that ‘The
Trinity’ of director, scriptwriter and producer and that they together have a responsibility to keep
the budget. According to the Chief Controller at DFI the film makers who are not graduates from
the film school - e.g. the old generation that has not studied at the school – are the ones that have
most difficulties keeping the budget. But even film school graduates with the positive attitude
towards budget responsibility are not enough to execute budget responsibility, DFI representatives
argue. The specific budget template seems to be playing a major role too.
Before, looking more into the specifics of the budget template the way in which the control function
is portrayed by DFI in general would briefly be described. In ‘Terms feature film’ 2 (section 4.5.2.),
2 www.dfi.dk/Service/English/Funding/Terms-Feature-Film-2008.aspx
24

which is a set of rules film makers have to comply with when receiving subsidies from DFI, some
general constraints imposed by DFI on the film maker by the DFI are clarified. ‘The terms
prescribe that:
4.5.2 The budget must contain the following items:
� Administration costs of no more than 7% of the budget, excluding the costs of project development, the
completion bond, and the margin of uncertainty.
� The producer's fee, the amount of which must be approved by the DFI, accounting for the nature and size of
the individual production.
� Margin of uncertainty of at least 5% and no more than 10% of the budgeted production costs, excluding the
costs of project development, administration and the completion bond.
� Premium for a possible completion bond or other security, in compliance with Items 5.3.1 and 5.3.2.
25
(Excerpt from “Terms Feature Film”)
The prescriptions - in section 4.5.2. - relate to traditional control problems, arising due to potential
conflict of interest between DFI, which is using Danish tax payers’ money to fund films to boost
Danish culture production, and film makers, who got their own interests which are not necessarily
aligned with the societal goals of film production. For instance, the limit on administration costs is
set because administrative costs quickly are considered as representing non-value adding activities
compared with the core activity supporting cultural production. In addition, the Chief Controller at
DFI elaborates on the item ‘The producer’s fee’:
”We evaluate salaries for the director and producer for moral reasons. We do not accept
that the producer gets more than the director. We also think that it is unfair if the film
has financial problems and that the producer gets one million DKK. Furthermore, we
also look at ‘the heavy equipment items’. The producers often have the equipment
themselves and then we do not think that the producers charge the same prices as if they
were going to rent it elsewhere.”
The chief controller’s concerns are related to preventing a receiver of public funds to work against
the societal purpose of the funds. The ‘moral principles’ seem to state that that film makers should
not earn too much when subsidized by tax payers’ money.
The role of the item ‘the margin of uncertainty’ is to improve the chances of keeping the budget for
film production. The size of the margin which influences the costs of the film is affected by the
persons involved in the film project, the complexity of the project etc. The Chief Controller at DFI

explains that if a well-known Director, Producer and Photographer team up and if theyhave a
reputation for keeping the budget, DFI will allow a smaller percentage for uncertainty, which will
lower financing costs. A complex project involving new technology, many special effects or other
elements that increase the risk of cost overrun when shooting the film and in the post-production
stage implies that DFI would demand a higher margin of uncertainty. In the case of TILS an
uncertainty margin of 10% was demanded because the film involved a lot of special effects which
was new in a Danish film. In addition, if a film project is considered very risky DFI can demand a
‘completion bond’, which is a bond provided by a third party (insurance company) that insures that
the film is completed even though the film makers goes beyond the budget.
Apart from controlling specific items, the line-item budget is also used by DFI to provide
transparency and to advice unrealistic and passionate film makers on the costs of film making in the
initiation stage. The Chief Controller at DFI explains how she looks at whether the different parts of
the production process– for example post production - is budgeted realistically so that the film can
be completed at a sufficient quality level. These types of advices are possible due to the DFI
consultants experiences from the film industry and they are expressed and specified in line-item
budget discussions. The Chief Controller explains that there have been episodes where DFI
discusses the relevance and importance of proposed scenes by the director and producers [in the
initiation stage] and that these discussions are based on DFIs knowledge of the costs of choosing a
particular location and using special equipment or effects. She adds:
“It could be the case where a director suggests ‘a helicopter scene’ as the opening scene
of the film which would be way too expensive compared with the funds available for
the rest of the film. The director might not be aware of how much it actually costs to
take such a scene and its proportions compared to the overall budget and the costs of
other scenes.”
In general, the chief controller emphasizes, the film makers are quite experienced and rational when
it come to planning the film project. Nevertheless, in some cases the knowledge from DFI in terms
understanding the costs of proposed scenes provides a valuable input for the film makers.
The film maker was not only exposed to control from DFI through the budget template but found it
useful for controlling his/her own actions and decisions in the initiation stage. The value of the
budget template as a device for the film maker came from the fact that film making is a complex
process involving a wide range of people which effort the film maker needs to coordinate and
26

