NABE Presidential Address: If Economics Is Relevant to Business, Why Not Economists?
Michaelis, Lynn O., Business Economics
WHEN I selected a title for my speech, the title seemed to have a clear meaning. Upon reflection, the title could have a double meaning. What I initially intended was, "If economics is relevant to business, shouldn't economists be also?" But another meaning could be, "If economics is relevant to business, why isn't it relevant to economists?" This might have been subconscious. I know of situations where economists got so consumed by a forecasting model that they forgot about the economic content of their analysis.
In preparing this speech, I skimmed or read the past twelve presidential addresses. It was a humbling experience. This organization has been led by a group of very thoughtful and diverse individuals. Ten years ago there appeared to be a well-established tradition, There seemed to be a routine cycle in the speeches. One year it was on the status of NABE or the profession. The next year the president would shift to an economic topic of his or her choosing. The topics were diverse, ranging from "Inflation vs. Political Freedom" to "Real Interest Rates: The UNpuzzle."
The cycle was broken, For five years the speeches focused more on topics of choice rather than the state of the profession. Last year's speech by Dick Rippe focused on our forecasting accuracy vs. alternatives. He concluded that the NABE forecasts were slightly better than no change forecasts. For interest rates, he advised us to use the consensus forecast. He did at the end provide some advice to the profession on forecasting techniques and style.
I decided to focus on the profession. Unlike Dick Rippe's speech in 1991, I wanted to focus on the application of economics in the "real" side of the economy. I have been a practicing business economist for nearly twenty years and have studied economics for nearly twenty-five years. I truly enjoy the subject and am proud to be an economist. Concern about how economists are seen and about the future of our profession has been a constant companion for most of those twenty years, especially in a line organization like Weyerhaeuser. I have lived through the best of days and some of the darkest days for our profession.
Even though our membership has stabilized, we should not be complacent. Total numbers are misleading. The role and composition of the membership has changed. Some of the change has been good. Many of the economists have shifted to roles with more influence on decisionmakers. But the troublesome decline in the economist's role, first in the industrial sector, then the retail area and now the banking industry is just as serious as it was a decade ago when Don Conlan spoke about the "decimation in our ranks." He wondered out loud if "we're in the process of being permanently ignored."(1)
The changing composition of our profession is not the problem. In fact, the changing roles are healthy and show we can adapt to the market place. Unfortunately, many of our members feel the need to hide that they are economists. Even worse, many people that have the title or profess to be economists have little or no economics training. Thus, I will once again call for a certification program in NABE.
THE PREMISE OF SPEECH: IS ECONOMICS RELEVANT TO BUSINESS?
The title of the speech has two parts. The first part of the question is a premise that most of you would accept readily. I know that I may be singing to the choir, but it is important to spend a few minutes on the assumption. Is economics relevant to the businessman?
In the past few years, many of the bright young MBAs that have come into my company have had little or no economics training. If they did, they clearly did not understand it. The notable exception has been those few graduates that we hired from the University of Chicago. There are some schools that are even dropping economics from the MBA curriculum.
The recent vogues in business management -- Total Quality, Re-engineering, Core Competencies, etc. …