I have been trying to avoid the many breathless news stories about whether President Obama will appoint Larry Summers or Janet Yellen as the next head of the Federal Reserve, because (a) the more people shout at him, the less attention the President is liable to pay; and (b) Larry Summers is the man for whom the phrase “I wouldn’t spit on him if he were on fire” was invented. But Joseph Stiglitz’s latest NYTimes column makes it clear that one cannot truly loath and despise Larry Summers until one has met the man in person. On the other hand, Ms. Yellen sounds like a lovely economist:
The controversy over the choice of the next head of the Federal Reserve has become unusually heated. The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers. Since I have worked closely with both of these individuals for more than three decades, both inside and outside of government, I have perhaps a distinct perspective…
Whoever succeeds Ben S. Bernanke as the Fed’s leader will have to make repeated judgment calls about when to raise or lower interest rates, the levers of monetary policy.
Two elements enter into these judgments. The first is forecasting. Wrong forecasts lead to wrong policies. Without a good sense of direction of where the economy is going, one can’t take appropriate policies. Ms. Yellen has a superb record in forecasting where the economy is going — the best, according to The Wall Street Journal, of anyone at the Fed. As I noted earlier, Mr. Summers’s leaves something to be desired.
Ms. Yellen’s superlative performance should not come as a surprise. Janet Yellen, whom I taught at Yale, was one of the best students I have had, in 47 seven years of teaching at Columbia, Princeton, Stanford, Yale, M.I.T. and Oxford. She is an economist of great intellect, with a strong ability to forge consensus, and she has proved her mettle as chairwoman of the President’s Council of Economic Advisers (she succeeded me in that role), as president of the Federal Reserve Bank of San Francisco, from 2004 to 2010, and in her current role, as the Fed’s No. 2.
Ms. Yellen brings to bear an understanding not just of financial markets and monetary policy, but also of labor markets — which is essential at a time when unemployment and wage stagnation are primary concerns…
Though the willingness to take actions to prevent crises, and good judgments in a crisis, are undoubtedly critical in the choice of the next Fed chair, there are other important considerations. The Fed is a large organization that has to be managed — and Ms. Yellen demonstrated her management skills at the San Francisco Fed. One has to obtain consensus among a diverse group of strong-minded individuals, some more worried about inflation, some more worried about unemployment. One needs someone who knows how to build consensus, not someone who excels in bullying, who knows how to listen to and respect the views of others. When I was chairman of Economic Policy Committee of the Organization for Economic Cooperation and Development, I saw how effectively Ms. Yellen represented the United States, and the respect in which she was held. In the ensuing years, she has gained in stature, and today has the enormous respect of central bank governors around the world. She has the stature, wisdom and gravitas one should expect of the leader of the Fed….
Click over to read the full indictment of Larry Summers.