A recent speech by Federal Reserve Chair Janet Yellen got considerable attention over her subtly implied suggestion that the Fed consider taking on a third mandate—reducing economic inequality—in addition to its current dual mandate of keeping inflation in check and unemployment as low as possible. Less noticed, but just as important, were her comments that “business ownership is associated with higher levels of economic mobility,” and that “it has become harder to start and build businesses.”
So is there a role the Fed could play in making entrepreneurship easier and less risky? Yes. Be more modest. Replace the Fed’s current dual mandate with a single mandate—keep the price system as honest and stable as possible.