Janet Yellin

What an odd occasion. Janet Yellin’s appearance before the Senate committee responsible for pressing her appointment as head of the Fed was nowhere near the hostile grilling it had been billed to be. By and large it was benign. The oddity stems from the repeated questions about inequality. As in what is the Fed doing about it?

I am glad I am not Yellin. My response would have been to point out that the current inequality, which is now apparently alarming certain Senators, is the result of political decisions taken over the last few decades. It was manufactured. It is deliberate. It is not necessarily an issue that the Fed is best positioned to attack.

More to the point, the social context in which that inequality became somehow acceptable was part of the entire shift towards market magic being the guiding hand in our economy. It follows as night follows day that after a few rounds of the game the fruits of competition will start to aggregate. That aggregation will self-reinforce through time. A social structure will emerge that reflects the ability of the winners to skim off a disproportionate share of our total wealth. And to protect themselves politically from having to share. They will justify this in many ways – they will claim privilege because they are the “risk takers” or “the job creators” and so on. In other words they will claim that their unequal share of our wealth is justified because they allow some of it to trickle down in the form of wages they pay or jobs they create.

Naive economists will protest that their market magic models don’t necessarily produce this unequal society, but that’s because they have long decoupled those models from the messy reality of society and it inherently political machinations. How convenient! Economists can absolve themselves of the blame when their ideas produce a social catastrophe. Their hands are clean.

Worse: when confronted by inequality those same economists then protest that it doesn’t matter as long as the outcome in its entirety is “efficient” or “optimal”. This makes it sound as if they don’t care how the pie gets sliced up. Which of course they do, because as soon as some form of redistribution is mooted to address inequality, they rush in and explain that we must not tamper with market magic lest we undo it munificence. Ergo: they endorse the distributive outcome of market magic.

Which makes them and their models culpable and morally clear.

It must be extremely galling to sit politely through a hearing in which the questioner asks about potential action that they are the real responsible party for.

Likewise it must be extremely galling to be an economist who actually has her hands on the levers that affect people to listen to tenured professors who don’t lecture her about the vicissitudes and harsh realities of the market place. As if they had any personal experience of those hardships.

The ethical dimension of this is hard to escape.

Then again who ever said that economists have to be ethical?

Surely the market will weed out the unethical.

Right?