Business Economics Table of Contents - October 2012


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Bus Econ 47: 89; doi:10.1057

From the Editor

Robert T Crow, Editor


The Myths and Facts of Patent Troll and Excessive Payment: Have Nonpracticing Entities (NPEs) Been Overcompensated?

Jiaqing “Jack” Lu
Bus Econ 47: 234-249; doi:10.1057/be.2012.26

“Nonpracticing entities” (NPEs) own patents but do not practice the patented technologies. They are sometimes referred to as “patent trolls,” who hold up practicing companies to seek exorbitant payments. This paper conducts a review of the theoretical literature, which is inconclusive on whether NPEs have been systematically overcompensated. This study offers the first empirical study in license royalty rates, and its econometric analysis demonstrates that NPEs have not been overcompensated in license markets, regardless of whether other relevant variables are controlled. This conclusion is then put back into the larger context of NPE economics to lay out topics for further research through cross-examining other major conclusions in this field.


nonpracticing entities (NPE); patent trolls; holdup; license agreements; royalty rate; overcompensation

A Comparison of Consensus and BVAR Macroeconomic Forecasts

John Silvia and Azhar Iqbal
Bus Econ 47: 250-261; doi:10.1057/be.2012.27

This paper provides a one-month-ahead, macroeconomic, Bayesian Vector Autoregressive (BVAR) forecasting approach that offers several advantages over conventional short-term forecasting procedures. In particular, it produces more accurate forecasts than the Bloomberg consensus forecasts, on average, for 20 major macroeconomic variables. In addition to a quantitative comparison of BVAR and Bloomberg consensus forecast, the paper focuses on five important areas of macroeconomic forecasting: the role of short-term macroeconomic forecasting, the importance of a robust forecasting approach, the importance of timing of data releases, forecast evaluation criteria, and the importance of changing model specifications as conditions warrant.


macroeconomic forecasting; individual forecaster; consensus; BVAR; real-time forecasting

Predictability of Financial Crises: Lessons from Sweden for Other Countries

Hubert Fromlet
Bus Econ 47: 262-272; doi:10.1057/be.2012.28

The predictability of financial crises is widely regarded as low. However, skills linked to market psychology (behavioral finance) and the understanding of history and macrofinancial aggregates have been insufficiently integrated in the forecasting and risk management of financial institutions. Traditional financial modeling can no longer be applied as nicely as in the past. In Sweden, the financial crises of the early 1990s and in the latter part of the past decade were caused by overconfidence, control illusion, and herd mentality—but also by shortcomings in management and corporate governance. There is no evidence that these two serious Swedish banking crises were not foreseeable. The general question is when and under which circumstances financial decision-makers and authorities should listen to the usual minority of warning voices. One conclusion is that economists should be more “in house-oriented,” and top managers should heed their professional opinions. Conclusions from this paper can also be drawn for China, India, and other emerging markets both when it comes to financial deregulation policy and government debt risks in deregulated financial markets.


Sweden; financial crisis; forecasting; behavioral finance

Keynesian Fiscal Stimulus: What Have We Learned from the Great Recession?

Laurence S Seidman
Bus Econ 47: 273-284; doi:10.1057/be.2012.25

What have we learned from the Great Recession about Keynesian fiscal stimulus? This article contains five sections that develop the following five points: (1) There is confusion about what constitutes fiscal stimulus; (2) economists are deeply divided about fiscal stimulus; (3) A fundamental error has been committed by an influential economist in estimating the recession magnitude of the Keynesian multiplier; (4) A fundamental error has been committed by two influential economists in their analysis of the impact of the 2008 tax rebate on consumption spending; and (5) advocates of fiscal stimulus in recession should support keeping government debt low in prosperity.


Keynes; fiscal stimulus; Great Recession


The Global Engineering Consultancy Market

Andrew C Gross
Bus Econ 47: 285-296; doi:10.1057/be.2012.29

The purpose of this paper is to assess and analyze the size and characteristics of the engineering consultancy market in select Western nations and worldwide. A secondary goal is two-fold: to look briefly at the training required for careers in this field and to evaluate the strategies of the participating firms. This sector has grown in the past half-century to about U.S.$550 billion revenue globally, with nearly 3 million establishments and about 500,000 employees. There are giant, multinational firms that span across regions; but the sector is still highly fragmented, and the top 10 firms have less than 15 percent of the global market share. The typical firm in the industry in most major countries consists of around five or six professional associates. The data problems in analyzing this sector are formidable. The paper offers guidelines to using these statistics. It also describes steps necessary for effective marketing.


engineering consulting; services; global markets; civil engineering


The Biases that Limit Our Thinking about the Economic Outlook and Policy

John E Silvia
Bus Econ 47: 297-301; doi:10.1057/be.2012.10

To make effective private-sector decisions and government policy, it is important for those who make decisions and those who are impacted by them to know whether these decisions might be influenced by underlying biases. This paper enumerates and discusses potential biases, their sources, and how they might influence selected policies and decisions.


bias; economic outlook; economic policy; markets; regulation


Book Reviews

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W Steven Barnett and Jen Fitzgerald 


Reviewed by
Jesse S Hixson




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