Janet Yellen: For the people

Two recent biographies offer insights into the life and work of the US Treasury Secretary. One is a tad more absorbing than the other

Yellen: The Trailblazing Economist Who Navigated an Era of Upheaval

Author: Jon Hilsenrath

Publisher: Harper Business

Pages: 375

Price: $32

Empathy Economics: Janet Yellen’s Remarkable Rise to Power and Her Drive to Spread Prosperity to All 

Author: Owen Ullmann

Publisher: PublicAffairs

Pages: 460

Price: $32

A few weeks ago a friend lent me two biographies of Janet Yellen, the US Treasury Secretary, because neither book is available in India yet. It’s been quite an interesting experience reading two biographies of the same person in quick succession.

Both the authors are journalists. One is Jon Hilsenrath who works for The Wall Street Journal. The other is Owen Ullmann, who has worked for several publications. Both have the nicest things to say about Dr Yellen.

Dr Yellen is the first female economist to have made it to the very top of a male-dominated profession in America. She has held, very successfully, all the major academic and policy posts there were. She is also married to George Akerlof, the Nobel winning American economist of the Theory of Lemons fame.

Janet Louise Yellen was born in 1946. Her PhD is from Brown University. She has taught both at Harvard and the London School of Economics. She has also worked at the US Fed first as a junior economist then more recently as its chairperson. She has held several other policy posts in the US government.

She doesn’t talk much and certainly never out of turn. But, as Mr Hilsenrath shows, she can be very forthright when needed. In 2009 when she was the CEO and president of the San Francisco Fed — yes, they have state Feds there — she was given some unemployment data. She didn’t like what she saw and banged her fist on the desk saying, “These are f*****g people”.

She was appointed to the US Fed as vice chairperson in 2010 and was at the forefront of the American effort to accelerate the tepid economy. It’s not very clear from the book what she thought about how she fared. Nevertheless, she was appointed chairperson in 2014.

The appointment came after, but may not have been caused by her concerns over rising inequality. She said as much in a speech at the Boston Fed. The Republican Party did, however, say she was pushing a Democratic Party line.

Donald Trump became US president in January 2017. Dr Yellen called the Treasury Secretary to say the markets would turn turbulent the next day. In fact, the opposite happened.

She maintained an absolutely professional stance. But there was no love lost over policies. She didn’t get a second term, although it seems she would have liked to have been reappointed. But she had succeeded in keeping the Fed independent to a degree that could not have been easy with a president like Mr Trump.

On balance, the Hilsenrath book isn’t quite as absorbing as it could have been. Also, there’s a bit more than necessary about Yellen’s husband, Dr Akerlof.

But as Mr Ullmann shows, Dr Akerlof is a useful person to quote. He credits

Dr Yellen with having made a fundamental discovery, at least about America. This is that there is a premium that employers place on loyalty and that they are willing to pay a little over the equilibrium wage for it.

But that’s not the only thing. Dr Yellen, says Dr Akerlof, said the opposite is also true in that employees also value loyalty from the employers and that this leads to what she terms “efficiency wages” wherein employees improve their efficiency because the employer is loyal to them. It’s the “you scratch my back and I will scratch yours” principle applied to labour economics.

Mr Ullmann’s book has more details gleaned from talking to people. It’s the style that was pioneered by Bob Woodward and Carl Bernstein in All the President’s Men in 1976.

However, neither book devotes much time to the difficulties women face in the economics profession.

Dr Yellen seems to have found the Harvard atmosphere quite horrible, as indeed have many women.

Overall too, Dr Yellen had been a strong advocate of increasing women’s participation in the labour force. She believed that women suffered from “outright discrimination… and an absence of mentors”. But she did have a top-class mentor, James Tobin, who went on to win a Nobel much later.  Tobin was Keynesian and Dr Yellen, too, was deeply influenced by Keynesian economics.

Both books are quite weak on their subject’s academic work but perhaps this wasn’t the place for that. There was one paper, however, which she jointly wrote that says a monopoly, unlike the received wisdom, can actually increase output and reduce prices.

The Indian Railways is a perfect example of that.