From the editor

Business Economics, Oct, 2003 by Robert Thomas Crow

We note with sadness the passing of Charles P. Kindleberger, a recipient of the Adam Smith Award and one of the giants in international economics and economic history. Thomas W. Synott, III, has provided us with an eloquent tribute to the man and his contributions.

October issues have some built-in rejoicing, however, for it is in this issue that we publish the annual winner of the Edmund A. Mennis Contributed Paper Award and the winner of the NABE Contributed Paper Award, the runner-up in the Mennis competition. The Mennis Award, won by John Kitchen and Ralph Monaco, is an imaginative use of the ongoing stream of monthly data releases by the federal government to provide continuously updated "real-time" forecasts of GDP.

This year, three papers tied for the NABE Award. In this issue, we publish the paper by Jonathan McCarthy, who explores whether there has been an overhang of equipment investment that has slowed the current U.S. recovery. In doing so, he develops an alternative to the commonly used capacity utilization measure that promises to be valuable in enhancing the predictive power of macroeconometric models. The other two NABE Award papers will be published in the January issue.

Can't think of anything to say a cocktail party, gentle readers? How about the stock market? Business Economics has provided many fascinating insights over the past few years, and this issue adds some more. Henry Townsend and Gary Shilling, in separate articles, investigate the likely prospects of the stock market and how they will affect defined-benefit pension plans. Although their emphases and approaches differ, they agree that the long-term outlook for the stock market is not as robust as most pension plans are assuming and that low stock price growth will have a major impact on those companies that have defined-benefit plans. Townsend focuses on the stock market itself, while Shilling investigates the accounting rules under which defined-benefit plans are either cash cows or albatrosses on corporate bottom lines.

Kitchen and Monaco are joined in their investigation of short-run forecasting methods by Rolando F. Pelaez and Timotej Jagric. Pelaez notes that the Purchasing Managers Index, frequently used as a short-term indicator, consists of five equally weighted components. He devises and tests an alternative indicator in which the weights of the components are determined empirically and finds that it yields superior performance. Jagric takes an innovative methodological approach to forecasting with leading indicators by applying artificial neural networks to monthly data. He describes this approach and finds that he materially improves forecasting performance compared to more straightforward methods.

In "Economics at Work," Jack Kyser describes his work at the Los Angeles County Economic Development Corporation--a private, non-profit entity. The economics function has thrived by producing valuable regular reports and offering for-fee consulting services on the Los Angeles County economy and its very large number of sub-regions and industries.

In "Focus on Industries and Markets," Leslie G. Polgar describes the rapidly growing flat-panel display industry. This is a ubiquitous technology, rivaling the semiconductor industry on its impact on lives and industry. It is substituting for traditional cathode-ray technology in applications such as television and computers and has made possible a number of new devices. The article describes the technologies, the organization and pricing in the market, the market's core drivers, and its major players.

In "Focus on Statistics," Robert P. Parker describes the upcoming major changes in the National Income and Product Accounts. These affect the magnitude of GDP and its components, their definitions, and their presentation. In particular, among the many changes, are closer integration with the input-output accounts and definitions that adhere more closely with the internationally accepted System of National Accounts.

In the book reviews, Bruce Kratofil reviews Broadband: Should We Regulate High-Speed Internet Access, edited by Robert W. Crandall and James H. Alleman. The papers describe broadband technology and explore questions of applied economic theory and policy proposals pertinent to regulation. Edmund A. Mennis reviews Technological Revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages by Carlota Perez. Perez develops and supports the argument, following Schumpeter, that technological revolutions spawn speculative bubbles and financial crises on a steadily recurring basis. These very long waves, however, do not have regular periodicity or simple economic theoretic interpretations.

Finally, it gives me great pleasure to announce that the Abramson Award for the outstanding article in Business Economics (other than the Mennis and NABE Award winners) went to Albert DePrince of Middle Tennessee State University for "Assessing the Term Structure of Expected Inflation Using Treasury Inflation-Protected Securities" (January 2003). Abramson Scrolls went to Uwe Reinhardt of Princeton University for "Churchill's Dictum and the Next New Thing in American Health Care" (July 2003) and to J. Paul Horne, an independent market economist, and Albert Merlin of Incopar of France for "Does Enronitis Threaten the Dollar and the Economy?" (October 2002)