A former economics professor at the University of California at Berkeley, Yellen is a brilliant researcher, adept at formulating complicated models and synthesizing large quantities of data. She communicates clearly and effectively, a skill necessary for calming markets. And on a more humanistic level, she thinks rigorously about the values a society should pursue, its practical interest in pursuing those values, and what economic tools are most effective for achieving them.
In other words, she is exactly who we want leading the United States through this immediate economic crisis and strategizing ways to address the country’s more chronic challenges.
Yellen has long been committed to using the tools of her discipline to understand and critique fundamental questions about equity. For example, some of her better-known research (co-authored with her husband, Nobel laureate George Akerlof) relates to fair wages. The paper hinges on the premise that paying workers fairly — “what they deserve” — leads to greater effort and, therefore, higher productivity. While helming the Fed, she likewise spoke at length of her concerns about rising inequality, asking “whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity.”
This was, to put it mildly, an unusual preoccupation for the chair of the central bank, whose statutory mandate is maximum employment and stable prices. Even on that more fundamental issue, Yellen helped shift the conventional wisdom about how much lower unemployment could fall without stoking greater inflation. To those who aren’t regular Fed watchers, that may sound like an abstract or subtle achievement. But it was a sea change in the world of monetary policy. In practical terms, it meant helping the most marginalized Americans find work, and greater economic security.
Yellen is no ideologue — she is a technocrat, whose views are informed by mainstream research and data. Even so, her focus since leaving the Fed has remained grounded in what values the country should pursue, why and how.
Once the only woman in her PhD class at Yale, Yellen has advocated for greater gender and racial diversity within her discipline. A lack of inclusivity, she has argued, is not merely unfair; it also “wastes talent” and results in lower-quality research and outcomes. “Within the federal government, diversity is especially important because diverse perspectives, inspiring the best ideas and decisions, translate into better service to the public,” she said last year.
Yellen is also one of the founding members of the Climate Leadership Council. The bipartisan group advocates harnessing market signals — specifically, through a carbon tax and dividend — to combat climate change. (Biden has not, to date, explicitly endorsed the proposal.) She has argued for more covid-19 fiscal aid, both to help the macroeconomy recover and to provide urgent humanitarian relief.
If confirmed by the Senate, Yellen would make history as the first woman to serve as treasury secretary since the post was created in 1789. She would also be the first person of either gender to serve in the top jobs at the Fed, Treasury and Council of Economic Advisers — what some have described as the “EGOT” of economic posts. She would no doubt be an enormous upgrade, in both experience and expertise, from the secretary she would succeed: the Trump-toadying former producer of “The Lego Batman Movie,” Steven Mnuchin, who appears to be salting the earth on his way out the door.
Like other policymakers expected to inherit these dual crises, Yellen would still face enormous challenges, of course.
Between the surging pandemic and dwindling federal aid, the fragile economic recovery appears to be stalling out. In the more political job of treasury secretary, Yellen would be tasked with not just stabilizing financial markets, imposing sanctions and making various other technical decisions but also lobbying Congress for more help. From her time at the Fed, Yellen is reputed to have good relationships with lawmakers of both parties. Republicans may rebuff her anyway, having suddenly rediscovered their fiscal hawkishness three years after adding an unfunded $2 trillion tax cut to deficits.
Perhaps Yellen can break through with not just her intellect but also her reputation for collegiality and an even keel. It will be good to see character, too, back at Pennsylvania Avenue.