A Fed love story: Janet Yellen meets her match

Reuters

By Marilyn W. Thompson and Jonathan Spicer

Sept 29 (Reuters) - Janet Yellen found love at the FederalReserve. She met him at a luncheon in 1977, launching awhirlwind romance that led to marriage in less than a year.

In connecting with George Akerlof, then on a temporaryassignment at the Fed's research division in Washington, Yellendiscovered not just a soul mate but an intellectual equal withsimilar views about the societal impact of economic policy.

Together, they formed one of the pre-eminent power couplesof modern economics. They collaborated on ambitious researchwhile holding increasingly demanding jobs and raising a son whogrew up to share their academic passion.

Yellen, who is currently the No. 2 official at the Fed, isexpected to win nomination from President Barack Obama to becomeits next chairman, replacing retiring Ben Bernanke. If approvedby the Senate, her appointment would crack one of the highestU.S. glass ceilings and make her the first woman to head thecentral bank in its 100-year history.

But the influence of her husband in shaping her thinking andprofessional success cannot be overestimated, say those who haveknown the couple for decades. Yellen and Akerlof declinedinterview requests.

The support went both ways. Yellen helped Akerlof maintainthe focus that distinguished his academic work, highlighted in2001 when he shared a Nobel Prize in economics. He later wrotein an autobiography for The Nobel Foundation (posted onNobelprize.org) about happily collaborating with his wife formore than a decade.

"Not only did our personalities mesh perfectly, but we havealso always been in all but perfect agreement aboutmacroeconomics. Our lone disagreement is that she is a bit moresupportive of free trade than I," he wrote.

Yellen, 67, came to the Fed in 1977 from Harvard Universityafter a recruiting effort that involved Ted Truman, then aboutto take over the Fed's international finance division. Trumanhad known Yellen since 1967 when she came to Yale University topursue her PhD in economics; he was a junior professor and heardher oral exam.

The recruiters faced an uphill battle because Yellen wasteaching at Harvard University and her early research made her asought-after talent. But she took the Fed job to work onprojects in trade and financial studies.

The Fed was under pressure in 1977 with rising inflationunsettling the economy. Truman assigned Yellen to researchinternational monetary reform.

Akerlof, 73, whose early paper, "The Market for Lemons," hadmade a splash among economists, landed at the central bank for aone-year stint between jobs. Recently divorced, he came from theUniversity of California-Berkeley en route to a post at theLondon School of Economics.

After connecting with Yellen, "we decided to get marriedhastily, not only because we had so little doubt about eachother, but also for practical reasons  if we were to avoidbeing separated, Janet would also need to get a job in Englandtoo," he wrote.

Truman said Yellen had barely settled into the Fed beforeannouncing she would join Akerlof and lecture at the LondonSchool of Economics. "We were disappointed when she left withhim, though completely understanding. We had invested a lot inattracting her," he told Reuters in an email.

Yellen, of course, would be back eventually - next as a Fedboard member and one of Truman's seven bosses.

In London, Yellen and Akerlof both had identity problems."We were Americans, not English," he later wrote. After twoyears, they returned to Berkeley, where Yellen was hired toteach in the business school.

Yellen twice won a coveted Berkeley teaching award. And sheand Akerlof, sometimes in partnership with others, collaboratedon research that benefited from their different styles,colleagues said.

"George was less disciplined, more artistic and perhapscreative; Janet was more grounded, sensible, and a paragon ofcommon sense," said Andrew K. Rose, who was hired by Yellen andnow serves as associate dean of Berkeley's Haas School ofBusiness. Rose collaborated with the couple on several papers,including a year of research on the East German economy.

Jim Adams, a University of Michigan economics professor whohas known Yellen since 1973 and also did research with her, saidher relationship with Akerlof shows "how mature they are thatthey can be so deeply in love as people who are so differentfrom each other."

"George is an incredibly creative person," Adams said. "Hejust has such unusual ideas by the standards of a verybuttoned-down discipline where there is conformism, as iseconomics these days. He is not afraid to be unorthodox andoff-beat in the service of real intellectual exploration."

Yellen, he said, "champions what is known as 'slow-thinking'- really thinking through things carefully and theirimplications."

The couple's first paper together was inspired during aBerkeley visit from Yellen's Yale mentor, Keynesian economistJames Tobin. Tobin had advanced a line of thinking thatgovernment intervention could avert recession. He urged thecouple to study why, and, as Akerlof put it, they discovered"sticky prices and wages would explain why monetary policy wouldbe effective: if the money supply increased, real balances,which determine real demand, would rise."

Their later research focused on poverty and policy,including on unemployment and a paper on the costs ofout-of-wedlock childbearing.

Yellen returned to the Fed in 1994 with her appointment tothe central bank's board, and Akerlof commuted betweenWashington and Berkeley, continuing to teach. When Yellen movedto the President Bill Clinton's Council of Economic Advisers,Akerlof took leave.

He tended the household and helped raise their son, but hismain support for Yellen while she was at the White House was"providing psychological support in the daily political storms," he wrote. Yellen maintained balance, friends say, withmothering and gourmet cooking.

In 1999, the couple returned to Berkeley, their son havingfollowed their paths to Yale. She was named head of the FederalReserve Bank of San Francisco in 2004 and nominated to be vicechair of the Fed in 2010.

Akerlof won the Nobel prize in October 2001. In mediacoverage, he posed for photos with Yellen as the family catsashayed through the room.

Now, as Yellen anticipates yet-another promotion, theirfriends say she is bound to make the Fed a strongerorganization.

"She's the kind of person who makes everyone around herbetter," Adams said.

The couple certainly is unusual in one way, joked theircollaborator Rose. "How many Nobel laureates work in the samediscipline as their spouse, but are less famous?"

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