From the editor.
Article Type:
Crow, Robert Thomas
Pub Date:
Name: Business Economics Publisher: The National Association for Business Economists Audience: Academic; Trade Format: Magazine/Journal Subject: Business; Economics Copyright: COPYRIGHT 2010 The National Association for Business Economists ISSN: 0007-666X
Date: Oct, 2010 Source Volume: 45 Source Issue: 4

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Unintended consequences and all that. In few places do such surprises show up as often as in the imposition of a partial equilibrium response in a general equilibrium world. Avoidance of unintended consequences and discovery of silver linings have to be among the chief functions of macroeconometric models that provide a reasonably complete representation of an entire economy. The first two articles of this issue provide examples of somewhat surprising outcomes of straightforward policy initiatives when they are examined in a full macroeconomic context.

One of the more popular initiatives in the United States is to correct a perceived misalignment of the exchange rate between the Chinese yuan and the U.S. dollar. Conventional wisdom holds that an appreciation of the yuan against the dollar will cause U.S. exports to China to rise and imports from China to fall, increasing U.S. employment and output. In this issue's first article, Ray Fair examines this proposition in the context of his U.S. macroeconometric model linked to his multicountry model. He finds that the effects of such a currency realignment may actually be perverse.

In the second article, by Kenneth Lewis and Laurence Seidman, they use the Fair U.S. macro model to examine the stimulative effects on the U.S. economy of a federally funded, broad-based program to provide discounts on retail sales. Of course, such a program would be expected to generate significant stimulation to employment and output. What is surprising, however, is that there is surprisingly little impact on federal budget deficits and debt.

Such results should certainly give one pause before acting on conventional wisdom. However, it would be more than interesting to know whether other macroeconometric models would produce similar results with the same experiments. Anyone want to step up?

The U.S. automobile industry has been hit about as hard as any in the recent recession and its painfully slow recovery. Questions have arisen as to whether it will ever return to health. In the third article of this issue, Ted Chu and Yingzi Su look at the structural factors underlying U.S. automobile sales and the patterns of recovery of past recessions and conclude that the automobile industry will recover and that it will play an important part in the U.S. overall recovery. However, the recovery of the automobile industry, like that of the rest of the economy, will not be rapid.

For years, U.S. consumers have saved little and racked up a great deal of debt--a major contributor to the depth and duration of the recession and slow recovery. Using the public database of the 2007 Federal Reserve Board Survey of Consumer Finances, Diane K. Schooley and Debra Drecnik Worden explore the demographic and attitudinal characteristics of those who incur consumer debt and how much they incur.

What price indices are chosen to measure inflation and to convert current-dollar values of output to constant-dollar values have potentially serious impacts on understanding an economy and public policy. Although the United States and other advanced economies have shifted toward an "ideal" index, important developing countries have not. Brooks B. Robinson's article explores the discrepancies between the results of using an ideal index instead of the non-ideal indices currently used to develop official statistics in several important Asian developing countries.

In Focus on Industries and Markets, Michael A. Dineen and Andrew C. Gross describe the shifting industrial structure and changing global demand for refractory materials--heat-resisting ceramics used in metal refining, glass making, and other high-temperature industrial applications.

This issue has three book reviews. First, Cliff Tan reviews Stephen Roach on the Next Asia: Opportunities and Challenges for a New Globalization, a wide-ranging collection of essays on global macroeconomics and trade relations--particularly between the United States and China. In the second review, Thomas A. Hemphill finds that Free the Market! Why Only Government Can Keep the Marketplace Competitive by Gary L. Reback is an informative book on antitrust policy--including political aspects of federal antitrust enforcement and how business strategic decision-making is influenced by antitrust cases. The book also has a useful discussion of the foundations of the debate over the proper formulation and enforcement of antitrust policy. In this issue's third review, Cliff Tan examines On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Henry M. Paulson, Jr. Paulson, of course, was the U.S. Treasury Secretary in 2008 during the attempt to mitigate the U.S. financial crisis. This is a blow-by-blow account, although Tan finds that it is occasionally incomplete, particularly in the case of AIG. Nonetheless, Tan provides a favorable review of Paulson's description of a crucial episode in U.S. economic history by one of its central players.

None of the readers of Business Economics need to be reminded of the roles of random shocks and exogenous events in not only the phenomena they observe but also in their own jobs. Such is also the case when busy people undertake to write articles for this journal. Thus, once again, we do not have Focus on Statistics or Economics at Work. I am confident, however, that they will appear in the January issue.

Robert Thomas Crow



Business Economies (2010) 45, 231-232.

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