From The Editor
This issue leads off with the 2005 winner of the Edwin A. Mennis Award, given annually to a NABE member for the best paper in an open contest. The author, Thomas F. Siems, calls attention to an underappreciated contributor— innovations in global supply chain management— to non-inflationary economic growth. Not only has improved supply chain management improved aggregate productivity, but it is also likely to have reduced aggregate volatility. However, some of the efficiency gains from improved supply chain management have been due to the increased ease of substituting foreign for domestic labor, thus increasing protectionist pressure.
The NABE Award is given to the second-place finisher in the Mennis contest. This year, papers by Xiaobang Shuai and Cliff Waldman tied; and they both receive NABE Awards. In his paper, Shuai asks whether the commonknowledge proposition that central city growth drives suburban growth is really true. His statistical tests indicate that causation may run the other way quite frequently, implying that policy assumptions concerning urban and suburban development will need to be rethought.
Waldman’s award-winning paper examines the effects of demographic change on China’s long-run economic growth. Unlike other countries that have become prosperous, China is on a path to grow old before it attains prosperity. Analysis of China’s demography indicates that it will not influence China’s growth in the short run. However, in a decade or so demographic changes are likely to have a profound influence on China’s economic growth and global competitiveness.
There has been concern that the U.S. economy is approaching full capacity in manufacturing, thus limiting its potential for sustained, non-inflationary growth. One piece of evidence that has been cited for this is the divergence of estimates of capacity utilization of the Institute of Supply Management (ISM) from those of the Federal Reserve. Recently, the ISM rates have been higher than those of the Fed. However, Norman Morin and John J. Stevens find that the differences are more apparent than real, suggesting that these differences should not be given undue weight in the formulation of macroeconomic policy.
Google’s recent initial public offering via online auction was intended to minimize a first-day price surge, which represents “money left on the table” for the company. Nayantara Hensel examines the extent to which it was successful in this objective and explores the developing record of online auctions compared to traditional IPO processes. She finds that, from the perspective of the issuer, online auctions have not yet delivered efficient results compared to traditional results. However, the results have varied according to the amount of IPO activity of the underwriting investment bank. Also, reforms under discussion may lead to better performance of future online auctions.
Nonresidential construction is an important sector due to its size and volatility. It is also difficult to predict, given the limited quantity and quality of data on building plans. However, since the overwhelming majority of nonresidential construction projects are designed by architects, an index of billing activity by architecture firms provides valuable insight on future nonresidential construction. Kermit Baker and Diego Saltes undertake a statistical investigation that demonstrates that an architecture billing index is a useful leading indicator of nonresidential construction.
In the Forum on Emerging Issues, Lawrence R. Klein, Vijaya G. Duggal, and Cynthia Saltzman present “The Sensitivity of the General Price Level to Changes in the Price of Crude Oil.” They contend that indirect effects of oil prices on economy-wide inflation measures—which then have effects on spending and producing decisions—have not been treated adequately. They seek to remedy this via input-output analysis and find that general inflation may be becoming more rather than less sensitive to oil prices.
Provision of good economic statistics has long been recognized as a vital interest by NABE, which has longstanding efforts to support adequate funding of the statistical agencies. Kathleen Cooper, a past president of NABE, served as the Under Secretary for Economic Affairs of the U.S. Department of Commerce from 2001 to 2005. In this capacity, she oversaw the economic statistics activities of the Department of Commerce. In this issue’s Focus on Statistics, she reviews the accomplishments during her tenure and addresses the question of whether consolidation of federal statistical agencies is advisable.
In the book reviews, Devon Herrick discusses A Call to Action: Taking Back Healthcare for Future Generations by Hank A. McKinnell. This book focuses on the importance of empowered consumers, incentives, and disease prevention in achieving more efficient health care. Lorna H. Wallace discusses Three Billion New Capitalists: The Great Shift of Wealth and Power to the East by Clyde Prestowitz, which decries America’s eroding competitiveness and its lack of will to reverse this trend. Prestowitz contends that many of the U.S.’s apparent advantages are illusory, and deficiencies in fundamental aspects of competitiveness will erode Americans’ standard of living. Reversal of these trends is possible but difficult.
Robert Thomas Crow
rtcrow@comcast.net