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How the Economy Works.

How the Economy Works

By Edmund A. Mennis. New York: New York Institute of Finance, 1991, pp. 292, $13.95.

THE AUTHOR, a veteran analyst of the economy and the editor of this journal, obviously did not select the title. In the first chapter, Mennis states clearly, "This book is not designed to be an economics text." The title is a misnomer that may dissuade the very readership he intended to serve - and will definitely deter many economists who would be grateful to have such a ready reference work.

The author's initial objective appears modest: to describe for the noneconomist how changes in the economic environment are measured. Economic statistics that bombard the public -- and constitute raw material for the professional -- are explained in concise, readable form. Mennis describes where the statistics come from, how they are derived, who produces them, where they are published and what they mean.

If familiarity breeds contempt, economists might react to the table of contents the same way as they might to the title. Our training and experience have equipped us to analyze GNP, inflation, consumer spending, business activity, international trade and finance, governmental influences, interest rates and monetary policy. Nevertheless, while the author has not designed the book for the professional economist, he has contributed to our craft. Any skilled artisan must understand the nature of the raw materials used, and Mennis has compressed into this volume the essential information on the data we all use. It provides a single, comprehensive source of information.

Each chapter is precisely cut and polished, but for the business economist, the chapter on corporate profits may have a significantly attractive luster. People familiar with the profits literature recognize Mennis as especially knowledgeable in this area.

This chapter is as lucid a description of the statistics pertaining to corporate profits as can be found in the literature.

The author's objective goes beyond simply a description of economic statistics. In his words, "The purpose of this book is to provide some perspective against which the daily bits of economic information can be evaluated." The perspective is gained through charts -- a treasure trove of nearly a hundred is included. Every one is designed to yield insights into the data or the relationships among economic elements.

For the noneconomist, the charts in conjunction with the elaborative text should certainly contribute the desired perspective. For the business economist who needs to present analysis as well as results to the noneconomist, the pictures alone could be worth more than the price of the book. They demonstrate how effectively charts can be used to deliver a message.

Recognizing the limits of his targeted audience, the author has properly chosen not to include any discussion of forecasting techniques. There are occasional suggestions on ways in which past developments may anticipate future changes, but only professional pursuits are likely to cavil at such statements as "the significant drop in job gains . . . (in 1989 and early 1990)... provided early indications of a definite slowing in the U.S. economy in the latter part of 1990." More often, Mennis provides cautions about the improper use of apparent forecasting devices, such as the leading indicators. Unfortunately, there is no discussion of the new focus on gross domestic product instead of gross national product as an economic measure and the greater significance of the shift in the base year of GDP and GNP from 1982 to 1987, although GDP is defined and referred to in the chapter on economic trends and cycles.

The subtitle of this book is "An Investors Guide to Tracking the Economy." There are comments in the first chapter about how knowledge of economic data "... helps to make sound investment decisions," and the final chapter is devoted to suggestions for the individual investor. The material is informative, but the author has wisely segregated it in order not to blur the book's primary focus. Anyone interested in investing needs to understand the nature of the gauges by which economic activity is measured, and this book is an excellent guide. For any reader of Business Economics, the book should prove an indispensable reference work.

Roy E. Moor

Illinois Institute of Technology
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Moor, Roy E.
Publication:Business Economics
Article Type:Book Review
Date:Apr 1, 1992
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