From the Editor - Brief Article

Business Economics, Oct, 2001

In this Issue

Preparation of this issue was under way when the events of September 11 took place. This column is not the place for commentary, other than to observe that in some ways economic priorities and activities will be significantly changed for years to come. Yet, everyday issues still dominate the business scene, and it is just as important as ever to understand them. As a case in point, Henry Kaufman, this year's recipient of the Adam Smith Award, addresses the timelessness of Adam Smith's path-breaking analysis of over two hundred years ago. Using Wealth of Nations as a backdrop, Dr. Kaufman speculates on how Adam Smith would react to today's economic environment and its prospects for the future. These reactions--both applause and consternation--would be as valid today as they were when Wealth of Nations was written.

Productivity growth was the focus of both the NABE and the Edmund A. Mennis Contributed Paper Awards. The NABE Award paper, authored by Charles Steindel and Kevin Stiroh, is an exposition of the definitions, data, methodology, and complexity of measuring productivity by source and by industry. The Mennis Award paper, authored by Ernest Goss, uses the type of rigorous methodology described by Steindel and Stiroh to investigate a difficult, hotly-debated question: What impact has the Internet had on productivity and therefore on aggregate economic growth? His results indicate that the impact is significant and varies by sector.

Monetary policy has already been used in the aftermath of September 11 to help stimulate an already-weak U.S. economy, and it is as important as ever to understand how it is made and implemented. To this end, this issue contains several papers that were presented last May at the Conference on Monetary Policy and the Markets, organized by NABE and sponsored jointly with the American Enterprise Institute. The conference had two main themes: exploring the similarities and differences of monetary policies and practices across countries and communicating the outcomes. Laurence H. Meyer explores the relationships between elected legislatures and executives and appointed central bankers, focusing on the importance of central banks walking a tightrope: balancing independence and accountability, while making the process credible through transparency--but at the same time not impairing efficiency.

Michael Moskow introduces different central banks' presentations on what they try to accomplish and how, raising questions about the value of transparency and whether or not monetary policy mandates should be tightly focused. Charles Freeman presents the advantages of inflation targeting for Canada and of good communication. Christian Noyer discusses the rationale and process for monetary policy at the European Central Bank, and Sushil B. Wadhwani discusses the Bank of England's success in reducing inflation while maintaining vigorous growth, along with the complexities associated with being both transparent and credible.

The next two papers focus on the importance of clear two-way communication between central banks and financial markets. Robert V. DiClemente provides the rationale for clear communication and provides examples of what happens when it works and what happens when it breaks down. Michael McKee emphasizes the role of the financial press as the medium of communication of central bank policy and actions and points out several areas in which central bank and financial press communication can be improved.

In the Forum on Emerging Issues, William F. Ford summarizes the short-term effects of September 11 and speculates about what the long-term effects might be. He describes how these may be critical to the success of many firms and how business economists have responsibilities and opportunities to help their firms anticipate, understand, and respond.

J. Fred Weston reviews the four volumes of Empirical Corporate Finance, whose 2,242 pages document the evolution of this field over the past thirty years. He traces the broad outlines of the major contributions in this field.

What's Not in this Issue

This issue does not contain either a Focus on Industries and Markets or a Focus on Statistics. This is not a matter of policy, it is simply what happened--in part because of September 11. Expect them to be back in January. Also, even though we sought to revive "Economics at Work" for the October issue, it did not happen. However, it is still on the agenda--we are shooting for January.

Robert Thomas Crow

rcrow@leland.stanford.edu