Three Candidates for Fed Vice-Chair

It will be tough to fill the shoes of Stan Fischer as Fed vice-chair. The candidates most actively under consideration by the Administration, to serve as number 2 to Jay Powell as Chair, are Rich Clarida, Larry Lindsey, and John Williams. Clarida and Williams are both excellent economists; either one would be great for this job.

Williams who has been getting the most media play, has been at the San Francisco Fed since 2002. (I think he was an undergraduate student in a large macro class I taught at UC Berkeley long ago.) He argues that the natural rate of interest (“r*”) has undergone a long-lasting global decline. At a Brookings conference earlier this month, he made his case that monetary policy should pursue a price level target.

Clarida has been at Columbia University since 1988, with a stint as a Treasury official under George W. Bush and then a side-job at PIMCO. The research for which he is most famous is on monetary policy in DSGE models. But at the Fed, if the dictates of those models conflicted with good policy sense, I am confident that he would opt for the latter. (It has been great working with him for years on the board of the NBER’s International Seminar of Macroeconomics. The photo of Clarida and Williams comes from a 2013 meeting in Rome.)

Larry Lindsey is a nice guy (I worked with him at the Reagan CEA), but too political for my taste. Still I will give him credit: when he was made to resign from his 2001-02 position as George W. Bush’s Director of the National Economic Council, the main reason was reportedly Lindsey’s estimate that an invasion of Iraq could cost $100-$200 billion, an estimate that the administration considered too high by a factor of 2-3. (Of course, in the event it turned out to be too low. By a factor of 25.)