From The Editor

The policy of Business Economics is to publish articles as they come, either as refereed submissions or as papers developed from the NABE Annual Meeting and the Policy Conference. The result is that one does not know what an issue will look like until it is put together shortly before publication. Thus, it rather surprising to see themes emerge, especially if one of them has not been visited frequently. Such is the case in this issue, which has two articles relating to health care. Three other articles can be loosely grouped around the theme of whether U.S. economic growth is sustainable. A fourth estimates the benefits to households of free trade.

Health care is not only one of the largest and fastest growing industries in the United States, it is also an industry whose costs and quality of service affect us all as individuals. A frustrating paradox in U.S. health care is that although we have unsurpassed technology and training, we also have rapidly rising costs and mediocre results. David J. Brailer makes the case that an important element of this paradox is slow adoption of information technology in the health care industries. He examines the opportunities and barriers in the use of information technology to control costs and improve quality.

There has been a great deal of concern over whether the United States faces a shortage of nurses. A question less visited is that of nursing aides. Susan K. Friedman examines the current activity in the market and concludes that the demand for such personnel is likely to outstrip the supply.

Is there an “output gap” that is insulating the U.S. economy from inflation? If there is, it suggests that healthy economic growth in the United States is not only sustainable but could be accelerated. William C. Dunkelberg and Jonathan A. Scott contend that what is taken as an output gap is based on a misleading benchmark of extraordinarily low unemployment leading into 2000. They support their contention that this period was an artifact of highly unusual circumstances and that it is misleading to use it as benchmark for making monetary and fiscal policy. The implication is that actual output may be closer to sustainable potential output than is often believed.

The sustainability of U.S. growth can be questioned from the perspective of financial markets as well. Michael Dicks presents a widely-held European view that U.S. financial markets are signaling significantly weakening prospects, with Federal Reserve tightening in the offing.

Another concern about sustainability of U.S. growth is the low and declining saving rate of American households. At some point, one argument runs, households will have to retrench, slowing consumption and therefore economic growth. Susan M. Stern, however, argues that the low saving rate is to a large degree a consequence of how saving is measured. Moreover, wealth accumulation has been robust, suggesting that consumption growth may persist for quite a while.

Economic gospel avers that free trade benefits consumers. However, most quantitative studies have focused on GDP rather than direct effects on consumers. James Langenfeld and James Nieberding use the existing literature to estimate effects on consumers, confirming that such effects are positive and important.

In this issue’s “Focus on Statistics,” Robert P. Parker describes recent and prospective initiatives of the Bureau of Economic Analysis to improve and extend its estimates of state personal income, local area personal income, and gross state product.

In “Economics at Work,” Carolyn Scott and Michael McCoy describe how their consulting activities add value for their business clients in a number of different ways, applying the economists’ conceptual tool kit and experience in compiling and analyzing data.

In the book reviews, Kevin L. Kleisen describes and comments on Chairman of the Fed: William McChesney Martin Jr. and the Creation of the American Financial System by Robert P. Bremner. Martin was the longestserving chairman in Fed history and was a central figure in macroeconomic policy from 1951 to 1970. John C. Goodman reviews Restoring Fiscal Sanity, 2005: Meeting the Long Run Challenge by Alice M. Rivlin and Isabel Sawhill, eds. This book is an effort to make a non-partisan (bi-partisan) analysis of the issues and potential solutions. This issue does not contain a “Focus on Industries” article. I expect that one will appear in the October issue.

Robert Thomas Crow
rtcrow@comcast.net