Harvard economists contacted yesterday said the appointment of Paul A. Volcker to head the Federal Reserve Board would lead to a more conservative U.S. monetary policy.
Volcker, nominated by President Carter on Wednesday, is known as a believer in "sound money," and as a fiscal conservative who would probably accept temporary increases in the numbers of unemployed if he could decrease the rate of inflation, Warren Law, Converse Professor of Finance and Banking, said yesterday.
"If a choice came down to slower growth and rising unemployment or higher inflation, most conservatives would opt for increased unemployment and lower inflation," Law said yesterday.
A fiscal policy which causes higher unemployment would probably conflict with White House desires in an election year, Law said. However, "it seems a traditional role for the Federal Reserve Board to be in conflict with the White House," he added.
Martin Feldstein, professor of Economics, echoing the majority view, called the nomination a "first-rate appointment."
However, John Kenneth Galbraith, Warburg Professor of Econom Emeritus, said yesterday the nomination of a conservative does not guarantee reduced inflation. "Bear in mind that the worst inflation has occurred under the staunch conservatives Nixon and Ford," he said.
Galbraith also said the chairmanship is a greatly overrated job. "One can become a great monetary expert by virtue of appointment to it," he added.
Business and banking leaders in the United States and in Europe greeted Volcker's nomination enthusiastically, praising Carter's choice of a conservative as an important move toward restoring world confidence in the dollar and checking inflation.