When the new president of the National Association of Business
Economists is asked a question about the role of economists in U.S.
corporations, she turns to a colleague and asks: "Do we call ourselves
business economists anymore?"
One Minneapolis economist names executives in large Minnesota
companies who have an economics background; however, he asks that
those people remain anonymous. "People don't want to be labeled
as economists," he says. He's smiling, but he's serious.
A business economist told this joke at a gathering of economists
a few years ago and got a big laugh: An economist is someone who
knows math but doesn't have the personality to make it as an accountant.
A business economist is the same, but is not very good at math.
The joke is told by William Melton, vice president, international
economist/strategy, for American Express Financial Advisors Inc.,
Minneapolis (formerly known as IDS). The irony, of course, is that
Melton himself is a long-time business economist for a company that
also employs a second economistDaniel E. Laufenberg, vice
president, chief U.S. economist.
Paul Anton is the Minneapolis economist who says that business
executives sometimes hide their economics backgrounds for fear that
their colleagues might perceive them as too theoretical or analytical.
Currently a consultant, Anton's career included a stint as money
market economist for First Bank System in Minneapolis, where he
received the highest form of praise that an economist can receive
from management: "He's an economist, but he's a practical,
And the president of the business economists' trade group, NABE, is Maurine Haver, president of Haver Analytics of New York, a firm she founded in 1978 after a career as a corporate economist. Her company produces information services and analytical software for businesses and business economists.
When Haver was first asked to assume a leadership position at NABE, she questioned her own qualifications since she wasn't in the business of economic forecasting, and forecasting has long been synonymous with business economics. What she does is provide information to business economists so they can best interpret their companies' relationships to the national and world economy. That role of economic interpreter is a better description of a business economist's role than that of forecaster, Haver says.
Usefulness of economic analysis often overlooked
As the corporate-to-consultant experience of Anton and Haver suggests,
the role of economists in U.S. business has changed, especially
in recent years. In the 1970s, the economics profession had an exaggerated
view of its forecasting abilities, a view shared by U.S. business,
says James D. Campbell, corporate economist and manager, energy
forecasting, for Northern States Power Co., Minneapolis. Likewise,
to have a staff of economists was considered the height of status
and corporate chic.
But with the 1980s came the prevalence of such terms as downsizing
and profit centers, and economics staffs were increasingly viewed
as luxuries. Also, business economists' forecasting records were
found lacking in clairvoyancemost forecasters missed major
turning points in the economy over the past 20 years. At the same
time, corporationsto the extent they even cared about macro
forecasts anymorebegan buying such information on a contract
basis. The bottom line: business economists' stock plunged.
Forbes ran a cover story entitled, "Dreary Days in the Dismal
Science." Big banks such as Continental, Citibank, Chase Manhattan
and Chemical, and major corporations like Equitable Life, Xerox
and Eastman Kodak reduced or eliminated their economics departments.
Paul Anton says that for a time, having the word "economist" in
your title was the "kiss of death" in corporate America. Indeed,
many economists found their titles changing as they applied their
skills to such departments as marketing, engineering and planning.
Some economists, like Anton, found their corporate positions eliminated
or reduced in stature, and they left to open shop as consultants.
One economist who left a major corporation was seemingly prescient
in his move: Joel Prakken, vice president of Laurence H. Meyer and
Associates, a St. Louis-based firm specializing in econometric analysis,
forecasting and policy analysis. From 1979 to 1982 Prakken was in
the economics department of IBM. Times were good, the department
was influential in planning, it had veto power over marketing forecasts,
and there were five Ph.D. economists and about a dozen support staff.
Then, in 1982, Prakken resigned to co-found, with Laurence Meyer,
the firm where he now works. Prakken remembers his boss taking him
aside and telling him he was "insane" to leave IBM. However, shortly
after Prakken left, IBM disbanded its economics department and Prakken
says he would have been downsized out of a job. As Prakken tells
it now: "I dodged a bullet and I didn't even see it coming."
Another bullet aimed at traditional macro-oriented economists
is the growth of international corporations. Balvinder S. Sangha,
manager of a group of about 50 economists and analysts for Ernst
& Young, Washington, D.C., thinks that many businesses are getting
general industry analysis from economists who work for trade groups,
and that another subset of economic consulting is developing that
involves highly specialized work on a particular subject.