prioritize. There is a significant proportion of local knowledge involved in filmmaking it’s
impossible for one person, e.g. the producer or director to specify all elements in the budget (see
Defillipi & Arthur, 1998; Caves, 2000). The director contribute with the vision of the film, and the
parties involved with scenography, sound, light and special effects come up with proposals on the
costs of performing their task. The producer plays the key role in order to coordinate these
proposals and put the puzzle together resulting in a funded film project. In the process the line-item
budget plays a key role.
In the case of TILS the budget and its line-items was an important reference point for the producer
in terms of sorting things out in the initiation stage. But not only the producer. In the case of TILS
the producer explicitly included the Director in the economic discussions of the process at a very
early stage. In particular due to the very large budget for the film. The TILS Producer explains:
“In the beginning he [the Director] had to get accustomed to the budget, which he was
not expecting, but I insisted on informing him and make him understand the importance
of it – and he knew the budget by heart before we started shooting the film”
Furthermore, the Post Coordinator of TILS describes the initiation of the budget and manuscript as
a ’work-method-description’ in which a number of ambitions and scenarios are initiated and the
costs calculated. Since the artistic ambitions often exceed the budget, the ambitions and scenarios
are often subject to a tough prioritization. The link between the manuscript and the budget was very
easy to recognize in the making of ‘TILS’. This film project was characterized by using a very
detailed ‘story board’. A story board is a book consisting of a drawn picture of every picture in the
film. By producers and the directors of the film the story board was called ‘the bible’, since it had
an very important role in the making of the film. Second unit Director explains: ’without this bible,
which everybody used all the time in the end, it would not have been possible to make this film.’
The story board, the heart of the artistic process, was linked directly to economic decisions which
again illustrates that the budget interacts directly with the artistic process and the Director did
actively try to find ways in which it became possible to keep the budget. During script writing it
was clear that the initial film visualized in the story board could not be realized within the limits of
the budget. A discussion between the Director and the VFX Supervisor, one of the owners of the
special effects company Ghost, illustrate the link between the story board and the budget.
27

Director: Then let us just say that you removed 3 or 4 pictures… That would not help? (on
reducing costs eds.)
VFX Supervisor: Yes
Director: Then it is something like that we should do.’
The Director and the VFX supervisor are discussing what pictures to remove from the script and the
line-item budget is involved in this process in order to better understand the cost consequences of
certain choices of removing pictures and thus used by the film makers to make constrained creative
decisions. These very specific discussions between aesthetic value creation and financial constraints
are not possible without a very detailed budget.
The role of the line-item budget in the implementation stage
This section explores the role of the budget functions the implementation stage (the implementation
of the script and story board in shooting and post-production). We argue that the budget and its
relation to the rules in ‘Terms’ function as constraints by creating delays and raising costs. We also
argue that a feature similar to Adler and Borys’ (1996) and Ahrens and Chapman’s (2004) concept
transparency is provided by the budget, but we argue that transparency here functions as advice
against passion and time-inconsistency by inducing a ‘shadow of the future’. We argue that this
indirect constraint is much more important in the making of the film than the direct constraints
caused by ‘Terms Feature Films’.
Film production is a process filled with passion and the history of the making of films includes
stories of ‘big egos’, which conflict over different issues in the process of film making. Passion in
film production comes in many versions. Zentropas controller on ‘The Island of Lost Souls’
experienced that there was excited and enthusiastic atmosphere when the crew arrived at the set
before starting the shooting. Everybody was eager to get started. But making the film was a huge
project involving a large amount of people and the control of these people is an important task. All
our interviewees have emphasized that it was important to have a detailed description of how to
make the film, because many of the scenes are produced with a large crew at very high costs.
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According to the Producer keeping the budget, also in the case of TILS, cannot be taken for
granted:
Question: Don’t you trust that he [the Director] will live up to the budget agreed upon?
Answer: No it never is that way. Film production is an interaction between many factors and a
lot of things can go wrong. The director can think of saying ‘couldn’t we do this a little bit
different’. When you start your takings you have a director who want to make his film, then
you cannot ask him to be loyal to you and your financial responsibility. That is imposible. So
if you want him to sit down with you and talk about the budget then you really have to have
your arguments prepared” (the Producer).
Passion and unexpected circumstances can wreck the initial budget. According to both the Chief
Controller at DFI and the Post Coordinator on TILS an accelerated consumption of raw film is
among the most frequent causes of budget overrun. Raw film is a leading factor for many other
types of costs. One example is recording overtime in which case allowances for working evenings
and nights must be included along with extensions of leases, catering and transportation costs. The
overconsumption of raw film can be caused both by unexpected circumstances and by passion
and/or time inconsistency. Sometimes film directors and photographers underestimate the time and
number of recordings it takes to get the right take or unexpected trouble can arise during the
shootings (e.g. an actor becomes sick).
But passion can also be a problem. When the director or photographer are in the act of shooting a
scene and is facing the choice between endeavoring to achieve the perfect take or to stick to the
initial plan within his budgetary limit it can be a hard choice to make. The Producer explains it in
this way:
“If we have agreed that this scene must be super good it is no use for the director to go
for super super super – that is no good”
The Post Coordinator, who is often bearing accumulated costs since post production is within her
budget, drawing from experience from other films, explains it even more explicitly:
29

