Monday, February 3, 2014

Good Luck, New Ms. Fed Chair

And, yes, Janet Yellen, congratulations, but you certainly need some good luck, particularly given that the day that your worst enemy on the Board of Governors, Daniel Tarullo, swore you in this morning as new Fed Chair, the US stock market crashed worse than it has in a very long time.  In any case, I think you did well getting there, with your excellent hubbie, George Akerlof, present along with many others, and you maintaining an appropriate silence while smiling to the applause.  Yes, you will be up in a week for the House Financial Services Committee to defend the current compromise gradual taper, although today it seems interest rates are down, even though the first reports of the taper last May triggered long run interest rate increases. Heck, today we had one nation (Japan) whose market is falling because its currency is rising (eeeek,reduced future exports!) while two others have ones that are falling (Turkey, Argentina) because, well, you know, falling confidence (eeeeek, even though future exports are likely to rise!).  Such fun and games will be your regular fare.

There was a long and thoughtful front page story in the Washington Post today about Janet Yellen and her rise to her current position, by Ylan Q. Mui, who last summer was with only minimal filtering passing on various sexist rumors from insiders at the White House as part of its campaign to push Larry Summers.  But Mui presumably has figured it out now that Yellen is in, and Larry's old friend, the Olivia Pope of Fed media management, Michelle Smith, is now managing publicity for the new boss, Janet. All that cynical stuff said, the article is well done and provides interesting background that the very discrete and careful Yellen had kept under wraps until now, and she was not quoted in the article or openly cooperated with it, although some of the material in it is not necessarily flattering. Anyway, a major sub-theme is how she suffered from sexism over a long period of time.

I confess to knowing both of them, but while I knew some of this, I did not know the full extent of it.  George and Janet are now the star couple of economics, with her reputedly the most powerful woman in the world, or mighty close, and he, well, a highly respected Nobel Prize winner.  Hard to top that. But they had their rough times.  The article brings out that he was turned down for his first effort to be promoted to Full Professor at Berkeley, despite having already published his slam dunk for a Nobel paper on the market for lemons previously, leading to a bout of depression and the end of his first marriage.  After being the only woman in her class at Yale, and one of only two women at Harvard, getting turned down for tenure there, with Harvard econ dept not tenuring a woman for another decade (and ironically her having then undergrad Larry Summers in one of her classes), they both were hanging out at the Fed around 1977, recovering from their respective traumas when they found love in the Fed cafeteria, now clearly the hottest power passion pit in Washington.

After a stint at LSE, where George got the job with Janet a "trailing spouse," they went to Berkeley where he got his promotion, but she was relegated to the Haas Business School, where she was only the second woman hired, and some there resented having her on board.  In those ancient days, there was no maternity leave, and when their son Robert was born in the early 80s, Janet got no leave and taught a full load of courses after his birth.

The turn in her career came with her appointment to the Fed Board of Governors by Clinton at the behest of Janet's colleague at Berkeley, Laura Tyson.  After that, she was on an upward trajectory, always fully supported by husband George, with the article making it clear that their marriage has been a great success, with them "in all but perfect agreement about macroeconomics" (according to George).  Taking that more seriously, while Yellen is usually described as a "Keynesian," her husband's Presidential address some years ago at the AEA was on "Behavioral Macroeconomics," and if one looks at their famous papers on labor market dynamics, while some involve mathematical technicalities, most are driven by behavioral economics concerns such as workers looking at each others' pay.  Indeed, the whole 2% inflation target itself comes from a paper by Akerlof with Dickens and Perry at Brookings in the mid 90s based on microeconomic relative wage adjustment arguments in the face of behaviorally founded downward stickiness of nominal wages, which Yellen sold to Greenspan shortly thereafter, from where it spread all over the planet.

I can note a silly personal observation on the change in their relative status at Berkeley after her 90s stint in Washington.  Even though he had the Nobel, he had arguably become the "trailing spouse," and the article notes that he has been very willing to follow her as she has moved about on her upward trajectory.  I happened to wander the hallways in the econ dept at Evans Hall at Berkeley during the brief interlude a bit over a decade ago when they had returned to Berkeley, but she had not yet been appointed as SF Fed President.  Neither of them were there when I did this, but I did observe office locations.  She had a corner office, and the word was she was about to be appointed Dean at the Haas School, where previously some had complained about her being hired at all.  George just had a regular sized office in the middle of the hall.  But then, in those days Berkeley had several other Nobel Prize winners, a dime a dozen there, while future Fed Chairs, well...  :-).

I shall close this by quoting from the piece by Mui, which reflects Janet's careful and discrete approach to dealing with the gender issue as she has risen, even as she is reported to having come to realize last summer that she had become a "role model" for women.

"Yellen's silence is a reminder that the workplace can still be treacherous terrain for many women.  She never spoke out, when President Obama mistakenly referred to her as 'Mr. Yellen,' nor when a few snarked that she wore the same outfit to her confirmation hearing and nomination ceremony.  Instead, Yellen - who declined to comment for this article - deployed the same strategy she has used for the past 40 years: letting her work speak for itself."

Barkley Rosser

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