From the Editor
July 2008 will not go down in history as an “era of good feeling.” As this is written, the impact of inflation of food and energy prices seems to be making itself felt in core inflation; the unemployment rate, while not terribly high by historical standards, is too high to be comfortable; and financial markets are in trouble. The Federal Reserve, of course, is being looked to as the principal actor in relieving short-run stress, balancing its twin responsibilities of controlling inflation and fostering full employment. Under the chairmanships of Alan Greenspan and Ben Bernanke, the Fed has become much more transparent, a move that has received general acclaim as good policy. Despite its increased transparency, however, there is still some question about what the Fed really means, particularly since prior to becoming chairman of the Fed, Bernanke was an advocate of inflation targeting. In the first article of this issue, Michael Woodford addresses the question of whether there is evidence of the Fed pursuing a “stealth” policy of inflation targeting and how communication can be further enhanced to avoid misunderstanding.
Of course, the financial aspect of the economic doldrums in this summer of discontent has been triggered by the collapse of the subprime mortgage market. John Silvia’s article puts the growth and collapse of this market in historical perspective. In one sense, it is similar to past crises, but each of these—including the sub-prime collapse— has unique features due to the continual evolution of financial markets. He proposes a means of predicting such cycles.
Much of the remarkable growth of productivity that powered the U.S. economy in the late 1990s seems to have come from investment in information technology, which in turn was powered by falling prices of semiconductor products. In their paper, Ana Aizcorbe, Stephen D. Oliner, and Dan Sichel investigate what was behind the rapid fall in semiconductor prices in the late 1990s and why this fall has decelerated since. Of particular interest is the role of technological change.
Given Mexico’s status as one the United State’s major trading partners and the continuing issues surrounding immigration of Mexican labor, any major aspect of the Mexican economy is important to U.S. business. One such aspect is Mexico’s long-run demographic composition, which is changing quickly. Fernando Sedano explores the reasons behind the rapid aging of the Mexican population and how it will affect the economies on both sides of the border.
Economists are frequently important players in corporate strategy. Understanding the implications of various types of strategy can be critical to competitive success. Michael Porter has long been influential in this field. In their paper, Orges Ormanidhi and Omer Stringa explore Porter’s contributions and alternative approaches and describe why they find Porter’s approach to be attractive.
In Economics atWork, George Chressanthis describes the challenges and rewards in working in the pharmaceutical industry and what is necessary for an economist to be successful.
In Focus on Statistics, Robert P. Parker describes the 2007 Economics Census, whose results will begin to be released in early 2009. His discussion includes the methods used to gather data, definitions, area and industry detail, and changes from previous Economic Censuses.
In the Book Reviews, Edmund A. Mennis and Gerald Musgrave (Business Economics’ Book Review Editor) review Muhammad Yunus’ Creating a World Without Poverty: Social Business and the Future of Capitalism. Yunus won a Nobel Peace Prize for his role in establishing microlending as a means of improving the lives of the world’s poorest people. In this book, he calls for a re-orientation of the current mode of capitalism to include more socially oriented investment. John C. Goodman reviews Nudge: Improving Decisions about Health, Wealth and Happiness, by Richard H. Thaler and Cass R. Sunstein. In the book, they describe the benefits of “libertarian paternalism.” The paternalism comes from top-down choices of what are deemed the most beneficial options in such areas as 401(k) plans and Medicare drug plans. The libertarian aspect is that beneficiaries have the choice of opting for other plans that they believe are better for them.
J. Fred Weston Retires from Editorial Board
Fred Weston has retired from the Business Economics Editorial Board after many years of distinguished service. He has had a long and productive career as a professor at the University of California-Los Angeles and was the winner of NABE’s Abramson Award in 1991 for an exceptional article contributed to Business Economics. I want to wish Fred the very best for his retirement and express my appreciation for his contributions to Business Economics.
Robert Thomas Crow
rtcrow@comcast.net