A Few More Words about Janet Yellen

Janet Yellen stepped down last week after twenty-one years of government service, first as a staff economist for the Board of Governors (1977-78) of the Federal Reserve, then as a governor herself (1994-97), Chair of the President’s Council of Economic Advisers (1997-99), President of the Federal Reserve Bank of San Franciso (2004-10), and, since 2010, Vice Chair and Chair of the Board of Governors. She will become a fellow of the Brookings Institution. I don’t think enough has been said about the magnitude of her achievement.

I don’t mean her leadership of monetary policy these last four years, though that seems to have been a remarkable success – a case of “keeping the punch bowl out at least until the last guests had arrived” — and leading the way to a coordinated and sustained global expansion. I am thinking about her career as a woman facing long odds in the era when females finally entered the professions in large numbers.

Yellen attended Brown University as an undergraduate, at a time when it still said “Pembroke College,” its female adjunct, on her degree.  She was the only woman in her entering class at Yale to graduate, in 1971, with a Ph.D. She taught as assistant professor at Harvard 1971-75, where she acquired a reputation for clarity, but when Harvard turned her loose, as it does almost all its assistant professors, she signed on as an economist at the Fed Board of Governors in Washington for a year, followed by two more years as a lecturer at the London School of Economics.  It was a time of trial for macroeconomists trained in the Keynesian tradition; Chicago and Minnesota economists were transforming the field with a series of new tools and seemed to dominate it. Only in 1980 did Yellen settle down to a tenure-track job, at the Haas School of Business at the University of California at Berkeley, down the hill from where her husband, George Akerlof, taught in the economics department.

As it happens, Akerlof, whom she had met in a Fed cafeteria during the year both worked at the Board, had similarly fought headwinds, though of a different sort.  His first paper, “The Market for ‘Lemons,’” about the role of information in the market for used cars, had been rejected three times, before finally being accepted. And when Berkeley declined to promote him to full professor, because he had published too little, he quit – or thought he had – which led to his year at the Fed in Washington, and two more years as a professor at the LSE. But it turned out that Berkeley hadn’t accepted his resignation after all. After the business school offered Yellen a job, the two returned to the Berkeley campus. Twenty-one years later, Akerlof shared a Nobel Prize with two other apostles of the economics of asymmetric information, Michael Spence and Joseph Stiglitz.

To succeed Ben Bernanke at the Fed, Yellen withstood a determined bid for the job by Harvard University economist Lawrence Summers, in the summer of 2013. She edged out Stanley Fisher, too, and then invited the former governor of the Bank of Israel to be her vice chair. She wasn’t reappointed to a second term, though she had hoped she would be – the first successful leader of the banking system to be denied the opportunity to continue to serve, another mark against President Trump. There’s time enough to judge Yellen’s contributions as a central banker. Alan Greenspan left a hero, too.  But the day after she left, a bond sell-off surged and the Dow dropped two-and-a-half percent on renewed inflation fears.  Tomorrow Jerome Powell will take his place at the center of the table, and a new era will begin.

There is a special place in history books for those who struggle against long odds, win out, and, in doing so, change others’ expectations of the world. If America needs a national grandmother, let it be Yellen.  True grit!

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