Asking About Prices: A New Approach to Understanding Price Stickiness

Preface

Preface What a long, strange trip this research project has been. The tale needs to be told here, for it explains both the long gestation period since the interviews ended (in March 1992) and the complicated coauthorship of this book. It also gives credit where credit is due. The idea of assessing the validity of theories of price stickiness by asking actual decisionmakers began percolating in my mind about a decade ago-after more than fifteen years of teaching graduate macroeconomic theory at Princeton. For the longest time, I vacillated over two questions. Could such a survey be done successfully by an academic economist with limited resources at his disposal? (The answer, I now know, is yes.) And would anyone pay attention to the results? (The answer to that question will be determined by readers of this book.) After more than a little prodding from Eric Wanner, president of the Russell Sage Foundation, I decided to give it a try. My first brilliant tactical decision came in 1988, when I recruited Elie Canetti, then a Princeton graduate student, as the chief research assistant on the project. Working together over the course of about three years, we refined the questionnaire, designed the sample , recruited and trained the interviewers, and conducted the initial interviews-including the pretest and pilot study described in chapter 3. Canetti ably handled literally hundreds of organizational and administrative details, made numerous substantive suggestions about research design, and dug up most of the previous survey xii Asking About Prices research summarized in chapter 2. Importantly, he also managed the team of Princeton graduate students that did the interviewing. When Canetti left Princeton for the International Monetary Fund, I made my second brilliant move: hiring Jeremy Rudd to take over. Over the course of about nine months in 1992, the two of us completed about two-thirds of the statistical analysis reported in this book-plus some that is not reported. His diligence, care, and subtle suggestions when I was going astray were all invaluable. By October 1992, I had drafted about a dozen chapters-some essentially complete, others fragmentary. A complete draft manuscript by early 1993 looked like a virtual certainty. Then the roof caved in on this project. Bill Clinton was elected president of the United States, and I soon became involved, first, in the transition, and then in the first Clinton administration as a member of the Council of Economic Advisers. Life on the Clinton CEA left little time for any outside activities , and no time whatever for research. So the manuscript was shelved-both literally and figuratively-for about two years. In June 1994, I became vice chairman of the Board of Governors of the Federal Reserve System. After a few months of getting my sea legs, I made my third brilliant tactical move. I knew that it would take much prodding and help for me to make any progress on the book while serving as the Fed's vice chairman. Fortunately, staff economists at the Board of Governors are expected to spend a portion of their time on economic research, and my special assistant , David Lebow, was an expert on pricing research. So in the fall of 1994 I asked Lebow to take responsibility for moving the project forward-which he did exceedingly well. He first replicated and then completed the statistical work that Rudd and I had begun a few years earlier, correcting a number of small errors in the process. He also drafted several of the remaining chapters and raised many substantive questions that improved the analysis. Progress was slow while I served on the Fed, but there was clear forward motion. The final leg of the long journey began shortly after my return to Princeton in February 1996. I once again enlisted the services of Rudd as research assistant. He and Lebow together finished and double-checked the statistical analysis. And the three of us jointly completed writing the few remaining chapters-apart from chapter 18, which I drafted alone. All four coauthors then reviewed the entire draft manuscript, making many small changes. Preface xiii Thus, while I am the common thread that links the inception of the idea in 1987 to the publication of this book in 1997, and while all final decisions were mine, each of my three coauthors made major and truly indispensable contributions. The work you hold in your hands literally would not be here...