Yellen Touts “Maximum Employment”


Interesting catch from Annie Lowrey who notes that Janet Yellen put the Fed’s jobs mandate first when officially acknowledging her appointment as Vice Chair of the Board of Governors:

I’m honored that President Obama has asked me to serve in that capacity. If confirmed by the Senate, I am looking forward to working even more closely with Chairman Bernanke and the other governors, and continuing to collaborate with my colleagues throughout the Federal Reserve System to conduct policies that foster economic prosperity and ensure a stable financial system.

I am strongly committed to pursuing the dual goals that Congress has assigned us: maximum employment and price stability and, if confirmed, I will work to ensure that policy promotes job creation and keeps inflation in check.

Might mean nothing, might mean something. It’s probably worth observing that the dual mandate is arguably conceptually incoherent. In normal times, the Fed only uses one policy instrument so it can’t really be targeting two things. The main practical upshot of the dual mandate is that it’s impossible to say for sure whether or not the Fed is meeting it. If you gave the Fed a single clear mandate—keep M*V growing at a steady rate of approximately such-and-such then Congress and the President could specifically say whether or not the Fed was executing its mission.