From the Editor

This is volume 50 of business economics—our 50th year of publication!¹ During the course of 2015, we will have several articles that mark this milestone anniversary. NABE itself was founded in 1959 [Regan 1989].

Upon being given NABE’s Adam Smith Award, Ben S. Bernanke was interviewed by Kai Ryssdal at the NABE Annual Meeting. The first paper of this issue is an edited version of that interview.² Bernanke recounts his early days as chairman of the Federal Reserve, the course of events of the 2007–09 financial crisis, and the economic environment and post-crisis Federal Reserve policies. He emphasizes the importance of clarity in communicating Federal Reserve policy and also identifies ongoing challenges to the U.S. and world economies.

This issue’s second paper is by John Silvia and Azhar Iqbal. It won a NABE Contributed Paper Award. It provides an ordered probit approach that estimates the probability six months in the future of three distinct scenarios for prices: inflation, deflation, or price stability. This approach is an alternative to single-point forecasts and should be useful for identifying options or risks facing decision-makers, especially in financial markets.

In the third paper, Robert C. Pozen considers “corporate short-termism.” He finds that some criticisms of corporate short-termism are warranted, but others are exaggerated. He identifies reforms and practices that would encourage firms and executives to focus more on the long-term and mitigate problems that result from preoccupation with short-term results.

Joel L. Prakken and Chris P. Varvares use a macroeconometric model to investigate the full range of direct and indirect effects of a significant rise in the value of the U.S. dollar. Among their findings, they identify and quantify a number of negative feedbacks that are likely to significantly offset the direct effects of a rising dollar on GDP, interest rates, and many other macroeconomic variables—including the value of the dollar itself.

Ed Clark presents a banker’s perspective on the importance of banking in the real economy, the weakening of trust of banks on the part of the public, and what banks must do to reclaim that trust. In addition to adequate capitalization and better informed bank regulation, he advocates cultural change within banking to a focus on the needs of customers rather than the potential gains from casino-like activity.

Christopher Swann and Anessa Custovic present the results of the 2014 NABE salary survey, focusing on the relationship between total compensation and professional characteristics of NABE members who responded to the survey. They find many consistencies with previous results as well as some interesting exceptions.

This issue has two book reviews. In the first, Derk A. Wilcox reviews House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again by Atif Mian and Amir Sufi. Wilcox distinguishes between two parts of this book (as the title suggests): how the Great Recession came about and what to do about it. He is favorably impressed by the analysis of the causes, which focuses on excessive household debt (especially in housing) rather than a contraction of credit due systemic weakness in banking. He is less impressed by the “what to do about it.” He finds that many of the recommendations have not been adequately thought out in terms of their counterproductive ramifications. On balance, he finds the book to be “of great value to business economists because of its unique and persuasive account of the causes of the Great Recession.”

In the second review, Gerald L. Musgrave reviews Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics by Adam Smith and Bruce Yandle. “The theme of this book is that there are two major forces driving government regulation. One force is the economic self-interest of those promoting the regulation—the Bootleggers. The other force is from those who take a high moral ground—the Baptists.” The book points out that these opposing forces often join together in regulation. The book provides a number of examples in which the moral high ground and self-interest join forces, often at the expense of the broader public. Musgrave finds that, “Business economists should have the term ‘Bootleggers and Baptists’ in their lexicon and the book in their library.”