Econometrica, Vol. 71, No. 1 (January, 2003)
THE ECONOMETRIC SOCIETY ANNUAL REPORTS REPORT OF THE TREASURER
Venice, Italy August 24, 2002
Many if not most nonproﬁt institutions have experienced a decline in their net worth over the past two years as a result of the decline in U.S. and foreign stock mar- kets. For instance, the American Economic Association (AEA) experienced a 25 percent decline in its net unrestricted assets from year-end 2000 to year-end 2001, and presum- ably another substantial decline has occurred thus far in 2002. The unrestricted net worth of the Econometric Society (ES) has also declined over the past two years (between end- 1999 and end-2001) but for an entirely different reason. Despite the decline in the stock market, the return on the ES unrestricted investment portfolio has actually been positive between August 1, 2000 and August 1, 2002, thanks to a well-timed exit from domestic
U.S. equities in February and May, 2000. Instead, the decline in the net worth of the ES has been the result of a deliberate policy to spend the fruits of the stock market gains of the 1990’s in ways that beneﬁt our members, as detailed below.
Unlike many organizations, the ES does not allow its ﬁnancial outcome to ﬂoat around like a bobbing cork in a stormy sea. Instead, the ES makes its ﬁnancial decisions based on the criterion of maintaining its ratio of net worth (NW ) to adjusted total revenue (ATR), that is, NW/ATR, equal to 50 percent. As capital gains on the U.S. stock market pushed up the NW/ATR ratio in the late 1990’s far above that 50 percent goal, the Society made reg- ular, prudent decisions to shift these gains from its NW to the welfare of its constituents, primarily by providing substantial travel grants to participants in its World Congresses, by suspending increases in membership dues over the past decade, by providing for an extra co-editor of Econometrica, by instituting a 50 percent increase in the number of pages printed in Econometrica in the year 2002 compared to the year 2000, and by making sub- stantial investments in its web site, including creating an electronic Members’ Directory and online access to Econometrica for all ES members.