Hillsdale College has an economic symposium going on right now (Sunday through Tuesday), on “Money: History and Controversies.” They have two speakers each evening, with live streaming, and apparently viewable later, because I didn’t get to it until late Sunday evening.
|The lecture series is found here.|
The one I watched already was Steve Forbes, “How the Destruction of the Dollar Threatens the Global Economy,” which is also the title of a book by Forbes. It was 45 minutes on monetary policy, followed by Q&A. Forbes suggested that, if you ever feel trapped between other passengers on an airplane and want a little extra room, just start a conversation on monetary policy—people will give you a wide berth. It’s not the most enthralling of topics. Nevertheless, he managed to keep it pretty interesting.
There was a large segment in favor of returning to the gold standard, and how that would work. Son Economic Sphere has told me in the past that gold is subject to market forces, and therefore not an ideal basis for money. However, I found Forbes’ logic fairly compelling. I don’t know enough to be able to reproduce the arguments both ways, but I do realize that monetary stability depends on the money supply exactly matching the creation of wealth, which it represents.
Forbes’ thinks that, while not ideal, gold is as stable as anything we have. If we set the price at, say, $1100 per ounce, then when it rises above that, we know money should be slightly looser (more dollars printed). If it goes under the price, then it should be slightly tighter (fewer dollars printed). Maybe so.
He pointed out that, since gold is an element, we don’t lose it. Whatever has been mined up to this point in history is still gold. It can be reforged, reformed. You might have bits of gold in a ring that was first used by ancient Egyptians. Gold is firm but malleable. It’s compact. In other words, there are reasons it has so frequently been used as money.
But what most got my attention was the final question and answer, which I’ve typed up below. It was positive and hopeful, which I think we can use.
Q: When Carter became president, inflation shot up to 18%. We thought we had joined the ranks of the banana republics. Then Reagan became president, and I thought, finally we have turned a corner; we are no longer on the road to serfdom. Now, 20, 30 years later, we are still firmly on the road to serfdom[i]. So even if we get a Reagan again, will it make any difference? Because, afterwards we’ll still go back to walking down the road to serfdom?
A: Steve Forbes: Question about how, after Reagan, could we be in the mess that we’re in today? And part of the answer is, we did not have then what you might call the base of intellectual understanding and ideas and advocates that we have today, that we did not have 35 years ago. And in terms, even among Republicans 35 years ago, there was sort of the feeling that government should play a real big role. And, yeah, we shouldn’t have inflation; we should cut tax rates. But they didn’t take it to the next step.
I think now, morally, people are beginning to realize that if you believe in free markets, you can’t just say they work. You also have to make the moral case for free markets. And that’s still a big task in front of us. That’s why I wrote a couple of books on it. Others are doing it. Numerous have done it for a number of years.
In essence, you succeed in free markets by meeting the needs and wants of other people. Even if you lust for money, you don’t get it unless you provide something that someone else wants.
Now, sometimes, as Steve Jobs said, when he was asked once, “Do you do marketing surveys?” and he famously replied, “No, because people don’t know what they want until we show them.” That’s part of entrepreneurship. You’ve tried something new; you don’t know if it’s going to work. People suddenly may discover they couldn’t live without it.
But, meeting the needs and wants of other people. And just keep in mind, philanthropy and commerce are often portrayed as polar opposites: you succeed in commerce; you make up for your sins by giving it away to philanthropy. They’re not polar opposites; they’re two sides of the same coin—meeting the needs and wants of other people. Different ways to do it, but same objective, which is why the US, the most commercial nation ever invented, is also the most philanthropic nation in the world.
Two sides of the same coin. We have to make that moral case.
There’s a lot more understanding of economics. There’s a lot more understanding about free markets today than there was 35 years ago, 60 years ago, 80 years ago. Now we know, more and more, that when you get these big economic crises, it’s not a sudden failure of free market or outbreak of greed. It is massive government policy error.
Now, I just want to say, it doesn’t excuse wrongdoing in free markets, or wrongdoing by bankers or anybody else. But, human nature hasn’t changed in thousands of years. People’s ability to do bad things preceded Adam Smith. Believe me, just look at the Bible, this is something that predated Adam Smith.
So, it’s a very good question. But now I think we are setting the foundation where, we get a good president, good. But what we want is understanding, as Hillsdale has tried to do, where even if you get a total mediocrity, the accepted wisdom is: Constitution, free markets, having a moral basis of a free society. When that happens, you don’t have to depend on a Reagan. When you have that kind of consensus. So we’ve got to get the consensus right, and not be dependent on particular outstanding individuals.
I highlighted that section near the end, because that got my attention. It coincides with my Spherical Model theory, that the political, economic, and social spheres interrelate. The goals are freedom, which we get from abiding by the US Constitution; prosperity, which we get from free markets (not to be confused with crony capitalism); and civilization, which we get from a moral people living moral lives, which includes strong families to pass along the way to civilization.
I like seeing evidence that we can make progress toward these things. Economically speaking, I think he is right that the understanding is getting through. When I was in college, I was blessed with free market teachers; they were somewhat rare in the late 70s. But now, with so much data to back it up, free market is the most likely kind of economic education you get in college. I’ve observed that change over the past decade and a half. So the hope seems real.
Our freedom, prosperity, and civilization are in trouble, but there’s reason to hope we can make the changes necessary to get them back. He’s right that we’ll need to defend the morality of free markets, that economy depends on meeting the needs and wants of people both through commerce and philanthropy—which requires a morally good people.
We need to express that viewpoint better. My writing here is an attempt toward that end. (See “Anything Evil about Capitalism, Part I, Part II, Part III. For the longer list of my economic posts see Best of Spherical Model Part II and More of the Best Part III.)