The withdrawal of Lawrence H. Summers from candidacy for Fed Chair has triggered a surge in world stock markets, as well as rejoicing among feminist groups, the labor movement, the left wing of the Democratic Party in Congress, particularly among those on the Senate Banking Committee, and the vast majority of the economics profession pretty widely across the ideological and methodological spectrum. Even many Austrian economists who would prefer that the Fed be shut down have admitted when pushed that they prefer Yellen over Summers. All that is needed now is for President Obama to appoint Janet L. Yellen to the post, the main rival of Summers. He may be about to, but why might he be holding back?
According to Ezra Klein, there is "pique" in the White House that so many would not go along with the desire the president to support his openly preferred choice, Summers. The other reason he gives is particularly weird, that she seems "like a kindly grandmother," see "Five reasons Obama should name Janet Yellen to chair the Federal Reserve". Klein's five reasons are obvious sorts such as that she is the most qualified candidate and this would break the glass ceiling. But this last odd remark about "kindly grandmother" must be coming from the WH and looks like the last gasp of sexism there. First she lacked "gravitas" and then we did not want a "female-backed currency" (OK, that was the ed page of the WSJ), but now we get this weird slam on kindly grandmothers? Frankly, some of the more formidable individuals I have encountered in my life have been kindly, but firm, grandmothers.
So, as a matter of fact, Janet Yellen is not (yet) a grandmother, although she does have white hair and at 67 (I think) old enough to be one. And she is kindly and nice. Her (and George Akerlof's) son, economist Robbie Akerlof (now at Warwick, last I heard) has so far failed to followed through on his reproductive responsibilities to sire an offspring, thereby making his kind but firm mother an actually existing grandmother. In the meantime, maybe this is what the world needs, a kindly but firm (and she is firm) grandmother. Let for now the world economy be her grandchild.
I shall not diss the remaining possible candidates, both the official one, Donald Kohn, an experienced Fed hand who preceded Janet as Fed Vice Chair, and the others often mention such as the macroeconomically smart Christina Romer, the globally experienced Stanley Fisher, or yet another former Vice Chair, Alan Blinder, all of whom I would have taken over Summers. But, very simply, when one puts together experience, knowledge, ability to forecast the economy, and that kindly but firm personality, Janet Yellen is simply superior to all these candidates, even if one or the other might have an edge on her on this or that particular desirable characteristic. She beats all of them for the total package, which is also the message from Ezra Klein.
So, Mr. President, what the world economy needs now is this particular firm but kindly grandmother look-alike, Janet Yellen, please!
Barkley Rosser
5 comments:
Can't we have Christine Roemer instead of Yellen?
Tim Duy covers Don Kohn:
http://economistsview.typepad.com/timduy/2013/09/froth-alert.html
"Former Federal Reserve Vice-Chair Donald Kohn - suspected of being a contender for the top job at his old employer - warned about too loose monetary policy today."
That alone should take him off any short list.
Mitchell,
I think that Yellen has two things over Romer: lots of experience at the Fed whereas Romer has zero, and a better track record for forecasting economic conditions. The WSJ did a study of the top 14 Fed decisionmakers, and Yellen came out #1.
Romer is clearly a distinguished macroeconomist, and she was CEA Chair early in the Obama administration, tangling with Summers on policy issues. She is certainly a possible candidate, but Yellen was CEA Chair under Clinton at the end of his administration. Aside from the fact that Yellen is already a candidate and Romer is not, I really see no clear reason why Romer would be a clearly superior candidate to Yellen.
I might mention that I left Tim Geithner off the list of alternatives, although some gossip has it that he may be Obama's real preferred fallback, just as he was for Treasury Secretary when it became clear that Summers would have a hard time getting through the Senate for that one. Geithner does have experience at the Fed as President of the NY Fed during the Minsky Moment five years ago, and he clearly has other high level experience, such as having served as Treasury Secretary. However, he has supposedly expressed a lack of interest in the position, and he is not an economist and I think weak when it gets to the matter of dealing with macro models and forecasts. There might be worse candidates out there than Geithner, but I see nothing that he has that makes him better than Yellen.
I think Romer would be better but I doubt she would get the votes and Republicans might block her somehow. She'd have a better chance of being much better. Yellen might be good we don't know. She'd be better than Kohn no doubt.
It's like it would have been better for Obama to have included the public option in Obamacare but he didn't have the votes.
The latest coming from the NY Times is that now the gang at the WH are saying that Yellen's problem is that she has too much experience at the Fed, even though her most immediate current rival, Don Kohn, is the only candidate around with more than she has. They want an outsider to "shake things up," although it is far from obvious that this is what the Fed needs. Do we need somebody who does not know where the bathrooms and the buried bodies are, much less someone who will get beaten up by all the insiders for six months?
Oh, and the story also outed Yellen's worst enemies in the process, Fed Governor Tartullos, who recently arrived and is close to the WH gang, along with Gene Sperling, who I have long argued was the main orchestrater of the anti-Yellen whisper campaign, having been her rival for influence back in the Clinton administration when he was NEC Chair then as now, and she was CEA Chair, just like Romer was for awhile, with Summers pushing her aside. The only good news here is that reportedly Sperling is leaving, the sooner is better as far as I am concerned. The guy is not even an economist.
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