|15th Vice Chair of the Federal Reserve|
June 27, 1994 – January 31, 1996
|Appointed by||Bill Clinton|
|Preceded by||David Mullins|
|Succeeded by||Alice Rivlin|
|Member of the Federal Reserve Board of Governors|
June 27, 1994 – January 31, 1996
|Preceded by||David Mullins|
|Succeeded by||Alice Rivlin|
|Born||October 14, 1945|
New York City, New York, U.S.
|Education||Princeton University (BA)|
London School of Economics (MS)
Massachusetts Institute of Technology (PhD)
|New Keynesian economics|
|Information at IDEAS / RePEc|
Alan Stuart Blinder (//, born October 14, 1945) is an American economist and the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs at Princeton University who served as the Vice Chairman of the Board of Governors of the Federal Reserve System under President Bill Clinton.
Blinder is among the most influential economists in the world according to IDEAS/RePEc, and is "considered one of the great economic minds of his generation."
He served on President Bill Clinton's Council of Economic Advisers from January 1993 to June 1994 and as the Vice Chairman of the Board of Governors of the Federal Reserve System from June 1994 to January 1996. Blinder's recent academic work has focused particularly on monetary policy and central banking, and on the "offshoring" of jobs. His writing has been published in The New York Times, The Washington Post, as well as a monthly column in The Wall Street Journal.
Regarding the 2008 near-meltdown of major financial institutions, Blinder drew ten lessons for fellow economists, including: "It can happen here," "Fraud and near-fraud can rise to attain macroeconomic significance," "Excessive complexity is not just anti-competitive, it's dangerous," and "Go-for-broke incentives will induce traders to go for broke."[non-primary source needed]
Blinder was born to a Jewish family in Brooklyn, New York. He graduated from Syosset High School in Syosset, New York. Blinder attended Princeton University as an undergraduate student and graduated summa cum laude with a B.A. in economics in 1967. He completed a 130-page long senior thesis, titled "The Theory of Corporate Choice". He subsequently gained an MSc in economics from the London School of Economics (1968) and then received his doctorate in economics from the Massachusetts Institute of Technology in 1971. He was advised by Robert Solow.
Blinder is the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs at Princeton where he has been since 1971; from 1988 to 1990, he chaired the economics department. Also in 1990, he founded Princeton's Griswold Center for Economic Policy Studies. And he has served as vice-chair of The Observatory Group.
Since 1978, Blinder has been a Research Associate of the National Bureau of Economic Research. He is a past president of the Eastern Economic Association and Vice President of the American Economic Association and was named a Distinguished Fellow of the latter in 2011. He is a Fellow of the American Academy of Arts and Sciences (since 1991), a member of the American Philosophical Society since 1996, and a member of the board of the Council on Foreign Relations (since 2008). Blinder's textbook Economics: Principles and Policy, co-written with William Baumol, was first published in 1979 and, in 2012 was printed in its twelfth edition.
In 2009 Blinder was inducted into the American Academy of Political and Social Science, "for his distinguished scholarship on fiscal policy, monetary policy and the distribution of income, and for consistently bringing that knowledge to bear on the public arena." He is a strong proponent of free trade.[non-primary source needed] Blinder has been critical of the public discussion of the US national debt, describing it as generally ranging from "ludicrous to horrific".
Blinder served as the Deputy Assistant Director of the Congressional Budget Office (1975), on President Bill Clinton's Council of Economic Advisers (January 1993 - June 1994), and as the Vice Chairman of the Board of Governors of the Federal Reserve System from June 27, 1994, to January 31, 1996. As Vice Chairman, he cautioned against raising interest rates too quickly to slow inflation because of the lags in earlier rises feeding through into the economy. He also warned against ignoring the short term costs in terms of unemployment that inflation-fighting could cause.
Many have argued that Blinder's stint at the Fed was cut short because of his tendency to challenge chairman Alan Greenspan:
[Economist] Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. "Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant," says Johnson.
In closed-door meetings, Blinder did what so few do: challenged assumptions. The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he'd come out and say, 'Well, that's not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.' And it just created a stir inside – it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was disrupted.
This put him in conflict with Greenspan and his staff. "A lot of senior staff ... were pissed off about Blinder – how should we say? – not playing by the customs that they were accustomed to," Johnson says.
He was an adviser to Al Gore and John Kerry during their respective presidential campaigns in 2000 and 2004.
Main article: Car Allowance Rebate System
Blinder was an early advocate of a "Cash for Clunkers" program, in which the government buys some of the oldest, most-polluting vehicles and scraps them. In July 2008, he wrote an article in The New York Times advocating such a program, which was implemented by the Obama administration during the summer of 2009. Blinder asserted it could stimulate the economy, benefit the environment, and reduce income inequality. The program was praised by President Obama for "exceeding expectations," but criticized for economic and environmental reasons.
He is a co-founder and a vice-chair of the Promontory Interfinancial Network, LLC.
After his service as the vice chairman of the Federal Reserve, Blinder, along with several former regulators, founded a company that offers a number of services that provide a means for depositors (including governmental entities, nonprofits, businesses, as well as individuals such as retirees) to access millions in Federal Deposit Insurance Corporation (FDIC) coverage at a single institution instead of multiple ones. This provides banks that are members the ability to offer coverage above the FDIC per account/per bank limit by letting those banks place funds into CDs or deposit accounts issued by other network banks. This occurs in increments below the standard FDIC insurance maximum ($250,000) so that both principal and interest are eligible for FDIC insurance. The company acts as a sort of clearinghouse, matching deposits from one institution with another. Through its services it allows access to higher levels of FDIC insurance although limits apply.
Blinder draws 10 lessons for fellow economists in an article entitled "What Did We Learn from the Financial Crisis, the Great Recession, and the Pathetic Recovery?":[non-primary source needed]
1) It can happen here.
2) Hyman Minsky was basically right. " . . The financial world envisioned by Minsky is different in every respect from the EMH [Efficient Markets Hypothesis] paradigm. While the good times are rolling, people forget the bitter lessons of the past. (“This time is different.”) So financial excesses grow more, not less, severe as the bubble progresses—creating greater vulnerability to shocks and more damage when the crash comes. The crash itself always seems to come as a surprise; and after it, sentiment swings radically in the other direction. People shun risk, pessimism rules, and the economy struggles. . "
3) Reinhart-Rogoff recessions are worse than Keynesian recessions. " . . Reinhart-Rogoff recessions destroy parts of the financial system and leave much of the rest reeling—and needing to deleverage. All of that stunts and delays recovery. Reinhart-Rogoff recessions also leave large buildups of debt—financial sector debt, corporate debt, household debt, and public debt—in their wake. . "
4) Self-regulation is oxymoronic.
5) Fraud and near-fraud can rise to attain macroeconomic significance.
6) Excessive complexity is not just anti-competitive, it's dangerous.
7) Go-for-broke incentives will induce traders to go for broke.
8) Illiquidity closely resembles insolvency. Blinder asks, Was the situation with Bear Stearns, which was saved in March 2008, really so different from the situation with Lehman Brothers, which was allowed to go bankrupt in September 2008?
9) Moral hazard isn't a show-stopper, it's a tradeoff.
10) Economic illiteracy can really hurt.