Janet Yellen, who Joe Biden ran for Secretary of the Treasury, is an economist with a clear Keynesian imprint, cultivated on this teaching by her Yale Ph.D. supervisor, Nobel Prize winner James Tobin. Yellen's career, the first woman to head the US Treasury, was marked by academic excellence, with professorships at Harvard and Berkeley, and institutional, as president of the Council of Economic Advisors of the Clinton administration and then president of the San Francisco Federal Reserve . Further recognition of her value took place in 2014 with the appointment, wanted by Obama and supported by a letter signed by 500 economists from all over the world, as President of the Federal Reserve, also in this case becoming the first woman in the history of the American central bank to take up this task.
Yellen's Keynesian inspiration is clearly visible in her commitment at the head of the Fed, to fight not only inflation, but also unemployment, given that – unlike other central banks – the Fed also has this objective as a mandate. Together with her husband, Nobel laureate in economics George Akerlof, Yellen has become a point of reference for a Keynes-inspired approach to economic policy. In his speech-lecture on the occasion of the awarding of the Nobel prize in 2001, Akerlof thanked his wife for "the extraordinarily useful discussions and help", testifying to the fruitful relationship that unites them.
The Keynesian approach places the commitment to find solutions to guarantee "a high and stable level of employment" at the center of each government's analysis and policies, as stated in the first official document of the British government of Keynesian faith in 1944. The Yellen, in addition to having an impeccable curriculum that testifies to this profound conviction, has also made significant contributions in terms of economic theory. In September of 2015 I got to hear it at the University of Massachusetts in Amherst, for the Philip Gamble Memorial Lecture, entitled "Inflationary dynamics and monetary policy".
In that lecture Yellen rightly argued with the concept – dear to much orthodox economic theory – of the existence of a "natural rate of unemployment", because it is "unobservable, changes over time and can only be estimated imprecisely". The natural rate of unemployment it would be the rate that keeps inflation stable; according to Yellen, however, monetary policy must look beyond short-term changes in the price level, to allow attention not to be diverted from ensuring that the economy does not deviate from the path that leads to full employment. Doing so does not necessarily undermine price stability, although of course within certain limits.
In an article in the New York Times dated August 24th Yellen has called for an expansionary policy, arguing that while the Fed has done its part by cutting rates, more fiscal stimulus is needed to get the US economy back on track. “When unemployment is exceptionally high, and inflation is at historically low levels, as both are now, the economy needs more fiscal spending to stimulate hiring. Monetary power sets the table and Congressional fiscal policy dollars bring the dinner.
It is therefore easy to understand why Biden chose her for the Treasury, not only for the excellence of her curriculum, but also for its stance on fiscal policy, made even more necessary in this crisis by Covid 19. Even if the European Union has begun to abandon – hopefully forever – the logic of austerity policies, having on the other side of the Atlantic a staunch supporter of Keynesian policies it is a promise of cultural change and a less dramatic future than it would otherwise be.
It should also be added that Yellen is also known and respected for her personal skills, of great tolerance and attention towards the weak and less powerful. I would like to conclude with a personal recollection. At the end of the conference in Amherst, there was a luncheon with members of the Department (including Visiting Professors like myself) and, with such a large number of guests, it would have been impossible for either of us to speak to her or even listen closely. So there was the idea – I don't remember proposed by whom but welcomed enthusiastically by her – that the diners would change places at each course, so that everyone could be near her at the same table. I think it was my turn for dessert, followed by the inevitable photo, with someone present; not with everyone though, so I'm very glad I had the pleasure of being among them.
