quality of education below the college level. to be sure, substantial reforms in math and science education have been under way for some time, and i am encouraged that policymakers, educators and the business community recognize the significant contribution that a stronger elementary and secondary education system will make in boosting the potential productivity of new generations of workers. i hope that we will see that the efforts to date have paid off in raising the achievement of us students when the results of the 1998 - 99 international comparisons for eighth graders are published. whatever the outcome, the pressures to advance our education system will continue to be intense. as the conceptual share of the value added in our economic processes expands further, the ability to think abstractly will be increasingly important across a broad range of professions. critical awareness and the abilities to hypothesize, to interpret and to communicate are essential elements of successful innovation in a conceptual - based economy. as with many skills, such learning is most effective when it is begun at an early age. and most educators believe that exposure to a wide range of subjects - including literature, music, art and languages - plays a considerable role in fostering the development of these skills. as you know, school districts are also being challenged to evaluate how new information technologies can be best employed in their curricula. unfortunately, this goal has too often been narrowly interpreted as teaching students how to type on the computer or permitting students to research projects over the internet. incorporating new technologies into the educational process is indeed likely to be an important element in improving our schools, but it must involve more than simply wiring the classroom. human capital - in the form of our teachers - and technology are complements in producing education output just as they are in other business activities. to achieve the most effective outcome from new technologies, we must provide teachers with the necessary training to use them effectively and to provide forums for teachers and education researchers to share ideas and approaches on how best to integrate technology into the curriculum. and we must create partnerships among the states, the school systems, labor and industry to develop appropriate standards and guidelines for the teaching of information technology in the classroom. a crucial concern today - and i know that the national governors ’ association is working hard to address this issue - is that the supply of qualified teachers will be insufficient to meet the demand. indeed, a substantial number of teachers are scheduled to retire over the next decade, and how to replace them and meet the additional demand from rising enrollments is certain to be a

the perceived risk in the economy or as a result of increased willingness to accept risk. many, though not all, of these imbalances are financial in nature - for example, increases in leverage or declines in liquidity and other margins of safety. these developments typically play a role in supporting or financing expansions. the resulting imbalances do not typically induce a downturn by spontaneously reversing. but they may act to magnify any downward forces that hit the economy, increasing the depth and perhaps duration of downturns. hence, these factors play an important role in both phases of the boom - bust scenario. i associate many of the second class of hard landing scenarios with the work of a former colleague and friend, hyman minsky, who died in 1996. he emphasized the development of financial vulnerabilities in expansions and their contribution to serious recessions. in his view, serious recessions are typically the result of a coincidence of adverse shocks on an already vulnerable economy. minsky emphasized the role of vulnerabilities arising from financial imbalances, including excessive debt burdens or increases in the price of risky assets relative to safe assets. historical perspective on market or sector imbalances figure 2 offers a historical perspective on equity prices, the personal saving rate, the current account, and debt burden. in each case, i identify a preferred measure of each variable, scaling it relative to an appropriate measure of output or income. i want to emphasize that we cannot reach a judgment from 12 / 99 1 / 00 1 / 00 1 / 00 1 / 00 national assoc. of business economists macroeconomic advisers dri robert gordon downtown economists club 4. 5 5. 1 5 - 1 / 4 5. 5 4. 9 5. 6 nairu ( percent ) 3. 3 3. 5 3. 2 3. 5 3. 2 3. 1 potential gdp growth ( percent ) median of 15 forecasts. nairu varies according to kalman - filter estimate from an equation based on the pce deflator ; equation is estimated through 1998, with some judgmental decline in the nairu since then. long - run nairu concept. short - run concept that includes supply shocks is 4 - 1 / 2 percent. nairu varies with demographics. potential gdp growth varies year to year with capital deepening, etc. median of 35 forecasts. nairu estimates were collected in september 1998. nairu varies with demographics. potential gdp growth varies year