From The Editor
“The NABE President selects the Adam Smith Award recipient based upon leadership in the profession and the use of ideas and knowledge in the workplace and policy arena.” For the 2007 Award, Carl Tannenbaum selected John B. Taylor, whose research and policy contributions include, but are not limited to, analysis and development of monetary policy. Inasmuch as Tannenbaum is the chief economist of a major bank and banks are the first to feel the icy blasts or warm breezes of monetary policy, it should come as no surprise that the Adam Smith Lecture and the Presidential Address concern what has traditionally been called “money and banking.”
One of Taylor’s major contributions has been the “Taylor rule,” which links the federal funds rate to inflation and the gap between actual and potential GDP. In his lecture, the first article of this issue, he traces the development of monetary policy rules—the Taylor rule in particular— and their use in the analysis, prediction, and stabilization of national economies. He shows that rules provide insight into eras in which monetary policy was not effective as well as when it was and that they also provide insight into fluctuations of housing construction and exchange rates, as well as into the term structure of interest rates.
In his address, however, Carl Tannenbaum does not dwell on monetary policy. Rather, he addresses the massive structural change that has taken place in the banking industry over the last 25 years. Deregulation, consolidation, securitization, innovative risk-management strategies, and competition from “non-banks” are examined for their impact on this once staid and predictable business.
This issue also presents the papers that won the Edmund A. Mennis and NABE Contributed Paper Awards. The Mennis Award-winning paper by James A. Wilcox presents new evidence that utilizing measures of consumer sentiment can reduce errors in forecasting total consumption expenditures and its components, such as durables, non-durables, and services. It finds that, contrary to conventional wisdom, such measures are especially predictive at the four-quarter-ahead horizon.
In the NABE Award paper, Jeremy A. Leonard and Cliff Waldman examine the sources of innovation in U.S. manufacturing. Their empirical results suggest that the drivers of innovation extend well beyond business R&D spending. Capital investment, cutting-edge scientific output from academic institutions, and the growth of the science and engineering workforce all matter. Although there can be lags of several years before inputs are fully realized in innovative performance, even a modest increase in key innovation inputs reaps significant benefits.
Strategic thinking for internationally oriented companies requires knowledge not only of what markets are currently important but also of which ones are likely to be important in the future. One national market with enormous untapped potential is Nigeria. Temitope W. Oshikoya provides a perspective on Nigeria’s global economic position and integration into the world economy. Although Nigeria has been growing rapidly, its integration into the global economy has been below potential. Further integration requires sustained policy reforms, improved governance, and public-private investments in social, human, and physical infrastructure.
Barbara Sawtelle’s paper offers insight into the “jobless recovery” phenomenon recently experienced in the U.S. economy by examining industry-sector employment responsiveness to the long-term real GDP expansion of 1991-2001. The results identify a broad range of employment elasticities across industry categories and suggest that even during extended periods of real GDP expansion, there may be a case for using industry-specific labor market transition initiatives to assist employment growth.
In this issue’s Focus on Industries and Markets, Anand Mehta and Andrew C. Gross examine the world agricultural equipment industry, which is growing at a healthy rate but whose regional demand and production composition is changing. Developing countries are taking an increasing share of this industry’s output and production, particularly China.
In Focus on Statistics, Jordan Rappaport describes the inherent difficulty of deriving aggregate measures of housing prices from data that are far from ideal for statistical purposes. He then describes three widely used measures and examines their strengths, weaknesses, and biases. An important conclusion is that users of these measures should think carefully about what it is that they really want to measure, for each of these measures has strengths in some applications and weaknesses in others.
In the Book Reviews, Robert F. Graboyes reviews Crisis of Abundance: Rethinking How We Pay for Health Care by Arnold Kling. He finds it to be “a mature work whose policy proposals strive simultaneously to make the American health care system more efficient and more equitable toward the poor and the sick.” However, these policies will not be easy to implement and there is no one-size-fits-all solution to financing health care in the United States.
In the second book review, John C. Goodman reviews A Farewell to Alms: A Brief Economic History of the World by Gregory Clark. He finds that this book carries an important message that “foreign aid” might actually be counter-productive and that the book “is creating quite a stir in economic development circles because (1) his general theory is both ingenious and easy to understand, (2) it is backed by a breathtaking array of evidence, and (3) it is very politically incorrect.” The book argues that significant numbers of poor countries are caught in “The Malthusian Trap” and that a cultural revolution—not merely institutional reform—is required for escape.
Editorial Changes
Peter Jacquette has resigned as Editor of Economics at Work, and Enrique Sanchez has resigned from the Editorial Board. I am personally and professionally saddened by their decisions, but they are certainly understandable. Peter has taken a new job that requires a coast-tocoast move and has concluded that the intensity and duration of these transitions precludes continuing. Although Peter’s work was outstanding work as the first Editor of this popular feature, I am delighted that Diane Swonk has agreed to succeed him. Diane is a past President of NABE and is well known to economists in business, government, and academe. We will see a stream of interesting Economics at Work articles under her stewardship.
Enrique has been a valuable contributor to the Editorial Board for the past seven years, but—like so many others—has found that the demands of retirement, as well as changing interests, mean a rebalancing of priorities. He is deeply involved in humanitarian work, and we wish him well.
The Editorial Board has also made a distinguished addition. Oral Capps of Texas A&M University has agreed to serve. Oral is known to many in NABE for his 14-year run in providing NABE-sponsored skills seminars in econometrics and forecasting. In particular, his appointment will help to bolster the Editorial Board’s ability to review articles that use sophisticated quantitative techniques.
Oral’s appointment notwithstanding, an increasing workload as a result of more submitted papers means that several positions on the Editorial Board should be filled in the next few months. NABE members who are interested should contact me.
Robert Thomas Crow
rtcrow@comcast.net