”I have experienced production managers who had to pull the plug – literally – you
simply could not continue – raw film is rolling and people are working overtime” (Post
Coordinator)
Overconsumption on raw film or other types of cost overruns is not passively accepted by DFI.
When realizing a galloping consumption on raw film this is reprimanded as experience shows that it
can be difficult to rectify such deviations which consequently have an accumulating effect. DFI can
thus initially reprimand undesirable deviations from budget and subsequently if they continue
potential sanctions can be considered. This way of using the budget is related to ‘Terms Feature
Film’. The line-item budget and the ‘Terms’ together function as a device because they create
delays and impose costs. In 4.8.1 in ‘Terms’ the creating of delays is emphasized:
4.8.1 Production subsidies are paid to the production company in installments. The DFI determines the amount
of individual installments (usually totaling six) on the basis of the approved cash-flow plan. Individual
installments are normally paid based on the cost report provided by the production company, cf. Item 4.10.2.
In case of significant changes to the schedule, production plan, cash-flow plan, etc., the DFI reserves the right
to change the dates and amounts of the installments.(emphasis added).
30
(Excerpt from “Terms Feature Film”)
Section 4.8.1 emphasizes that variance according to the plan can change the dates of installments,
which will cause a delay in the film production process. Apart from creating delays ‘Terms’ also
can impose costs on the film makers. This element is emphasized in section 4.10.2:
4.10.2 During shooting, the production company must provide a cost report every two weeks containing the
same items as the approved budget, plus expenditures to date, the estimated final outcome of the budget's
main items, with relevant comments, and an updated cash-flow statement. In case of minority co-productions,
cost reports need only be submitted in connection with installment payments. If the final outcome is expected
to exceed the approved budget, including the margin of uncertainty, the production company must prepare an
audited budget, plus new financing and repayment plans, and present them to the DFI for approval. The DFI's
approval of a cost report does not imply an approval of possible variances from the production budget.
[emphasis added].
(Excerpt from “Terms Feature Film”)
As emphasized in section 4.10.2 a cost overrun will impose costs on the film makers, since they
will have to provide explanations for cost overrun, and ultimately have to come up with additional
financing plans. In TILS there was no need to come up with new financing plans, but according to
the Chief Controller at DFI there have been examples of producers and directors, who have had to
use their own property as collateral as part of the financing of a film. Apart from keeping an eye on
raw film DFI’s control on the specific items in the budget is not very strict according to the Chief
Controller. If there is an overrun on any of the items an explanation has to be given. But if there is a
reasonable explanation and the cost overrun can be covered on savings elsewhere no further action

