Will Ms. Yellen Be More of the Same?

Russ Roberts has a simple and straightforward word for those who are hot and bothered over President Obama’s nomination of Janet Yellen for Fed chair: relax. If history tells us anything it’s that political incentives just might move Yellen away from her dovish focus on unemployment over inflation and, as a result, cram her into a composite that includes Bernanke, Greenspan, and her other predecessors.

Here is how powerful the incentives are. When an acolyte of Ayn Rand became chair of the Fed, an alleged advocate for government keeping its hands out of the private choices of free individuals, he relentlessly sheltered investors via monetary policy (the Greenspan “put”) and relentlessly sided with the big banks.

So yes, he opposed regulation—”a free-market ideologue” the critics chorused. But the ideologue also testified before Congress in support of the government guarantee of Mexican debt in 1995, calling it a bad policy but a necessary one and insuring that the large banks that had financed the debt of the Mexican government lost not a penny. When his ideology conflicted with helping the banks, he helped the banks.

Of course, as Ryan McMaken points out, Greenspan’s Objectivist leanings may have had less to do with philosophy and more to do with social climbing, but that probably doesn’t really undermine Roberts’ point in any meaningful way. After all, there have also been after he got off the bench and into the game.

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