From the Editor
One of the basic principles of Business Economics’ editorial policy is that articles have shelf life: analysis and conclusions concerning events must be interesting and important for at least a year or two after the events take place. A quarterly journal is not the right forum to discuss fast-moving events and transitory responses. However, given the importance and duration of the current financial crisis and economic slump, this issue and the next will have a significant amount of material devoted to the current financial and economic situation. While much of what will be written will undoubtedly be outstripped by fast-paced events, it is nonetheless important to document the background of these events to provide a backdrop for what they have led to and to learn whatever lasting lessons they hold.
In this Issue
The above is a preamble to the first three articles of this issue, all of which address the current U.S. financial crisis and economic slump to a greater or lesser degree. They are speeches presented at the NABE 50th Annual Meeting, October 5-7, 2008. In the first, Federal Reserve Chairman Ben S. Bernanke provides a valuable overview of the financial crisis and what had been done to address it as of early October, including the Troubled Asset Relief Program (TARP). However, yesterday (November 12) Treasury Secretary Paulson announced that the TARP was shifting its focus from acquiring illiquid assets to direct infusion of capital into financial firms. It is likely that there will be other policy improvisations as problems shift and become better understood. Changing events require changing responses.
In the second paper, Sheila C. Bair, chairman of the Federal Deposit Insurance Corporation (FDIC), presents a short history of mortgage finance, highlights of what the FDIC had done as of early October to help stabilize the financial crisis, and states five basic principles that must be followed to repair mortgage finance.
The third paper of this issue is by Edward P. Lazear, chairman of the Council of Economic Advisers. Its focus is to remind us that while times of crisis require government action, it is necessary to continue to adhere to underlying market principles that permit flexibility, openness, and low taxes in order to achieve stability and prosperity.
As important as U.S. economic conditions are, it is useful to know what goes on in potential markets in the rest of the world. Matthias F. Fifka explores the economic prospects of the Baltic Countries—Estonia, Latvia, and Lithuania. He concludes that although these countries share in the current global economic slump, their futures are promising as trading partners and investment destinations.
The use of private aircraft for business travel has grown rapidly for several decades. Claire Starry and Gerald W. Bernstein explore the growing number of ownership and leasing options and analyze the factors that underlie optimal choices of when and how to use private aircraft, particularly jets.
Turning to an entirely different type of aircraft, Nayantara Hensel explores the competition to build a new aerial refueling tanker for the U.S. Air Force. This competition was complicated by the fact that one of the bidding teams was largely European, raising a host of political as well as military and economic issues in the decision leading to an initial award and to the subsequent decision to have the competitors re-bid after the change of presidential administration.
In Economics at Work, Richard Koss looks at the misuse of theoretical economics in the current financial crisis at the same time that the role of economists was being diminished in asset allocation decisions. This resulted in a loss of perspective and contributed to bad decisions. President Truman’s lament notwithstanding, Koss makes a compelling case for a revival of economists’, “On the other hand…”
In Focus on Industries and Markets, Andrew C. Gross and Joszef Poor describe and analyze the management consulting sector, a rapidly growing but elusive global industry. Their paper encompasses the sector’s driving factors, its changing service offerings, and global markets.
In the Book Reviews, Thomas Sowell’s Economic Facts and Fallacies is reviewed by Jesse S. Hixon. The focus of the book, which Hixon finds to be worthwhile, is to uncover and dispel the hidden assumptions that underlie much public policy. Hugh Schwartz reviews Dan Ariely’s Predictably Irrational: the Hidden Forces that Shape Our Decisions. He finds it to be, “perhaps the most enjoyable economics book around.” It explores the causes of predictable irrationality and what can be done to cope with it.
Editorial Board
I am pleased to announce that Christopher M. Swann has accepted membership of the Editorial Board. Chris is known to many NABE members as a past director and an enthusiastic worker on NABE initiatives. He is also an excellent economist with a wide range of interests (not to mention the drummer at the NABE jam sessions at the Policy Conferences).
The Mennis Award Competition
After a one-year hiatus, NABE once again invites members to compete for the Edmund A. Mennis Contributed Paper Award. This award is accompanied by a monetary prize. The runner-up will receive the NABE Contributed Paper award. Both papers will be presented in a special session at NABE’s 2009 Annual Meeting. See Business Economics, NABE News, and IndeaLink for details.
Focus on Industries and Markets
For many years, Andrew C. Gross has been the editor and primary contributor to Focus on Industries and Markets. Readers of Business Economics recognize and appreciate his contribution. He would, however, like to share some of this burden that he has so willingly borne for so long. To that end, he would like to invite others to join him by writing papers on their industries or markets or on those with which they are familiar. Also, he would like to share his editorial responsibility and possibly work toward transition to a new editor as he pursues other interests. Papers and inquiries about submitting papers should be directed to Andy at a.gross@csuohio.edu. Inquiries about taking on editorial responsibilities can be directed to Andy or to me.
Robert Thomas Crow
rtcrow@comcast.net
1-650-343-7615