is taken by DFI. Focus is on the overall budget. An exception is - as in the initiation period - on
those specific items, which relates to a direct conflict between DFI and the film makers in this case
the producers. An example relates to a conflict of interest regarding the contingency fund. Since
part of the unused contingency goes back to DFI, the producers often try to expropriate some of the
fund. The expropriation is attempted through strange items like for example ‘extra production
assistant DKK 200.000’, which is hard to understand in relation to the specific film production. If
this type of items appears, DFI request an explanation.
The line-item budget is used earlier in the process and much more actively by the film makers,
especially the producer, as self-control. This way of using the budget and the constraints it provides
is incidental and the costs imposed on the film makers for budget overruns are provided in an
indirect manner. Controlling the making of a film is an extremely challenging task. The Post
Coordinator elaborates on this point:
“To make films is like controlling a super-tanker, it takes a long time to rectify if
something goes wrong. It is therefore important that you many tools available for
control.”
The control conducted by the consultants at DFI takes place after the ‘super-tanker has wrecked’.
To prevent the ‘supertanker’ from wrecking, costs are reported on the film every week. The purpose
of the weekly reporting is to enable early intervention.
An episode from ’Island of Lost Souls’ illustrates this. After weeks of shooting the film the budget
had already been substantially exceeded. According to the Producer one of the reasons for this
particular overrun was a potential overconsumption of raw film with corresponding costs. Each day
after shooting the financial manager receives the updated ‘shoot lists’ which show the scenes that
have been recorded and the consumption of raw film, hours and other information regarding the
budget of the film. From considering these ‘shoot lists’ the producer can calculate the expected
costs of i.e. raw film as the material cost and the expected cost of post production of the consumed
film. The producer and the financial manager are constantly updated on the current consumption in
comparison with the expected result and in this way are able to calculate the expected total cost of
the film. The producer argues that early intervention is important:
31

“To engage in the necessary conflicts concurrently and in good time, to speak decently
to people and to treat people decently. The sooner you take the conflict the better if the
collaboration is to work. The best thing is to take the conflict preferably before they
arise – when they are underway. Prevention is better than treatment!”
In the specific episode, the Producer took a meeting with the responsible parties in this case the
Director, the photographer and the production designer and presented the problem to them. They
were not aware of the size or existence of the budget overrun. According to the producer there was
not at that time an actual overshoot but the current cost reports showed that there would be
substantial overrun if action was not taken in due course. It was apparent from the ‘shoot lists’
which were updated on a daily basis. After presenting the case the Producer asked the involved
parties to find the necessary cost savings to match the expected budget overrun:
“The involved parties were asked to find the money missing otherwise I would do it.
Either we find the money or the film will have no end – and they want a good film to
come out of it. It is not funny but it is nevertheless better than if I had to find the money
for them”
The Producer argues that this process is not without conflict, and that is why she needs a precise
picture to convince the director and photographer that action is necessary if the film is going to have
an end. In the specific episode the film makers found DKK 1 million in savings to cover the
overspending. Also the Post Coordinator emphasizes the importance of a detailed budget:
“That is why we define everything, even down to the small lamps. If you know your
skeleton, then you know where to cut if you have used too much in a scene. But also the
other way around. I have experienced that we have used less raw film that we had
expected, then the detailed budget tell us that we can spend the money elsewhere.”
According to the producer the director, even though he was in the process of making the film, and
preoccupied dealing with actors, special effects and all the other task that director is doing when
shooting of a film, he did understand that money was a problem and accepted to be constrained by
that fact which was facilitated by the precise line-item budget. The producer reflects on the process:
32

’He [the director] was good. When he saw the cost overrun he was willing to take the
discussions and fights to make the cuts. He was willing to take the pressure’
In some instances the cutting of costs actually creates a situation where ‘less is more’. In
‘commentary’ the director comments on the opening scene, which was shot after the cuts had been
made:
‘I think it is one of the most visually attractive scenes, and it is also one of the cheapest. We
did not have any money because we had to cut several days of shooting. We had to shoot very
fast. We tried to find a cheap location for month, but it was not possible. In the end we made
a very cheap scenary. It was a very cheap seat but it worked excellent.”
V. Discussion
The analysis above has shown that the budget is linked both to direct and indirect devices which
create delays and impose costs on the film makers. The different devices are illustrated in table 2.
Though the direct control devices implemented through the rules in ‘Terms..’ also function as self
control, the most important device in the making of TILS is probably ‘the shadow of the future’.
The budget provides the film makers especially the director with information about the
consequences of a budget overrun. This constraining feature of the budget does not include any of
the direct devices mentioned above, but works through the vision of a miserable future with a
wrecked film. In Elster’s terminology (2000, p.12) the budget is used as an advice, but we are more
optimistic concerning the role of advices than Elster. He argues that a self-control advice, such as
counting to ten is not likely to be a very good remedy against anger because if one is enraged by
anger, how can one make oneself count to ten. The case study shows that advices here in the form
of a budget linked to a story board can play a more active role in self control. A closer look at
Elster’s different types of passion clarifies what type of passion advices can control.
33

