Economics News

But for Daly the economic struggles are also personal, a reflection in part of her own experience four decades ago just outside of St. Louis, Missouri, where her family’s difficulties led to her dropping out of high school at age 15.

“We lived pretty close to the bone, as we say in the Midwest. You know, we were just a shock from falling through,” she has said.

The trajectory of Daly’s career stretches from those difficult days, 41 years ago, to today, where she is now in her second year as president and chief executive officer of the Federal Reserve Bank of San Francisco—which is the largest district, both geographically and economically, of the U.S. central banking system. The roots of her current prominence thrived, in no small part, in intellectual soil she found at Maxwell (including, she says, in the break room at Maxwell’s Center for Policy Research—but more on that later).

Daly is also one of only three women among the 12 presidents of the Fed’s regional banks, which gives her an additional perch from which to highlight the persistent lack of diversity—gender, yes, but also race and ethnicity—within the profession of economics.

“Frankly, I’m not exceptional in the kinds of things that happened to me as a young person. These are things that happen to many young people in many families. And it resulted in me dropping out,” she says. “The remarkable part is that I was able to find a mentor to help me sort of lift myself out, to get escape velocity so I could get through that and then go on to contribute in the way I was capable of.”

In May, when Daly returned to Syracuse University to receive an honorary degree and give the Commencement address, she touched on her “crooked path,” offering students advice her mentor—a woman named Betsy Bane—offered her as a teenager adrift:

“Don’t worry if your journey wanders, or if your seemingly perfect plans end up being not quite right. This is just part of exploring, and it helps you figure out what’s right for you,” she told the 7,000 graduating students. “And when something goes wrong, and fear and worry creep in, I hope you’ll remember Betsy’s words: ‘You have to bloom where you’re planted.’”

Growing up in a suburb just southwest of St. Louis, Daly was part of a single-income family. Her father was a postman, her mother a homemaker. When she was 15, her family was hit by a set of shocks and “imploded,” as she recently described it. Her parents divorced. Her three younger siblings went to live with their grandparents. Daly lived with friends, dropped out of high school, and took a series of jobs to make ends meet. She worked in a deli, delivered doughnuts, sold lingerie at a department store.

Though Daly had dropped out, a guidance counselor at school connected her with Bane, a psychologist.

“Betsy was in her mid-30s, a successful woman, busy building her life and career,” Daly recalled, in her Commencement address. “I was 15, my family was in chaos, I’d dropped out of high school, and I was living with friends. My counselor thought Betsy could help.”

Bane pushed Daly to get her high-school equivalency degree, and she later encouraged Daly to take classes at the University of Missouri’s campus in St. Louis. She paid for Daly’s first semester at school: $216 for a full term. Daly started out studying psychology, but she struggled with it.

“It became clear that I probably wasn’t cut out for that,” she says now. “I’m not the most patient person in the universe. I’m great at research and less good at one on one, though I’ve gotten better at that in my life, largely thanks to my wife,” she adds, laughing.

During her initial semester, Daly failed a couple of classes as she struggled to adjust to college life. Eventually, she would work on campus as a tutor for other students, which helped her own studying. She took a course called The History of Social Science, which proved pivotal. The University of Missouri professor who taught it was Maxwell graduate Frank “Gene” Wagner ’67 PhD (Econ), and he became the next key advisor on Daly’s journey. Wagner told her something that one of his mentors had said: “Your mind is like a big open room and you want to fill it with all the things that make you interested and curious and keep you engaged.”

“And so I started taking classes: The History of Social Science, The History of Thought and Economics,” she says now. “And what I ended up finding is that I really had an affinity and a love for thinking about the world the way economists do—not as a narrow person who’s just doing the math, but as a person who could use that lens to affect public policy.”

“Long before I was introduced to supply-and-demand and all the basic tools that economists have to know, I was introduced to what makes economics great,” she adds, “which is you’re curious about the world, and you try to study it, and you try to think about it like a detective: how things work and why people behave the way they do and what incentives they face.”

After getting a bachelor’s degree from the University of Missouri-Kansas City in 1985, she went on to earn a master’s degree at the University of Illinois at Urbana-Champaign in 1987 and then (with Wagner’s encouragement) her doctorate in economics at Maxwell, in 1994. It was at Maxwell that she discovered what she calls her “North Star”—the purpose that drove her research on microeconomics and labor economics: fiscal policies geared at serving others. After two years of postdoctoral work at Northwestern University, she joined the San Francisco Fed, where it seemed symbolic that Janet Yellen worked, as she would later become the first woman to head the entire U.S. Federal Reserve system.

Daly’s books and publications reflect both her personal and academic interests. Her postdoctorate work at Northwestern was a fellowship from the National Institute of Aging. Her first published book, which she co-authored with Cornell University economist Richard Birkhauser, examined how household incomes move up and down, and examined trends in income inequality in the 1980s. In 2013, her third book, which she co-edited, analyzed how unexpected life events—job loss, health problems, divorced parents—affect a person’s, or household’s, economic welfare.

And a year later, she and another economist published a widely noted paper that studied wage data in the aftermath of the great recession of 2008-09. The paper analyzed so-called “wage rigidities”—where employers are slow to cut wages in a downturn and slow to raise them in a nascent recovery—and found that this phenomenon may have helped slow down inflation, not only after 2008, but in two previous recessions, as well. It was an analysis that went against the grain of many widely held assumptions in economics.

Another theme runs prominently through her research: the lack of diversity in the field of economics, symbolized by a 1997 event that occurred not long after she joined the San Francisco Fed. She had given a major presentation at the Fed’s headquarters in Washington, D.C., after which, she says, a senior banker congratulated her by saying: “That was amazing. I didn’t expect that. You’re such a tiny little woman. Who knew?”

“I don’t think he realized what he was implying. Though I and others did. We laughed it off,” she wrote in a first-person essay for the Financial Times in 2018.

The field has changed since then, Daly says, but not enough. Whereas STEM fields—science, technology, engineering, and mathematics—have made strides in recruiting and retaining professionals who are not white men, economics still lags.