Yellen: The Trailblazing Economist Who Navigated an Era of Upheaval

by Jon Hilsenrath

In September 2000, with a Senate vote of 83–15, Clinton convinced Congress to allow normal US trade relations with China and paved the way for its admission into the World Trade Organization. For years the United States had already been granting China annual, but temporary, access to US markets with low tariff barriers. Normal trade relations removed the uncertainty of renewals every year. Clinton hoped it would formalize China’s cooperation with a club of rules-bound trading partners and help open the markets of the world’s most populous country to US companies hungry for a billion new customers. He also hoped an open China would lead to a more democratic China, and one less threatening to others. Reformers were in charge in Beijing, and Clinton wanted to empower them. A collection of 149 economists—including all of the luminaries who signed the NAFTA letter—banded together again to support the move. “There is much more at stake here than our economic self-interests,” Clinton said after the vote. The decision, he said, was “about building a world in which more human beings have more freedom, more control over their lives, more contact with others than ever before.”

They also had vastly different approaches to the mundane issue of traveling to the airport. Summers found airports annoying and sought to minimize the time he spent in them. He often arrived late, hustling to gates. “If you’ve never missed a plane, you’re spending too much time in airports,” he liked to say. Yellen’s airport theory was framed around the concept of crisis management. She wanted to minimize the possibility of major disruption, such as missing a flight. She didn’t mind being in airports; she took reading with her that she would want to do somewhere anyway; she might as well do it in the airport while she waited. By getting to the airport early, she got the best seats for reading in the passenger lounges, early boarding, and the best choice of overhead compartment space on the plane. Some of her travel companions also came to think that Yellen simply liked being first. The fact that each had a discrete, thought-out theory about how to travel to an airport said something about their intellects. It also provided a view into much bigger issues in economics. Economists believe that an individual’s goal is to maximize his or her utility. When it came to airport travel, Yellen and Summers had completely different views about what they were trying to maximize, which led to different behavior and different explanations for their actions. Their contrary airport theories were proof that humans are complex and different in their aspirations and dispositions. This is exac...

Many of the nation’s founders, during their own age of upheaval, understood that their most profound task was to create institutions that could be trusted to fairly and effectively manage the unruly behavior that drove markets and also moved government to extremes and misjudgments. If those institutions—the Constitution, the rule of law, trusted courts, a fair and reliable system of national commerce, a free and unaligned media, reliable elections, effective bureaucracy—failed, then the causes of free markets and free people would fail too.2 “Vigor of government is essential to the security of liberty,” observed Alexander Hamilton in his first Federalist Paper. Failure in the endeavor of building these institutions, he said, was the road to despotism. His mentor George Washington warned in his farewell address of the “designing men” who sowed the seeds of public division that threatened to pull the young nation apart.

Real patriots will take measure of this moment—as the founders did—and look more deeply into the work of building and repairing the institutions that hold the country and the economy together, rather than capitalizing on the friction that pulls them apart, as George Washington warned people were prone to do. Both sides of the red-blue divide now blame the other for getting the country to this unstable place, and both often employ dangerous hyperbole to prove their points. Patriots can draw on the roots of a common identity. This is perhaps the most important first step to building a new path to prosperity. The work of building a good society was never finished. Hamilton said: “Is it not time to awake from the deceitful dream of a golden age, and to adopt as a practical maxim for the direction of our political conduct that we, as well as the other inhabitants of the globe, are yet remote from the happy empire of perfect wisdom and perfect virtue?”3 Market-driven democracy, this story shows, is not inevitable, nor are its systems ever complete. It is an endeavor.