Most of the analysts in Sangha's department work on issues related
to transfer pricinga relatively new, complex issue for international
corporations that price products to foreign subsidiaries. Expertise
in exchange rates, royalties and tax laws are important, Sangha
says, and large firms can provide the skill and resources for such
But not all is new in the world of business economics. While the
tasks and titles of many business economists have changed in recent
years, many have retained their traditional role in business, and
not all corporate economists who lost their jobs did so because
their skills were no longer useful. Haver says that the advent of
the personal computer greatly increased the productivity of economists
and thereby decreased the need for large staffs to compile and analyze
data, and to prepare reports and publications. "I think the productivity
story is really overlooked here," she says.
Haver also thinks that the usefulness of economic analysis is
sometimes overlooked in the world of business. If the experience
of some Twin Cities economists is any indication, Haver is probably
The new bottom line: 'Added value for doing business'
Anton, the former First Bank System economist, may be a case in
point. Of the 14 FBS departments to use his services at no charge
while he worked at the bank, 13 hired him when he left to form his
own business in January 1988. And many others have hired him also.
Anton, who says "It's hard to come up with an accurate description"
of his work, does special reports for businesses, state agencies
or such groups as the Minnesota Business Partnership; he also gives
speeches, provides forecasting analysis and gives expert testimony
at trials over such issues as antitrust or employment law. "It's
pretty much a mixed bag," he says.
In contrast to his earlier work, especially his research as an
economist at the Minneapolis Fed prior to his employment at FBS
in 1979, Anton says that microeconomics is now more important than
macro. "The business cycle takes second place to an industry," he
says, in a description that mirrors other business economists' comments
about their changing roles since the '70s and early '80s.
One thing that hasn't changed for Anton's colleagues at Norwest
Corp. in Minneapolis is thatunlike at FBS and many other large
U.S. banksthey are still in business. And they are still high-profile
members of Norwest's corporate team, often quoted in the regional
and national press and always traveling throughout the western United
States to meet with Norwest banks, their clients and to give speeches.
But for the three economists at Norwest, one important thing has
changed: Their department is now a profit center, that is, they
charge their services to departments and banks within Norwest's
holdings, according to Larry Wipf, director of regional economics.
Wipf joined Norwest in 1979, five years after Norwest's economics
department was started by Sung Won Sohn in 1974 (the department
began at what was then Northwestern Bank Minneapolis and was moved
to the corporate level in 1980). Generally speaking, Sohn's emphasis
is the national economy, Wipf's is regional economics and Kevin
SigRist provides international analysis. SigRist mainly provides
Norwest's clients with an assessment of the political climate of
countries where their companies may have an interest.
As Norwest has grown, both geographically and with such expanding
divisions as Norwest Mortgage and Norwest Investment Services, Wipf
says the economics department has become increasingly busy. In addition
to producing regular publicationssuch as newsletters and a
weekly Friday p.m. report on macro issues for all Norwest banksthe
economists travel a great deal, both to meet with banks and with
those banks' clients. Wipf says he made about a dozen trips per
year when he first came to Norwest, and last year he made nearly
40 trips, with each trip including a number of presentations. For
example, in January, he will give six talks in three days in communities
across southern South Dakota; the following month he will do the
same thing across the northern part of the state.
With its travel and its visibility in the press, Norwest's economics
department is more than just a service to its banks and their clients,
the department is also a marketing tool for the corporation, Wipf
says. "It's a way of differentiating Norwest from the competition."
One long-time client of Norwest's economics department has been
John Pierson, currently manager of Norwest Bank in Bismarck, N.D.,
who has formerly run Norwest Banks in Minot and Grand Forks and
who will soon join Norwest Bank in Cedar Rapids, Iowa. Pierson says
Norwest's economists have been helpful to his business over the
years for three reasons: helping to explain the economy to Norwest's
bankers so they can better work with their clients, working directly
with individual clients to provide analysis of particular markets,
and serving a public relations role by giving talks at organized
events, for example.
"We see [the economics department] as a real plus," Pierson says.
"Our clients see it as added value for doing business with Norwest."
Adding value is also Campbell's job at Northern States Power Co.
in Minneapolis. As it was when he was hired in 1979, Campbell's
primary responsibility for NSP is to forecast load requirements
for the utility, both for the short term (two to three years) and
up to 20 years. He also does general economic consulting for departments
within NSP and provides analysis of regulatory matters.
Another thing that hasn't changed for Campbell is that he is not
required to bill for his services. The forecasting information that
Campbell and his staff of three economists provide the utility is
used throughout NSP's business, which not only includes setting
rates and assuaging regulators, but also dealing with the vagaries
of energy suppliers, like coal companies, and equipment manufacturers.