Devices for pre-commitment The role of the line-item budget
Creating delays: Direct Modification in the budget may result in installments
delays
Imposing costs: Direct Budget adjustments or a budget overrun results in
scrutiny and sometimes a new financing plan
Imposing costs: ‘The Shadow of the future’ The budget illustrates how and why the film will run
into problems in the future.
Table 2: Pre-commitment devices
Elster (2000, p.8-9) emphasizes that there are different types of effects of passion. (i) Passion may
distort our thinking about the consequences of the behavior, (ii) The passion may be so strong as to
crowd out all other considerations, (iii) inducing weakness of will, and (iv) a person in a state of
passion may weigh the consequences of behavior differently from the way he does in a calmer
mood. In the second type of passion the person is completely adrift in passion and cannot respond to
any types of rational arguments. In the case of strong passion information from for example a
budget and the transparency it provides, does not constrain the film maker at all. This could be the
situation where a producer has to pull the plug as mentioned above. Based on the case study we
conjecture that the making of TILS was not characterized by this type of passion.
Elster (2000, p. 8) argues that all types of passion but the second one, leaves the agent with some
capacity to respond to incentives. Incentives are of course a precondition to control passion, but
incentives are not the only issue in self control. Passion distorts cognition, but the distortion is also
caused by the lack of information not only lack of incentives. Rationality prevails exactly because
the consequences becomes clear (e.g. the film will have no end). In the making of a complex film
these consequences are not always available to the film makers. The visualization of these
consequences is maybe the budgets most important function to foster self control.
34

The budget can thus be seen as enabling in the way that Adler and Borys (1996) and Ahrens and
Chapman (2004) signify the concept because the budget here creates transparency. Transparency is
facilitated when: ‘Procedures are therefore designed to afford them an understanding of where their
own tasks fit into the whole’ (Adler & Borys, 1996, p. 73). Ahrens and Chapman (2004, p. 280)
argue that budgets ‘are the most widely used management control tool for making organizational
processes globally transparent’ (ibid), but continue that budgets seldom are used to provide global
transparency, because it is only made available on ‘need-to-know’ basis.
In our case transparency functions in a constraining and self controlling manner. In film projects the
budget is available to the film makers, and he or she can then see how each scene fits into the whole
film, and since ‘everybody is interested in making a good film’ the budgets transparency provides
commitment from the filmmakers. But commitment in Elster (2000) is different from commitment
in Ahrens & Chapman (2004), Commitment in Elster (2000) is not about motivating potential nonpassionable
agents to work in the overall interest of the film, but on the contrary to commit highly
motivated passionable film makers to rationality.
Thus, the analysis paved the way for a conclusion which is contrary to much management
accounting theory. In contingency theory uncertainty - the inability to foresee and plan for all
possible contingencies - is often proposed to require less control (for a review of these thoughts see
for example Chenhall, 2003). Our analysis indicates that at least when making films but possible
also elsewhere uncertainty requires strict control and self control, because uncertainty (problems
with special effects etc.), which causes a cost overrun, requires that savings are realized elsewhere.
Though passion and time-inconsistency intensify the benefit of control, the close link between
uncertainty and detailed control is relevant even in a situation where this type of irrationality is not
present.
Further reflections on constraint theory
In this paper we have argued that constraints could play a more positive role - ‘less is more’ - than
is normally considered in the management accounting literature. Drawing on the role a line-item
budget, arguable a design of a budget that ‘provide an extreme form of control’ (Zimmerman, 2009,
p. 262), we have illustrated that the budget can be used to focus creativity in the initiation stage and
provide a safeguard against hyperbolic discounting and passion in the implementation stage. Thus
35

