13 ms·

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se. The gold standard, having been around for 2,000 years, is the constant subject of serious study by economists.

davidw 18y ago
There are certainly a few serious, respectable economists who favor the gold standard - I said only that "most don't", not that anyone who does is a not a "serious economist". Incidentally, I think the "because we did it that way for a long time" argument is a terrible one. There are plenty of things we've done for a long time as humans and as societies that aren't very good, and are worth discarding. I don't think the gold standard is a good idea myself, but in the arguments for it, there are better ones than that one.
- Prrometheus 18y ago
  That's not a good argument for the gold standard, but it is a good argument for studying it as a serious monetary policy.
curiousgeorge 18y ago
Not really. The last nail in the coffin of serious research on the gold standard was "Golden Fetters" by Eichengreen. It has a phenomenal and indisputable country-by-country timeline showing the cycle of deflationary behavior stopping during the Great Depression in country after country shortly following (4-6 months) the effective abandonment of the gold standard. One can argue that N=20 is not significant research, but there is a reason no-one will take you seriously if you do. I personally haven't met anyone who has argued for the gold standard and has read it although that may be a comment more on the academic backgrounds of the people who used to write pro-gold stuff and stuff it into my inbox back in college than the theoretical basis of the argument. So while gold may have a place as an investment (especially as a hedge against inflation) in large part people who spend considerable breath on extolling its virtues using words like "intrinsic value" and "stability" and "natural" are kooks. Their choice of the word "natural" is also odd since gold coinage is hardly more natural than paper and in fact is less easy to control the asset base. When economists talk about not repeating the mistakes of the 1930s, they are by and large talking about the importance of maintaining liquidity in the system to prevent deflationary spirals, and avoiding liquidity traps. They are also cognizant of Keynes' proof that Say's Law does not work once people want to start doing things like holding liquid assets, and the dismal performance of things like the zero-inflation policy in Canada and other countries through the 1990s. I'm amazed by the number of Internet libertarians who have jumped on this bandwagon.
- patrickg-zill 18y ago
  You make some interesting points and I will definitely hunt down the "Golden Fetters" piece. However I would ask whether you have looked into the argument that gold restricts the ability of the gov't to expand, in that there is a built-in expense to more spending when you have a gold-backed currency. It appears (to me and probably others) that part of the current problems the USA is facing is due to a govt that grows and grows, without a method to have a feedback loop that would restrict it - currently it seems the answer is to just print (electronically or physically) more $100 bills (which cost about 4 cents to make).
- bokonist 18y ago
  As a result of World War I, the governments of the world printed far more money than they had backed in gold. Eventually, people realized that the government did not have enough gold to redeem all the paper currency. People rushed to the bank to withdraw so they could get their money out first. At this point, the government had to either devalue the currency or leave the gold standard. Sticking to the gold standard at the previous valuation was a recipe for ruin. Most countries chose to leave the standard altogether. But they could have simply devalued, learned their lesson about diluting, and returned to a gold standard. The lesson the Keynesians took from this episode was not to go on a gold standard in the first place. The lesson the Austrians took was that government should not dilute the currency. Since all government's prefer to dilute the currency, and most "mainstream economists" are government funded, mainstream economists are almost all Keynesian, not Austrian. The best two articles I've read in defense of gold are these two: http://unqualified-reservations.blogspot.com/2007/11/who-heck-is-benn-steil.html http://unqualified-reservations.blogspot.com/2007/11/who-hec... and http://unqualified-reservations.blogspot.com/2008/02/return-to-castle-goldenstein-gold.html http://unqualified-reservations.blogspot.com/2008/02/return-...

davidw 18y ago

There are certainly a few serious, respectable economists who favor the gold standard - I said only that "most don't", not that anyone who does is a not a "serious economist". Incidentally, I think the "because we did it that way for a long time" argument is a terrible one. There are plenty of things we've done for a long time as humans and as societies that aren't very good, and are worth discarding. I don't think the gold standard is a good idea myself, but in the arguments for it, there are better ones than that one.

Prrometheus 18y ago
That's not a good argument for the gold standard, but it is a good argument for studying it as a serious monetary policy.

curiousgeorge 18y ago

Not really. The last nail in the coffin of serious research on the gold standard was "Golden Fetters" by Eichengreen. It has a phenomenal and indisputable country-by-country timeline showing the cycle of deflationary behavior stopping during the Great Depression in country after country shortly following (4-6 months) the effective abandonment of the gold standard. One can argue that N=20 is not significant research, but there is a reason no-one will take you seriously if you do. I personally haven't met anyone who has argued for the gold standard and has read it although that may be a comment more on the academic backgrounds of the people who used to write pro-gold stuff and stuff it into my inbox back in college than the theoretical basis of the argument. So while gold may have a place as an investment (especially as a hedge against inflation) in large part people who spend considerable breath on extolling its virtues using words like "intrinsic value" and "stability" and "natural" are kooks. Their choice of the word "natural" is also odd since gold coinage is hardly more natural than paper and in fact is less easy to control the asset base. When economists talk about not repeating the mistakes of the 1930s, they are by and large talking about the importance of maintaining liquidity in the system to prevent deflationary spirals, and avoiding liquidity traps. They are also cognizant of Keynes' proof that Say's Law does not work once people want to start doing things like holding liquid assets, and the dismal performance of things like the zero-inflation policy in Canada and other countries through the 1990s. I'm amazed by the number of Internet libertarians who have jumped on this bandwagon.

patrickg-zill 18y ago
You make some interesting points and I will definitely hunt down the "Golden Fetters" piece. However I would ask whether you have looked into the argument that gold restricts the ability of the gov't to expand, in that there is a built-in expense to more spending when you have a gold-backed currency. It appears (to me and probably others) that part of the current problems the USA is facing is due to a govt that grows and grows, without a method to have a feedback loop that would restrict it - currently it seems the answer is to just print (electronically or physically) more $100 bills (which cost about 4 cents to make).
bokonist 18y ago
As a result of World War I, the governments of the world printed far more money than they had backed in gold. Eventually, people realized that the government did not have enough gold to redeem all the paper currency. People rushed to the bank to withdraw so they could get their money out first. At this point, the government had to either devalue the currency or leave the gold standard. Sticking to the gold standard at the previous valuation was a recipe for ruin. Most countries chose to leave the standard altogether. But they could have simply devalued, learned their lesson about diluting, and returned to a gold standard. The lesson the Keynesians took from this episode was not to go on a gold standard in the first place. The lesson the Austrians took was that government should not dilute the currency. Since all government's prefer to dilute the currency, and most "mainstream economists" are government funded, mainstream economists are almost all Keynesian, not Austrian. The best two articles I've read in defense of gold are these two: http://unqualified-reservations.blogspot.com/2007/11/who-heck-is-benn-steil.html http://unqualified-reservations.blogspot.com/2007/11/who-hec... and http://unqualified-reservations.blogspot.com/2008/02/return-to-castle-goldenstein-gold.html http://unqualified-reservations.blogspot.com/2008/02/return-...