Free Thinker Favored for Chair

Ben S. Bernanke ’75 once joked that his main talent was “taking the SATs” according to a colleague, but it seems that he can hold his own in economics as well.

On April 1, President Bush announced the nomination of Bernanke to be the next Chair of the Council of Economic Advisors (CEA).

Bush’s decision has reinforced the view of many that Bernanke—a current Governor of the U.S. Federal Reserve Board and a graduate of both Harvard and MIT—is the top contender to replace Federal Reserve Chairman Alan Greenspan, whose term ends Jan. 31, 2006.

Although Bernanke says he is unable to grant interviews prior to his CEA confirmation hearing, those economists who have taught and worked with Bernanke describe him as a “mild mannered” family man with a passion for the Boston Red Sox who has consistently excelled in the field of economics due to his independent thought and skill at public speaking.

“I would sleep comfortably if he was the Fed Chairman,” says New York University Economics Department Chair Mark Gertler, who has worked with Bernanke in the past. “He’s eminently qualified.”

“OFF ON HIS OWN”

As a member of the Fed’s governing body, Bernanke has become a leading proponent of an idea known as “inflation targeting” that some say would improve the stability of the monetary system.

A switch to this policy could be one of Bernanke’s biggest initiatives if he becomes the next Fed Chair.

Under inflation targeting, the Federal Reserve would publicly announce a level of inflation it is trying to achieve, instead of its current policy of striving for low inflation without naming a specific target.

Inflation targeting is practiced by the Bank of England but not in the United States, in part because “Greenspan has always been very much against inflation targeting,” says Morris University Professor Dale W. Jorgenson.

In a June 2004 interview with the Federal Reserve Bank of Minneapolis, Bernanke explained what he saw as the benefits of inflation targeting, among them that articulating a specific goal for inflation would help people better plan their long-term economic decisions.

Many economists are still opposed to or uncertain about inflation targeting, but Jorgenson says that Bernanke’s ability to remain a credible source in Washington while promoting such a policy shows his strength as an independent thinker and his ability to explain his ideas.

“Bernanke has gone off on his own and still retained the confidence of the President,” says Jorgenson.

“A SUPERSTAR IN EVERY DIMENSION”

Born in Augusta, Ga. on Dec. 13, 1953, Ben Shalom Bernanke attended a public high school in Dillon, S.C., a small town along Interstate 95 near the North Carolina border.

He arrived at Harvard in 1971 on a National Merit Scholarship, where he lived in Weld as a freshman and quickly took an interest in economics.

“Once he got into economics, he found that he really liked it,” says Jorgenson, who advised Bernanke’s undergraduate thesis.

Bernanke excelled, winning the Allyn A. Young Prize for the best Harvard undergraduate economics thesis in 1975 with his paper, “An Integrated Model for Energy Policy.”

He was elected to Phi Beta Kappa as a resident of Winthrop House, and received the John H. Williams Prize, which is awarded to the most outstanding senior in the Harvard Economics Department.

“He was a superstar in every dimension,” says Jorgenson. “He was at the absolute top of the economics concentrators of his year.”

“HIS OWN GUY”

Upon graduation from Harvard in 1975, Bernanke moved down Mass. Ave.to MIT to continue his studies.

At MIT, he examined economic growth and periods of recession, such as the Great Depression.

“He did an extremely interesting thesis on trying to understand pauses of economic growth,” says Cabot Professor of Public Policy and Professor of Economics Kenneth S. Rogoff, who was an economics student at MIT at the same time as Bernanke.

Bernanke’s thesis “led to a lot of rethinking” in the study of growth, Rogoff adds.

Nobel Laureate Robert M. Solow ’44-’47—an Institute Professor Emeritus at MIT— who taught Bernanke, says his independent thinking stood out.

“He was, even as a graduate student, his own guy,” says Solow. “He had his own ideas, and he worked not necessarily on what was fashionable at the time.”

“He was always interested in monetary matters,” Solow added.