the paper provides an alternative to some part of the management accounting literature were the
non-constrained ‘profit conscious’ (Hopwood, 1972), interactive (Simons, 1995) and enabling
(Ahrens & Chapman, 2004) use of budgets and control systems are seen to be in opposition to the
‘budget constrained’, ‘diagnostic’ and ‘coercive’ use of budgets. Two main questions are important
for further research: What are the limits of constraints - meaning when is less less? What type of
actions apart from the ones discussed in this paper are constraints enabling?
The limits of constraints
Elster (2000, p. 279) emphasizes not surprisingly that more constraints is not always better.
Sometimes less is less. In line with Adler and Borys (1996) and Ahrens and Chapman (2004), Elster
argues ’Constraints and conventions impose three main costs: loss of flexibility, loss of spontaneity,
and loss of decisiveness’ (Elster, 2000, p. 279). Elster argue that loss of spontaneity is especially
problematic in arts, ‘where a genuinely powerful imagination may find it intolerable to be shackled
by rules’ (ibid, p. 280). This point is illustrated by the Francis Ford Coppola quotation in the
introduction to this paper. Though the film crew according to Coppola ‘went insane’ during the
making of ‘Apocalypse Now’, to some extent due to lack of constraints, the film is widely
considered a masterpiece. Elster (2000) adds that “constraints must be set tight, but not too tight.
The search for the right word, tone, and so on is impeded both if the feasible set is too large and if it
is too small.” (Ibid. 210). He continues that “inspiration – defined as the rate at switch ideas move
from the unconscious into the conscious mind – is an inversely U-shaped function of the tightness
of the constraints‘(Elster, 2000, p. 213).
Another point is that constraints can be so tight as to leave little room for innovations. The
American constitution is for example often criticized for having a system of checks and balances
that is rigorous that even much-needed reforms are blocked: “Beyond a certain point, constraints
and conventions cease to be enabling and become stifling” (Elster 2000, p. 280). A line-item
budget, which can only be changed with large delays and at high costs, could have such a feature.
This would also be a case where less is less.
Loss of flexibility is a costly aspect of constraints. According to Elster (2000, p. 279) loss of
flexibility is linked to the need for exceptions. Odysseus was bound to the mast to avoid being
seduced by the sirens, but what if the ship was about to wreck for some other reason (a storm for
36

example), then surely a rational constraint would be equipped with an exception clause allowing his
men to relieve Odysseus, the skillful sailor, to save them all. But as Elster (2000, p. 279)
emphasizes the use of exceptions run into a problem: how to distinguish genuine exceptions from
the temptations or impulses that the constraints were to protect against? How do the sailors know
whether a fatal storm is really coming, or whether Odysseus being in a state of passion, is simply
trying to persuade the sailors (a difficult task by all means since the sailors had wax in the ears) to
release him to indulge in that passion? A theory of constraints must deal with the issue of
exceptions. The cost and benefit of exceptions differ according to what the constraints are directed
towards. Surely there must be a difference between flexibility concerning a constitution and for
example the standards for service in a restaurant, which is the object of Ahrens and Chapman’s
(2004) study. Exceptions are a much more seriously matter in the former. Budgeting is probably a
case somewhere in between.
The enabling role of constraints
In addition to what we have already discussed with respect to the enabling side of the constraint,
some additional aspects can be developed. Surely passion and hyperbolic discounting cannot be the
only dangers, which should be constrained. A theory of constraints must differentiate between
different reasons and functions of constraints. One preliminary distinction is provided by Wilson
(1989, p.115), who argue that a main difference between public and private bureaucracies is that:
‘..Government management tends to be driven by the constraints on the organization, not the task of
the organization’. Du Gay argues in his ‘In Praise of Bureaucracy’, which is a counter critique
against NPM (New Public Management), that the constraints in the public bureaucracy have its own
logic:
‘The ethical attributes of the ‘good’ bureaucrat – adherence to procedure, acceptance of
sub- and superordination, commitment to the purpose of the office and so forth – do not
therefore represent an incompetent subtraction from a ‘complete’ or all-round’
conception of personhood. Rather they should be regarded as a positive moral and
ethical achievement in their own right’ (Du Gay, 2000, p.4)
The bureaucrat is constrained by rules and there is little room for exceptions exactly to develop an
ethos, which prevents ‘corruption or encouraging inappropriate forms of patronage’ (Du Gay, 2000,
p. 75). Less discretion to the public bureaucrat enables more equal treatment of the citizens in a
democratic society. Less flexibility can also be enabling in private bureaucracies. Here the focus is
37

