AEAweb: JEP: Contents: Spring 2000

Journal of Economic Perspectives
Vol. 14, No. 2, Spring 2000

Contents

Distinguished Lecture on Economics in Government: Fighting Poverty: Lessons from Recent U.S. History
Rebecca M. Blank      3-19

Medicare Reform: Fundamental Problems, Incremental Steps
Mark McClellan      21-44

Walking the Tightrope on Medicare Reform
David M. Cutler      45-56

Medicare Reform: The Larger Picture
Victor R. Fuchs      57-70

Health Care for the Aging Baby Boom: Lessons from Abroad
Uwe E. Reinhardt      71-83

Making the Transition to Prepaid Medicare
Thomas R. Saving      85-98

Stock Market Wealth and Consumption
James M. Poterba      99-118

Economics in the Cyberclassroom
Peter Navarro      119-132

Minority Groups in the Economics Profession
Susan M. Collins      133-148

Keynesian Macroeconomics without the LM Curve
David Romer      149-169

An Interview with Zvi Griliches
Alan B. Krueger and Timothy Taylor      171-189

Policy Watch: The Repeal of Glass-Steagall and the Advent of Broad Banking
James R. Barth, R. Dan Brumbaugh, Jr. and James A. Wilcox      191-204

Classroom Games: Making Money
Susan K. Laury and Charles A. Holt      205-213

Data Watch: The U.S. National Income and Product Accounts
Joel Popkin      215-224

Features:
Recommendations for Further Reading      225-232
Correspondence      233-239
Notes      241-244

Welfare reform efforts in the 1990s aimed at reducing welfare dependence and moving women into work. Public assistance use fell and labor force participation among mothers rose at a stunning rate over the decade. Poverty declined, but at a slower rate. These changes are causally related to the strong macroeconomy, welfare reform efforts, and other policy changes, especially the EITC and minimum wage expansions. This paper concludes that all of these effects reinforced each other, producing very large behavioral changes. It is too early to predict the effects of these changes on long-term family well-being.

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A central controversy in the debate about Medicare is whether the program spends too much money or whether instead it should be expanded to cover more. I consider the value of increased Medicare spending. I argue that on average Medicare spending is worth it: the health gains brought by medicare have been greater than their cost. At the margin, however, services are overused and have low value. Medicare reforms need to promote the high average value of care while eliminating care of low value. Many of the proposed reforms fall short of this goal.

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The "Medicare problem" is examined as part of the larger problem of providing for the overall financial needs of the elderly. Several myths about Medicare are discussed, and sources and uses of the elderly's "full income" are estimated. The paper explores policy options to deal with technology-induced increases in health care expenditures and excessive dependence of the elderly on transfers from the young. The paper concludes that if Americans wish to continue to enjoy the benefits of medical advances, they will have to work before and after age 65 and will have to increase their rate of saving substantially.

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he Medicare system is facing a financial crisis brought on by the combination of rapidly rising consumption of health care services by beneficiaries and financing based on generation transfers. This paper simulates a transition to prepaid Medicare where each generation puts aside funds for the health care it will demand later in life. By prepaying Medicare we increase the nation's capital stock which in the long run will allow the nation to enjoy greater consumption for both working and retired generations and we achieve immunity from generation size shocks. By transferring the baby boomers and younger generations into a prepaid system we can complete the transition in less than fifty years and achieve an ultimate contribution rate of 1.26% of taxable payroll instead of the more than 12% of taxable payroll that will be required if we remain in the status quo.

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This paper explores the link between changes in the aggregate value of corporate stock and changes in consumer spending. It presents data on the distribution of corporate stock ownership based on the 1998 Survey of Consumer Finances. It also uses time-series evidence on the comovement of stock market wealth and various categories of consumer spending to calibrate "the wealth effect." It concludes that in the year after a change in stock market values, consumer spending is likely to rise by between one and two cents for each dollar increase in the value of corporate stock.

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The coming of the cyberclassroom may change almost everything we do in teaching economics. This article discusses the size and scope of the cybereconomics market; the range and mix of instructional technologies; course design, development, and content; cyberinfrastructure and technical support; student characteristics, performance, and access; and labor issues. Some key findings include: the cybereconomics market is small but rapidly growing. Technical problems are common but can be minimized. It takes instructors significantly more time both to develop and teach a typical cybereconomics courses. Institutions, rather than instructors, are capturing a lion's share of the intellectual property rights.

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The primary objective of this paper is to provide information about minorities (blacks, Hispanics and Native Americans)in economics, at various stages in the education pipeline, and in the labor market. Despite sustained increases in the numbers and percentages of minorities earning bachelors degrees and Ph.D.s, the absolute numbers remain very small--only about 36 new Ph.D.s per year, including permanent residents. Minority economists are relatively underrepresented on four-year college faculties and in government employment. The paper also discusses activities by the AEA's committee on minority groups, aimed at increasing minority representation in the profession.

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Changes in both the macroeconomy and in macroeconomics suggest that the IS-LM-AS model is no longer the best baseline model of short-run fluctuations for teaching and policy analysis. This paper presents an alternative model that replaces the assumption that the central bank targets the money supply with an assumption that it follows a simple interest rate rule. The resulting model is simpler, more realistic, and more coherent than IS-LM-AS, not just in its treatment of monetary policy but in many other ways. The paper also discusses other alternatives to IS-LM-AS.

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Enactment of the Gramm-Leach-Bliley Act (GLBA) in November 1999 effectively repealed the long-standing prohibitions on the mixing of banking with securities or insurance businesses and thus permits "broad banking." We attribute repeal of these prohibitions to the increasingly persuasive evidence from academic studies of the pre-Glass-Steagall era, the recent favorable experience in the United States following partial deregulation of banking activities, the experience of banking systems abroad with broader scopes for banking activities, and rapid technological change in telecommunications and data processing. How regulators will in practice coordinate their efforts so that the safety and soundness of the banking system is maintained efficiently remains to be seen.

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Economics is often taught at a level of abstraction that can hinder some students from gaining basic intuition. However, lecture and textbook presentations can be complemented with classroom exercises in which students make decisions and interact. The approach can increase interest in and decrease skepticism about economic theory. This feature offers short descriptions of classroom exercises for a variety of economics courses, with something of an emphasis on the more popular undergraduate courses.

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GDP is arguably the most widely used economic statistic. It is part of the National Income and Product Accounts (NIPAs). The concepts, methods and source data for the NIPAs are described in this article. It contains citations to more detailed information obtainable from the publications and web sites of the U.S. Bureau of Economic Analysis, the agency responsible for the NIPAs. A brief history describes the evolution of the accounts. It explains the growing congruence between the U.S. accounts and the UN's System of National Accounts (SNA). The integration of financial and satellite accounts into the NIPAs is summarized.

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Features (view in pdf format):
Recommendations for Further Reading (AEA members only)
Correspondence (AEA members only)
Notes      

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