To be good choices for Federal Reserve chair, candidates must pass three tests. They must have experience at a similar job: this is not something to throw somebody into and expect them to swim. They must fear high inflation as they fear a tornado, and feel in their bones the pain of the unemployed. And they must understand and properly weight the different models of how the economy might behave. Right now, this third means that a good Federal Reserve chair must give a relatively high weight to the Keynesian model, which has been so successful at describing and forecasting the economy over the last six years.
Janet Yellen has a proven record of being able to build consensus inside the Fed. Larry Summers is the least likely to bind himself to an institutional consensus past its sell-by date. Only five potential candidates pass this threefold test: Larry Summers, Janet Yellen, Christy Romer, Alan Blinder and Laura Tyson. They are all, in my view, superior by far to others whose names have been mentioned. Superior, for example, to a Tim Geithner who gives no sign of feeling in his bones the pain of the unemployed, or a Donald Kohn whose estimates of both growth and inflation have been erroneously high since 2007. A choice of any of the five would be a good outcome. A choice of anybody else would be a bad outcome.
Among those five, Janet Yellen has an edge in long-term Fed experience and has a proven record of being able to build consensus inside the institution. Larry Summers has an edge as the most creative thinker likely to successfully think outside the box should outside-the-box thinking be called for, and least likely to bind himself to an institutional consensus past its sell-by date. If times are placid, the stakes are small. If times are turbulent, outside-the-box thinking has its place.
Therefore I have a slight preference for Summers.