Dumb Question on the Gold Standard

By -
OK it's late, I finally got the toddler down (my wife is out of town so I'm on full-time Daddy Day Care mode), and I just cracked open a cool one. So maybe this is D-U-M dumb. But...

I think most Austro-libertarians believe that with a sound money, let's say 100% gold standard, prices should fall gently over time.

So does that mean gold gets more expensive year after year, compared to CPI basket? Doesn't that violate Julian Simon's general view of the world? What about industrial operations that require gold as an input? Would they do better under a silver standard?

I imagine I'm making some elementary mistake here; obviously Julian Simon wasn't saying that the relative prices of all goods goes down year after year, since that is impossible.

But on the other hand, something isn't quite clicking here.

Comments

  1. Anonymous2:29 AM

    I don't think this would violate Simon's view of the world because even if gold was getting progressively more expensive in terms of other goods, we could still be more amply supplied with it.

    "What about industrial operations that require gold as an input? Would they do better under a silver standard?"

    I think you are right that industrial operations that require gold would be better off under a silver standard, in the same way that you would be better off if nobody bid against you at an auction. I believe Adam Smith argued for a paper standard for the reason that it would free up resources for other uses.

    ReplyDelete
  2. Bob Murphy9:54 AM

    Yeah I think you're right. The big thing would be the exchange rate between an hour of labor and other goods.

    So let's say the dollar is fixed to a weight of gold. Over time, the dollar prices of everything tend to fall, except the gold price stays fixed (by definition), and wage rates measured in dollars go up slightly.

    But I think many Austro-libertarians think it's possible that the dollar wage falls over time too, just not as quickly as the prices of other goods and services. In that case, an ounce of gold gets progressively harder to buy.

    ReplyDelete

Post a Comment

Popular posts from this blog

Libertarians, My Libertarians!

By -
Cruel to be kind means that I love you . Because, while I think you are mistaken, your hearts are in the right place -- yes, even you, Silas --  unlike some people . This Breitbart fellow (discussed in the link above), by all appearances, deliberately doctored a video of Shirley Sherrod to make her remarks appear virulently racist, when they had, in fact, the opposite import. I heard that at a recent Austrian conference, some folks were talking about "Callahan's conservative turn." While that description is not entirely inaccurate, I must say that a lot of these people who today call themselves conservative give me the heebie-jeebies.
Read more

"Pre-Galilean" Foolishness

By -
 I am currently reading The Master and His Emissary , which appears to be an excellent book. ("Appears" because I don't know the neuroscience literature well enough to say for sure, yet.) But then on page 186 I find: "Asking cognition, however, to give a perspective on the relationship between cognition and affect is like asking astronomer in the pre-Galilean geocentric world, whether, in his opinion, the sun moves round the earth of the earth around the sun. To ask a question alone would be enough to label one as mad." OK, this is garbage. First of all, it should be pre-Copernican, not pre-Galilean. But much worse is that people have seriously been considering heliocentrism for many centuries before Copernicus. Aristarchus had proposed a heliocentric model in the 4th-century BC. It had generally been considered wrong, but not "mad." (And wrong for scientific reasons: Why, for instance, did we not observe stellar parallax?) And when Copernicus propose...
Read more