From the Editor
Crow, Robert Thomas, Business Economics
This issue opens with Janet Yellen's address to the NABE Policy Conference. As president of the Twelfth District (San Francisco) of the Federal Reserve Bank, she is an important contributor to U.S. monetary policy. (1) She notes the improvements in transparency and credibility that the Fed has achieved since the early 1980s and the beneficial effects they have had. However, noting that policy can always be improved, she outlines further changes that would enhance the Fed's effectiveness, particularly the adoption of specific inflation targets.
David Wise examines the shift from employer-based, defined benefit pensions to employee-controlled personal retirement accounts (PRAs), focusing on the relative risk and asset accumulation of the two approaches. In particular, he focuses on possible strategies for PRAs and concludes that they are likely to lead to higher retirement accumulations that are also less risky than defined benefit plans.
Katherine Baicker notes that health care outcomes are less than what could be expected by high and rapidly growing expenditures. Important reasons are that there are few incentives for efficiency and that consumers seldom have sufficient price and quality information to make informed decisions. She advocates properly designed Health Savings Accounts as an affordable means of providing consumers with more choices, incentives, and control, thus strengthening their role in reducing waste, improving efficiency, and promoting competition.
Kajal Lahiri and J. George Wang note that probabilistic forecasts are often more useful than point forecasts. They evaluate the Survey of Professional Forecasters' (SPF) joint subjective probabilities for the onset of a recession during the next two quarters, utilizing techniques developed in other disciplines. They find that SPF forecasts can be improved by following relatively simple guidelines that apply to probability forecasts in general.
Frank Michello and William Ford describe and analyze an inherent conflict between reducing the unemployment rate and proposed U. S. Social Security reform measures that encourage delayed retirement. They find that unless the economy is unusually robust, retention of older workers would be likely to increase the aggregate unemployment rate.
In the Forum on Emerging Issues, John Bogle, the founder of the Vanguard Group of mutual funds, identifies major structural and moral failures in the evolution of American capitalism--particularly the shift in power from owners to managers who manage in their own, rather than the owners', interest. He identifies nine negative consequences of this shift, decries the public's indifference, and calls for a revival of discourse and integrity in business. …