Janet Yellen: On making economics work for everyone

Fearless Portraits

“Economics should be about caring for real people.”

Janet Yellen

First female Secretary of the Treasury

First female Chair of the Federal Reserve

Chair of the Council of Economic Advisors

First person to hold all three roles

The Artwork:

Yellen’s portrait in the Fearless Portraits project consists of an Ink and colored pencil drawing on a map of San Francisco. She’s wearing a purple blazer with her trademarked popped collar. The Federal Reserve Bank of San Francisco she presided over from 2004 – 2010 is on the right side of the map, just over her shoulder.

The Story:

Janet Yellen’s philosophy on how economics should be about caring for real people had its roots in her childhood. Growing up in a working-class Brooklyn neighborhood, she watched a stream of factory workers and dock hands visit her father’s medical practice, paying $2 cash to be seen, or not paying if they couldn’t. “I came to understand the effect that unemployment could have on people in human terms,” she says.

This philosophy was solidified in college during a macroeconomics lecture: “I remember sitting in class and learning about how there were policy decisions that could have been taken during the Great Depression to alleviate all that human suffering—that was a real ‘aha’ moment for me. I realized that public policy can, and should, address these problems.”

Fast forward 50 years and Yellen—in her role as president of the San Francisco Federal Reserve Bank—would be among the first to raise concerns about the impending subprime mortgage bubble. Later, as vice chair of the Fed and then chair of the Fed, she oversaw a controversial plan to buy trillions of dollars in assets to prevent the economy from further collapse. Called quantitative easing, the plan may well have been the difference between keeping a job or losing it for millions of workers in the US economy.

Yellen’s human-centric economics mindset was a marked shift in thinking for the Federal Reserve and later to the Department of the Treasury. As she put it, the job of central bankers as she sees it, “isn’t just about fighting inflation or monitoring the financial system. It’s about trying to help ordinary households get back on their feet and about creating a labor market where people can feel secure and work and get ahead.”

In her long and distinguished career, Yellen served as one of President Clinton’s top aides, chairing the Council of Economic Advisors. Then, she led the Federal Reserve Bank of San Francisco and became the first female Chair of the Federal Reserve system in 2014. Five days into Joe Biden’s presidency, Yellen was confirmed by the Senate as the first female Secretary of the Treasury. She is the first person in history to hold all three of the US’s top economic positions.

Background on Yellen:

Yellen’s household is a true economics powerhouse. She’s married to Nobel laureate and UC Berkeley professor George Akerlof and their son, Robert, is also an economics professor.

Aside from collaborating on raising their son together, (Yellen notes that if all hours on parenting and housework were added up, Akerlof did “more than 50%”) the economics super couple also co-wrote a famous paper together. Drawing on their experience hiring a babysitter for their son, the paper illuminates why lower wages don’t always lead to higher employment.

“Firms are not always willing to cut wages, even if there are people lined up outside the gates to work. So, why don’t they?” asks Yellen. Their conclusion was that some companies choose to pay higher wages to attract better talent and motivate their employees to do good work.

As Yellen notes, “When you hire a nanny, the question you ask yourself is, ‘what’s best for my precious child?’ And do you really want someone who feels that your motive in life is to minimize the amount you spend on your child?”

Music:

This episode contains music by Geovane Bruno and Praz Khanal.

Sources:

• Akerlof, G. A., & Yellen, J. L. (1988). Fairness and Unemployment. The American Economic Review, 78(2), 44–49. http://www.jstor.org/stable/1818095
• Akerlof, G. A., & Yellen, J. L. (1990). The Fair Wage-Effort Hypothesis and Unemployment. The Quarterly Journal of Economics, 105(2), 255. https://doi.org/10.2307/2937787
• Amadeo, K. (2021, March 4). Who Was the Only Female Federal Reserve Chair? The Balance. https://www.thebalance.com/janet-yellen-3305503
• Appelbaum, B., & Couturier, K. (n.d.). Yellen’s Path to the Pinnacle. Timeline - NYTimes.Com. https://archive.nytimes.com/www.nytimes.com/interactive/business/yellen-timeline.html#/#time276_7992
• Bell, S. (2018, January 24). The Tragedy of Janet Yellen. POLITICO Magazine. https://www.politico.com/magazine/story/2018/01/24/janet-yellen-fed-chair-donald-trump-216509/
• Chozick, A. (2017, December 11). Janet Yellen Didn’t Set Out to Be a Feminist Hero. The New York Times. https://www.nytimes.com/2017/12/09/business/janet-yellen-didnt-set-out-to-be-a-feminist-hero.html
• Counts, L. (2021, January 12). Prof. Janet Yellen, trailblazing former Fed chair, is Biden’s Treasury pick. Haas News | Berkeley Haas. https://newsroom.haas.berkeley.edu/research/janet-yellen-former-fed-chair-bidens-expected-treasury-pick/
• Foroohar, R. (2014, January 20). Janet Yellen: The Sixteen Trillion Dollar Woman. TIME.Com. http://content.time.com/time/subscriber/article/0,33009,2162267,00.html
• Gibbs, N. (2014, January 9). The Most Unprecedented Thing About Janet Yellen. Time. https://time.com/275/nancy-gibbs-janet-yellen/
• Graveline, D. (2017, September 22). Famous Speech Friday: Janet Yellen on holding women back. Denise Graveline. https://denisegraveline.org/2017/09/famous-speech-friday-janet-yellen-on.html
• Lane, S. (2020, November 30). Biden names Janet Yellen as his Treasury nominee. The Hill. https://thehill.com/policy/finance/526996-biden-picks-janet-yellen-for-treasury-secretary?rl=1
• Mejia, Z. (2018, December 12). Janet Yellen survived the “horrifying” financial crisis thanks to this one simple habit. CNBC. https://www.cnbc.com/2018/12/12/how-did-janet-yellen-survive-the-horrifying-financial-crisis-sleep-.html
• The Economic Times. (2013, October 12). Janet Yellen moves out of her Nobel-laureate husband George Akerlof’s shadow. https://economictimes.indiatimes.com/opinion/et-editorial/janet-yellen-moves-out-of-her-nobel-laureate-husband-george-akerlofs-shadow/articleshow/23993099.cms?from=mdr
• Wolverson, R. (2021, January 27). Janet Yellen’s past mistakes will haunt her as treasury secretary. Quartz. https://qz.com/1962724/janet-yellens-greatest-mistakes-will-haunt-her-toughest-job-yet/