The world has lost one of its greatest monetary economists ever: Leland Yeager (b. 1924) has passed away, and boy will I miss him.
Leland’s writings on monetary economics taught me a big chunk of all that I know about the subject. Among other things, they gave me a better understanding of just what “money” means; of what banks do and why it matters; of how changes in the price level clear the market for money balances (and why those changes can take time, giving rise to bouts of “monetary disequilibrium”); and of how various international monetary arrangements can either aggravate or limit the extent of such disequilibrium.
Beyond matters of strict economics, Leland taught me — by example mainly — the importance of clear writing, and of steering clear of such enervating impediments to good scholarship as excessive preoccupation with one’s “methodology” or exclusive devotion to any one school of economic thought.
But mostly I will miss Leland simply because, besides being a kindred spirit, he was one of my all-time favorite human beings. Although it has now been many years since I last spent time with him, we corresponded regularly until recently, and I remember our past encounters with great affection. Leland was simply a blast to be with, and all the more so if the occasion involved plenty of good food and wine, for which he had a fine appreciation (and, in the case of wine, an apparently unlimited tolerance).
But all that food and wine was just so much fuel and lubricant. The motive force behind those rollicking rendezvous was Leland’s gift for conversation. His erudition and curiosity were such that one could always count on learning something, despite never knowing just where the conversation was going. And with Leland’s broad interests it could end up anywhere. Well, almost anywhere: so far as I can recall we never talked about professional sports, TV shows, or consumer electronics. That alone was a reason, so far as I was concerned, for cherishing Leland’s company.
Leland also spoke more languages than anyone I ever knew — and more than anyone I’ve ever heard of save Richard Burton (the explorer, not the actor), who commanded 29 of them! So depending on the food we were eating or where the conversation wandered we might switch to Italian, or French. But whereas I speak the one fluently, the other haltingly, and nothing apart from them besides English, Leland was conversant with at least half a dozen natural languages, as well as with the planned languages Esperanto and Interlingua. For all I know, he was perfectly capable of waxing lyrical, in Swahili of course, over a well-seasoned bowl of ugali.
Though we eventually became close, and despite my having admired Leland before we ever met, for a time he wanted nothing to do with me. Believe it or not, instead of being repulsed by any of my many, genuinely off-putting qualities, he disliked me because of my name. It happens, you see, that Leland once had a colleague whom he intensely disliked, whose last name also began with “Sel.” That alone made me persona non grata. It was, Leland later explained to me, a matter of simple prudence. “ ‘Selgin,’ ‘Sel___’ … Too close for comfort!”
After I’d known him for some years, it occurred to me that, although I’d learned plenty from Leland’s writings on monetary economics, most of those writings were scattered throughout various professional journals, some of which weren’t easy to come by. (This was, needless to say, in the days before the world-wide-web and PDFs and all that.) So I had the bright idea of gathering them together under one cover, along with several of Leland’s unpublished papers. I approached Liberty Fund with the proposal, knowing that, if they went for it, I’d end up not only with a beautiful book, but with one that, in its paperback version especially, even grad students might reckon a bargain. Such was the genesis of The Fluttering Veil.
That title, by the way, alludes to a remark by John Gurley, another monetary economist who once summed up Milton Friedman’s monetarism, facetiously but not inaccurately, as holding that “Money is a veil, but when the veil flutters, the economy sputters.” Although Leland was nothing if not eclectic when it came to schools of economic thought, the label he was most happy with was “old-fashioned monetarist,” by which he mainly meant to distinguish himself from New Classical economists like Bob Lucas, Robert Barro, and Tom Sargent. The New Classicals imagined that, by modeling expectations as model-consistent or “rational,” while assuming that prices always adjusted to their Walrasian market-clearing values, they were proffering a more “rigorous” version of monetarism.
Yeager, who was equipped with an especially sensitive version of the device Ernest Hemingway referred to as a “built in, shock-proof s***t detector,” saw right through the New Classical pretense. Instead of perfecting monetarism, by invoking the deux ex machina of instantaneous Walrasian pricing, the New Classical economists managed instead to strip it of its capacity to account for the real consequences of monetary disturbances.
But while he rejected the “equilibrium always” theorizing of New Classical economists, and understood instead that an economy has to “grope” its way to a new set of equilibrium prices following any major monetary disturbance, Yeager was far from embracing either “Keynesian” or “New Keynesian” economics. While he denied that prices adjust instantly to clear the market for money balances, he was if anything still more adamantly opposed to the “old” Keynesian treatment of the rate of interest as the “price” of money — with its implicit assumption of a parametrically “given” price level. “New” Keynesian models, with their staggered pricing parameters and other devices for simulating “sticky” prices, are no doubt better. But those models’ basic tenets, Yeager pointed out, are in fact neither “New” nor particularly “Keynesian,” having roots that trace back to Classical economics, and having been a feature of old-fashioned Chicago-school thinking since the days of Herbert J. Davenport.
Now that Leland is gone, it cheers me up somewhat to think that future students can still learn from him, and that they might even do it using the collection of his articles I assembled for the purpose. But no amount of exposure to Leland’s writings can suffice to give someone who hasn’t met him a true measure of the man. He had too many facets; and he was, in his peculiar way, infinitely delightful. I thank my lucky stars for having had the chance to know him.
For all his awareness of the drawbacks of “equilibrium always” reasoning in monetary economics, Yeager was far from holding general equilibrium theory in contempt. On the contrary: he insisted, against its (mainly Austrian School) detractors, that it supplied “a necessary background” for monetary analysis as well as an important check against many kinds of fallacious reasoning. Yet Yeager would also have been the first to defend valuable Austrian-school insights against THEIR detractors among more mainstream economists. Yeager was, in short, a scholar remarkably free of partisanship and bias, save one favoring reasonable arguments over unreasonable ones.