From The Editor
This issue, like most, reflects the amazing diversity to be found under the umbrella, “business economics.” Economic analysis is being brought to bear on an increasing range of issues and reflects the increasing necessity for firms to recognize that opportunities and challenges are global rather than national or local. Many of these opportunities and challenges come from underdeveloped countries. Barrels of ink have been shed over what is necessary for these countries to achieve sustainable long-run growth, but no one would deny the importance of the efficient mobilization of capital as a necessary (but by no means sufficient) condition. In this issue, Florence Eid sheds light on an important but often neglected aspect of capital mobilization in developing countries—local private equity funds. Drawing on data and analysis of the Middle East and North Africa, she identifies what private equity can accomplish and what is necessary for it to reach its potential. Continuing on global issues, John E. Silvia examines the impact of globalization on U.S. national labor markets and the consequences of failure to adjust analysis and expectations to the reality of global labor substitutability in manufacturing.
Turning to U.S. macroeconomic issues, Laurence S. Seidman and Kenneth A. Lewis confront an age-old policy question: the effectiveness of fiscal policy in combating recessions. In particular, they explore the effectiveness of the 2001 federal tax rebate to households and the potential impact of a much larger, more persistent rebate. They find that the effects of a temporary rebate are much more powerful than are commonly believed. Another major macroeconomic concern is the impact that Social Security revenue shortfalls will have on federal discretionary spending. Jerry H. Tempelman presents the case that this bind will begin making itself felt far sooner than is generally anticipated.
The rapid increase in the cost of healthcare insurance— along with incomplete and/or inadequate coverage— in the United States is a major public, business, and household problem. One effort to make healthcare more efficient is consumer-driven health plans. Richard M. Scheffler and Mistique C. Felton examine the potential of such plans and their pitfalls, illustrating the contrast between a proposed health savings account plan and a traditional preferred provider organization plan. Among public sector health insurance programs, Medicaid is large and growing rapidly. Louis F. Rossiter and Randy F. Neice examine the current and projected burdens imposed by Medicaid on state government finances and what is being done to avoid having Medicaid crowd out other state expenditures.
Peter B. Jaquette has been analyzing the results of NABE’s annual survey of its members’ compensation. In this issue, he documents this year’s econometric model of compensation, based on the compensation and characteristics of respondents. The result is a tool for benchmarking compensation and an identification of job and personal characteristics that have significant impacts.
In Economics at Work, Millicent Cox describes her work as an independent consultant on empirical analysis of the cross-border economies of California and Mexico. She focuses on the importance of understanding what is being measured in analyzing survey data and on the problems of convincing clients that empirical analysis is important and relevant in the face of opposition by those who believe that cross-border data cannot be compared. Although this issue does not have a Focus on Statistics article, many who are interested in statistical questions will find her descriptions of cross-border data problems and the ability to solve them to be of interest.
In Focus on Industries and Markets, Michael A. Deneen and Andrew C. Gross describe the global market for power tools, a highly competitive and growing market of over $19 billion in 2004.
Global issues again take center stage in the book reviews. Edmund A. Mennis writes an enthusiastic review of Thomas L. Friedman’s The World is Flat: a Brief History of the Twenty-First Century, in which Friedman argues— as does John Silvia in the article cited above—that the forces of globalization imply that work will flow to where it can be done most efficiently. He identifies the problems and opportunities that are entailed by such flattening of the global playing field. Lorna Wallace reviews U.S. National Security and Foreign Direct Investment by Edmund M. Graham and David M. Marchick, which traces the love-hate relationship the United States has had with foreigners building and acquiring productive assets in the United States and analyzes the national security issues on the horizon. She found the book to be comprehensive and thought-provoking.
Robert Thomas Crow
rtcrow@comcast.net