“As far as I could tell, they did almost everything together,” said Michael Ash, a student of Akerlof’s and now an economics professor at the University of Massachusetts, Amherst.
The two might chew on problems separately, but the “degree of communication, respect and a willingness to be playful in thinking” distinguished them, Ash said.
Akerlof, of course, can no longer afford to be as outspoken as he once was. He declined to comment for this article, mindful of how his words would be weighed for insights into what Yellen might be thinking.
The 73-year old economist recently stepped down from an unpaid advisory position at the University of Zurich backed by the Swiss bank UBS “to avoid the appearance of a conflict,” he wrote in an email.
Since officially becoming Fed chair, Yellen has declined to speak publicly to reporters. On Wednesday, she will hold a news conference after the Fed meeting ends.
Akerlof has been critical in the past of the institution his wife leads and of other central banks. He’s argued that there’s a painful price to pay when a central bank focuses too much on avoiding higher inflation: sluggish hiring and meager pay.
His suggestion that the Fed should put more emphasis on job growth and accept the risk of higher inflation is among the most divisive issues Fed officials are debating.
Unemployment remains at a still-high 6.7 percent nearly a half-decade into the economic recovery. The Fed’s investment portfolio has roughly quadrupled to more than $4 trillion since the recession began in late 2007. That’s because the Fed has tried to spur growth by buying Treasury and mortgage bonds to keep long-term loan rates low.
Super-low borrowing rates are intended to drive spending, growth and hiring. But rates kept too low for too long risk causing sharp price spikes that could disrupt the economy. So far, inflation hasn’t become a threat. In fact, it’s running below the Fed’s 2 percent target.