“HE HELPED BUILD OUR DEPARTMENT”

After receiving his Ph.D. in 1979, Bernanke held teaching positions in MIT’s Department of Economics and Stanford University’s Graduate School of Business before landing at Princeton University in 1985.

Alan S. Blinder, a professor of economics at Princeton University since 1979, worked to bring Bernanke to Princeton.

“I thought he would be terrific here,” says Blinder. “It was not just that he had a high IQ and could solve puzzles. He was imaginative....I thought he was brilliantly creative.”

After ten years on the Department of Economics faculty at Princeton, Bernanke became department chair. He held the position for five years, which Blinder says is an unusually long term for Princeton’s economics department.

“He worked very hard,” says Princeton Economics Department Chair Gene M. Grossman. “You could find him in the office on weekends. It rarely took more than 45 seconds for an e-mail to be replied to.”

“He helped build our department, Grossman adds. “He was very good at recruiting...and good at helping people get along.”

“A GREAT SPORTS FAN”

Colleagues who have worked with Bernanke say that he can be private and difficult to get to know, but that he is an avid sports fan and a devoted family man.

“When we first met, he was a little shy and rough around the edges,” says Gertler, but “he’s evolved into a great diplomat.”

“He’s a great sports fan,” Gertler adds. “We spent a lot of time playing one-on-one basketball [at Princeton].”

A number of people who know Bernanke say that he closely follows the Red Sox.

“He probably acquired that disease while he was at Harvard,” says Blinder, who was born in New York City.

“He’s mind mannered, with a wry sense of humor...the kind of guy who would make a funny quip,” Blinder adds.

Bernanke, a father of two, also served two terms on the local school board in New Jersey.

“That takes quite a bit of effort, between his family, the school board, and his work,” says Blinder.

“VERY CALM AND REASONED”

In 2002, Bernanke moved from Princeton to Washington, D.C. to take up a position as a Governor of the Federal Reserve Board.

“He and I had extensive discussions about the pros and cons of leaving the classroom, [but] he doesn’t regret his decision,” says Blinder, who served as Vice-Chairman of the Federal Reserve from 1994 to 1996.

Bernanke’s colleagues praised his ability remain objective in the politically-charged Washington landscape.

“One of the most complimentary things I can say about Ben is that he was a colleague of ours at Princeton for years, and a close colleague of mine before I ever knew he was a Republican,” says Blinder. “If you just read his scholarship, there would be no way you could tell if he was a Republican or a Democrat.”

“He’s very calm and reasoned,” Grossman says.

Bernanke also has a keen ability to interact with the press and with politicians, his colleagues say.

“He has been a very effective public speaker in Washington,” says Rogoff.

“The reporters absolutely love him,” Gertler says. “He can actually explain what’s going on.”

“THE NATURAL SUCCESSOR”?

While Bernanke’s colleagues seem to agree that he would be a successful Fed Chair, they acknowledge that he is just one of a very strong field of contenders, which includes R. Glenn Hubbard, the dean of Columbia University’s Graduate School of Business, and Baker Professor of Economics Martin S. Feldstein ’61. (See related stories on Wednesday and Friday.)

Hubbard “was extremely effective in the first part of the Bush administration” when he was chairman of the CEA, says Jorgenson. “He had a big influence on tax policy.”

“Feldstein, of course, is one of the outstanding economists of our time,” adds Jorgenson. “He is the economist who is the closest to President Bush....He has a lot of credibility.”

But a number of colleagues say that Bernanke’s specific focus on monetary policy issues like inflation could distinguish him from the rest.

“They are all eminently qualified,” says Gertler, but “Glenn and Marty’s experience is more in tax policy.”

“Bernanke is much closer in terms of his intellectual interest to what the Fed actually does,” says Jorgenson.

Solow even said that among academics, Bernanke is “the natural successor to Greenspan”—and in a few months, the country will know if Bush agrees.

—Staff writer Evan H. Jacobs can be reached at ehjacobs@fas.harvard.edu.