The Gold Standard: Yglesias at Slate Doesn't Have to Tell You Why It's Absurd


Matthew Yglesias yesterday filled some space on Slate with something that pretended to be a critique of the Cato Institute for throwing a conference that considers the possibility that gold might make better money than government/central bank paper.


He doesn't do anything as gauche as, say, report on what people said there regarding gold, even to critique it. Here's the gold content:

….the affinity between free market economic thinking and hard money is an interesting and important phenomenon. It's far from universal—Milton Friedman was obviously a low taxes and deregulation guy. But I do think there's a deep logic to it. Once you concede the fact that prosperity over both the long- and short-term depends in part on competent demand management from a powerful bureaucratic organization, then it's difficult to resist the moral logic of redistribution regardless of the empirical merits of any particular government program. But there's a deep yearning to give the case for free markets a profound moral reading rather than a pragmatic one, and that reading is hard to maintain in the face of a modern monetary system. Hence the hankering for gold.

Friedman, as lots of people don't know or don't remember, despite his reputation as the "libertarian who hated gold" got far more mellow about the possible merits of gold-as-money in his later, more libertarian years. See his book Money Mischief, where he wrote that "it does not follow [from the fact that there are costs associated with mining the gold, etc.] that the existence of a gold standard…is a mistake and harmful to society…the verdict is far from in on whether fiat money will involve a lower cost than commodity money," pointing out that relying on the probity of government managers to guarantee a safe and sane money might have its own risks.

While there is nothing like an argument against gold as money in the above–to say it is to refute it apparently–one can find elsewhere Yglesias offering such smackdown assaults as that, well, more gold can be mined (or aliens can steal some–really) so it isn't totally resistant to inflation or deflation, so that should make it no better as an inflation management tool than allowing government central bankers to invent as much money from nothing as they want. (This is not to say there aren't more sophisticated and interesting ways to argue for the benefits of fiat money over gold as money; but it is to point out that the idea is apparently in Ygs head so definitionally nutty that he doesn't think his readers need or deserve to hear them.)

The rest of the above quoted just doesn't make any coherent sense. It might be clumsy writing as opposed to incoherent thinking, but one can believe in "competent demand management" for reasons of economic efficiency or even "that's just the way things are" without embracing the "moral logic of redistribution." (See, for example, the sort of "demand management" we see in the real world that involves giving resources to banks or car companies or big Wall Street firms vs. the poor.)

There is no reason to say that gold as money people embrace it for some sort of "profound moral reading" of anything in particular, necessarily, or why the morality of free markets, if one does believe in it, is "hard to maintain" if fiat money exists, or even if one believes in it. (He may be getting at an argument that some libertarians used to aim at Friedman: that if you believe free markets work, you shouldn't believe that money needs to be centrally managed by the state. If so, he's not delivering it very clearly, and not sure what the morality part has to do with it.) That last "hence" comes from nowhere, but given the laughability of his "gold is no better than fiat to curb inflation" argument above, I guess he can't imagine any real reason one might value gold as money.

His argument seems inexplicable, pointless; on the surface it has nothing to do with any actual argument for or against gold as money, says nothing worth saying and is confusing in doing so. It is, I should say, perhaps the very definition of that horrible little twitter-esque mockery term "derp" which appears in its URL, as if Cato is guilty of it rather than the Yg.