not on equal treatment, but to avoid employees pursuing bonus, promotions and other types of
rewards by engage in influence activities (Milgrom & Roberts, 1988). Influence activities are
possible exactly because the constraints are flexible. Merchant (1989, p. 135) for example argue
that opening up for adjustments of budgets may create an ‘excuse culture’.
In large part of management accounting and organizational literature the focus of the analysis is on
constraining the employees (bureaucrats or agents), but in political science there is a large tradition
on focusing on constraining the leader. In a world of just, fair, trustworthy and omniscient rulers,
imposing rules to constrain these rulers seems to be a worthless exercise. This is the world of
fairytales and romantic history writings. According to Scalia (1989, p. 1175-1176) both Louis IX of
France, properly named Saint Louis, and King Solomon was according to the tales doing a pretty
good job in dispensing justice without being constrained by law. But few people living in a
constitutional democracy would trust a system where a ruler could rule without any constraints. A
modern constitutional democracy is characterized by ‘a circular system of checks and balances, in
which the performance of each institution is monitored by another’ (Elster, 2007, p. 434). The
political system consists of a dense web of devices focused on constraining the most powerful.
Political science in the western world is to a large degree focused on ‘the organization of Distrust’
(Elster. 2007, p. 434). Electoral law prevents the government from manipulating the electoral
system, the judges are bound by the law they are set to administer and so forth.
Constraining the power of the powerful provides democracy, but the dictum ‘less is more’ is also
important for economic growth. A powerful counterpart is often a less attractive trading partner
than a less powerful. Barzel (1992, p.1) argue that ‘the power to confiscate is a mixed blessing’,
because a absolute ruler, who is not absolute enough to confiscate by his subjects ex ante, but
powerful to do so ex post will have difficulties to borrow from his subjects, due to the fear of
confiscation. Root (1989) thus sees many institutional devices as means to ‘Tying the King’s hand’.
Less power is more access to borrow money.
Lately the approach to constrain the powerful to further economic efficiency has received some
attention within organizational theory (Foss et al., 2006; Miller, 2002; Roberts, 2004). Foss et al.
(1996) discuss a firm-level equivalent to Root’s (1989) ‘Tying the King’s hand’ namely ‘Tying the
manager’s hand’ (Foss et al., 2006). Constraining managers can be done for other reasons than
merely opportunism. The managers can have a passion towards their own abilities. Roberts (2004)
argue that even non-opportunistic managers may intervene in an ineffective manner because they
38

have ‘an overblown estimate of their own abilities, not trusting others to take the appropriate actions
(i.e. those that they would take themselves)’ (Roberts, 2004, p.99-100), and simply because after
all, it is their job to manage. There are several ways that mangers can constrain themselves by
committing credibly not to intervene excessively. Miller (2002, p. 231) analyzes how for example
employee stock ownership plans can be used to constrain opportunistic acts from the owner within
firms. Foss et al. (2006) argue that personal reputation as well as employees controlling important
assets can be a way to commit to intervene. A budget could be seen as a way to delegate decision
rights credibly, since intervention is visible to many. A line-item budget thus also constrains the
managers because possibilities of intervention are further constrained. Foss et al. (2006) mentions
worker unions as a device to constrain the manager by raising the cost of defection. Less power to
intervene creates more incentives to the employees to create more wealth.
VI. Conclusions
In this paper we have provided preliminary illustrations of a theory of constraints, which indicate
that even constraints that are inflexible in the sense that they impose costs, rewards inflexibility and
create delays can functions as enablers for agents when it comes to organizational decision making.
We have illustrated more general ideas from Elster (2000)’s theory of constraints at a more specific
level related to budgeting by providing examples from the Danish film industry, where a line-item
budget is used in the initiation as well as the implementation stage and happened to be beneficial for
producers and directors. In the initiation stage the constraints imposed by line-items ensured
aesthetic value creation by reducing the opportunity set for the director whereas they helped the
instructors to reduce consequences of their passion and tendencies towards hyperbolic discounting
in the implementation stage.
39

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