In essence, Campbell says his job is to provide good information,
part of which comes from basic theory, history and from his own
Melton and Laufenberg must also provide good information to their
primary clientsAmerican Express' portfolio managers. "Their
success is quantifiable," says Laufenberg. "If they don't like our
They must like the economics service because after hiring Melton
in 1982, American Express added Laufenberg in 1987. Melton now focuses
on international markets, with Laufenberg doing national analysis.
And after years of analyzing such numbers as the Fed funds rate,
Treasury cash balances and other short-term statistics, Melton says
they now look to the economic fundamentals that were on the bottom
of the list through much of the 1980s: employment, gross domestic
product, earnings, productivity and similar data.
Melton and Laufenberg still worry about what rates are going to
do, but there is less uncertainty in the markets than there was
10 to 15 years, and there is also greater respect for the Fed and
its efforts, the two economists say. (Melton worked for four years
at the New York Fed; Laufenberg for 14 at the Federal Reserve Board.)
One of the major differences in the markets between now and 10 years
ago, according to Melton, is that institutional investors no longer
"sneer" at the Fed; the Fed is given the benefit of the doubt on
its policy choices.
The Fed's recent decision to immediately announce its rate policies
following Federal Open Market Committee meetings has also changed
the dynamics of forecasting and economic analysis. Melton jokes
that an entire group of economistsFed-watchershave lost
work because of the new policy and that perhaps the federal government
should develop some sort of retraining program for those economists.
Seriously, he sees the move to greater Fed openness as logical and
When the two American Express economists survey the upheaval among
business economists in recent years, they credit their survival
of the downsizing decade to their "lean" staffthere are two
economists and two associatesand even though they don't charge
for their services, everything they do must have a client base within
the company. And they pitch their efforts within the company, Laufenberg
says. It doesn't do any good to generate accurate forecasts if nobody
knows about them and they aren't used, he says.
The biggest decisions are made on broad observations
The changing role of business economists has inspired much discussion
at the NABE about the education of business economists. Paul Anton
served on an NABE task force during the mid-'80s that determined
that a prototype for a business economics career would include a
master's in finance, a doctorate in economics and a minor in communications.
When the NABE approached schools with the idea of trying to educate
students as business economistswith a master's in business
economics, for examplesome schools showed interest, with one
caveat to the NABE: guarantee that the students will find a job.
In a speech at the NABE annual convention in 1992, Lynn O. Michaelis,
chief economist at Weyerhauser Co. in Tacoma, Wash., grimly addressed
the issue of education and economics: "If through business training
or through the press, business managers come to believe that economics
provides little insight in how to arrive at a business decision,
then what we have to selleconomic advicemay not have
much value. ... So get involved in how economics is taught in business
schools. My concern is that our academic brethren could put us and
themselves out of business."
That won't happen if John Pain has anything to do about it. Pain
is the manager of Tenant Corp.'s Global Strategic Research and Planning
Department, Golden Valley, Minn., and he is convinced of the need
for economic thinking in the world of business.
While Tenant does not employ a corporate economist, as such, Pain's
staff of seven analysts includes economistsor at least those
who may fit Anton's mold of a new economist. One is Carolyn Allmon,
formerly with the Minnesota Department of Revenue, who received
a master's degree from the University of Hawaii in public economics
and administration. The core of her classes were in the business
school, "lots of applied stuff," Allmon says. "It broadened my view
of how MBAs look at economics," she says. "The study I had prepared
me for the real world, quote unquote."
At Tenant, she forecasts orders for the company's industrial floor
maintenance equipment and floor coatings, among other duties. Those
forecasts are important to Tenant, Pain says, as the company prepares
to enter new countriesmany of them with quickly developing
economiesthroughout the world.
Pain's own study includes undergraduate degrees in economics and
math, a master's in finance and some doctoral classes in economics.
His economics background has helped him, he says, and he looks to
hire people with the ability to do quantitative analysis and to
see "the big picture." His department tries to link aggregate performance
with a particular industry, and extends that analysis to a certain
customer, then tries to communicate that analysis to a sales representative.
"Economic reasoning" is the phrase used by Pain to describe one of the
qualities he likes to see in his staff, because no matter how much data
are known, no matter how much microanalysis is done, "The biggest decisions
that are made, are made on broad observations."