I was just reading that Janet Yellen, recently mentioned as a possible replacement for Fed chair Ben Bernanke, is considered on Wall Street to be an “inflation dove,” which means that she considers maintaining full employment to be -gasp!- “as important” as controlling inflation.
I also wonder about Brad DeLong at Berkeley. He was in the Treasury Department in the Clinton Administration. He's a free trader, which I guess is neither here nor there when it comes to monetary policy (and not necessarily bad in any case), but I like that he's an economic historian.
In any case, we strongly need someone who will put reducing unemployment tops on the list. I know, from personal experience, how unemployment can convulse a family…
Back in 1983, my dad, a middle manager in corporate America, died at age 41 after being laid off from five separate companies in five years. Chasing new work forced him to move his young family from Kansas to Texas to Iowa in the space of two years. Then, just as he seemed to find stability in a new job in Iowa, the brutal double-dip recession of 1980 – 1982 cost him his job again. He never recovered from that one.
The costs to my family of that loss are obvious. But the costs are broader than that. When the economy lost my dad, it lost a certain amount of knowledge and experience, and the productivity that went with it. Now I can't say with certainty that if my dad hadn't lost his job of 11 years in 1978, that he wouldn't have died five years later anyway. And, the vast majority of unemployed people will survive, obviously. And, I'm not arguing for an open-ended dole. But, research has shown over and over that bouts of unemployment, especially for the father in a family, carry with them permanent and “baked-in” costs, both to the unemployed person's family, and to the economy at large. I just ask that these costs of unemployment to productivity and economic growth be somehow factored in when the balance between inflation and unemployment is being struck.
Yes, reducing unemployment by tolerating higher inflation transfers money from the financiers to the workers. But given the enormous increase in inequality over the last 30 years, most of it driven by skyrocketing returns to capital, I'd say it's time for a re-balancing.