Ideology versus Efficiency

One of my long-running frustrations with libertarian thought is the idolization of gold (and to a lesser extent, silver). I could be wrong and there is substantial merit to the argument. I just don’t think so. All currency is relative. During a famine, would you accept gold for a loaf of bread? A loaf of bread for gold? The answer is different, right?

Megan McArdle posted about this last week:

“Hard money” types tend to denigrate the dollar as little green pieces of paper, not a real thing that’s actually worth something. This seems to me like a version of the Marxist fallacy, the belief that value can be somehow intrinsic rather than relative. Gold is pretty, of course, but not actually much more “useful” than a dollar bill. It does have some industrial application, but the vast majority of the gold in the world is used for money or jewelry.

A dollar is a real thing: a store of value and a medium of exchange. These are extraordinary valuable uses. Indeed, the need is so great that if currency is restricted or unavailable, people do not simply revert to barter; they turn something into a currency.

She continues, leading to a story about prisoners using canned mackerel as currency. We can, and probably should, complain loudly about fiat currency, if only to encourage and force more responsibility and less maniuplation by the government. But fetishizing gold misses the point. The point that gold has an extra application is most irrelevant because most people are not interested in bartering with organizations interested in gold’s industrial applications. Gold has value for the same reason a dollar isn’t a mere piece of ink-stained paper: someone else values it.

That is real, but it is also subjective. Argue for gold. Argue against fiat. Just remember that they are separate issues.

2 thoughts on “Ideology versus Efficiency”

  1. “Gold has value for the same reason a dollar isn’t a mere piece of ink-stained paper: someone else values it.”
    And the only reason anyone values an ink-stained greenback, is because behind it is a government gun. Labeling hard-money proponents as fetishists is kind of off-the-mark. What we want is not to impose “gold” or anything for that matter, we just want to be free to trade in any medium which is mutually accepted, without being penalized by the government.
    The fact that fiat currencies are imposed and maintained by violence, deception, fraud, and theft, is *always* overlooked by people willing to apologize for fiat currency. *ALWAYS*
    Until and unless you’re willing to defend that idea, you can’t – with any consistency or conviction – complain about specie advocates.

  2. I didn’t intend to argue for fiat currency in this post, although I will in a moment. I sought only to argue against gold having objective value. More specifically, I’m arguing against gold backing a fiat currency. It merely introduces redundant subjectivity. That wasn’t clear enough, so I hope it is now. I don’t think that’s incompatible with what you’re saying. People should always be free to trade in any mutually accepted medium.
    I’m also happy to concede that I’m only arguing against a small segment of specie advocates, those who want our fiat currency to be backed by metal. Most, like you, are against fiat. What you want to replace it with is entirely valid for you and your trading partners.
    I happen to think a national currency with strict, admittedly difficult-to-design limitations is the least bad option for a general economy because of its efficiency. We are not there because we have fiat without the necessary restrictions. But I do not believe that the power of the gun should be used to make alternate currencies illegal. Gold, liberty dollars, soda caps, mackerel – I don’t care.
    I realize that this is a significant challenge of two mostly conflicting goals. I’m not saying it’s easy or good. I’m looking at least bad to achieve efficiency. I’m open to non-fiat alternatives, but there are trade-offs to private currency. It’s possible that I’m weighing the trade-offs incorrectly.

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