A Fed love story: Janet Yellen meets her match
In connecting with George Akerlof, then on a temporary assignment at the Fed's research division in Washington, Yellen discovered not just a soul mate but an intellectual equal with similar views about the societal impact of economic policy.
Together, they formed one of the pre-eminent power couples of modern economics. They collaborated on ambitious research while holding increasingly demanding jobs and raising a son who grew up to share their academic passion.
Yellen, who is currently the No. 2 official at the Fed, is expected to win nomination from President Barack Obama to become its next chairman, replacing retiring Ben Bernanke. If approved by the Senate, her appointment would crack one of the highest U.S. glass ceilings and make her the first woman to head the central bank in its 100-year history.
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But the influence of her husband in shaping her thinking and professional success cannot be overestimated, say those who have known the couple for decades. Yellen and Akerlof declined interview requests.
The support went both ways. Yellen helped Akerlof maintain the focus that distinguished his academic work, highlighted in 2001 when he shared a Nobel Prize in economics. He later wrote in an autobiography for The Nobel Foundation (posted on Nobelprize.org) about happily collaborating with his wife for more than a decade.
"Not only did our personalities mesh perfectly, but we have also always been in all but perfect agreement about macroeconomics. Our lone disagreement is that she is a bit more supportive of free trade than I," he wrote.
Yellen, 67, came to the Fed in 1977 from Harvard University after a recruiting effort that involved Ted Truman, then about to take over the Fed's international finance division. Truman had known Yellen since 1967 when she came to Yale University to pursue her PhD in economics; he was a junior professor and heard her oral exam.
The recruiters faced an uphill battle because Yellen was teaching at Harvard University and her early research made her a sought-after talent. But she took the Fed job to work on projects in trade and financial studies.
The Fed was under pressure in 1977 with rising inflation unsettling the economy. Truman assigned Yellen to research international monetary reform.
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Akerlof, 73, whose early paper, "The Market for Lemons," had made a splash among economists, landed at the central bank for a one-year stint between jobs. Recently divorced, he came from the University of California-Berkeley en route to a post at the London School of Economics.
After connecting with Yellen, "we decided to get married hastily, not only because we had so little doubt about each other, but also for practical reasons … if we were to avoid being separated, Janet would also need to get a job in England too," he wrote.
Truman said Yellen had barely settled into the Fed before announcing she would join Akerlof and lecture at the London School of Economics. "We were disappointed when she left with him, though completely understanding. We had invested a lot in attracting her," he told Reuters in an email.
Yellen, of course, would be back eventually—next as a Fed board 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 two years, they returned to Berkeley, where Yellen was hired to teach in the business school.
Yellen twice won a coveted Berkeley teaching award. And she and Akerlof, sometimes in partnership with others, collaborated on research that benefited from their different styles, colleagues said.
"George was less disciplined, more artistic and perhaps creative; Janet was more grounded, sensible, and a paragon of common sense," said Andrew K. Rose, who was hired by Yellen and now serves as associate dean of Berkeley's Haas School of Business. 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 who has known Yellen since 1973 and also did research with her, said her relationship with Akerlof shows "how mature they are that they can be so deeply in love as people who are so different from each other."
"George is an incredibly creative person," Adams said. "He just has such unusual ideas by the standards of a very buttoned-down discipline where there is conformism, as is economics these days. He is not afraid to be unorthodox and off-beat in the service of real intellectual exploration."
Yellen, he said, "champions what is known as 'slow-thinking'—really thinking through things carefully and their implications."
The couple's first paper together was inspired during a Berkeley visit from Yellen's Yale mentor, Keynesian economist James Tobin. Tobin had advanced a line of thinking that government intervention could avert recession. He urged the couple to study why, and, as Akerlof put it, they discovered "sticky prices and wages would explain why monetary policy would be 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 of out-of-wedlock childbearing.
Yellen returned to the Fed in 1994 with her appointment to the central bank's board, and Akerlof commuted between Washington and Berkeley, continuing to teach. When Yellen moved to the President Bill Clinton's Council of Economic Advisers, Akerlof took leave.
He tended the household and helped raise their son, but his main 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, with mothering and gourmet cooking.
In 1999, the couple returned to Berkeley, their son having followed their paths to Yale. She was named head of the Federal Reserve Bank of San Francisco in 2004 and nominated to be vice chair of the Fed in 2010.
Akerlof won the Nobel prize in October 2001. In media coverage, he posed for photos with Yellen as the family cat sashayed through the room.
Now, as Yellen anticipates yet-another promotion, their friends say she is bound to make the Fed a stronger organization.
"She's the kind of person who makes everyone around her better," Adams said.
The couple certainly is unusual in one way, joked their collaborator Rose. "How many Nobel laureates work in the same discipline as their spouse, but are less famous?"