George Selgin, Less Than Zero: The Case for a Falling
vaults. But so too does a fiat standard entail
Price Level in a Growing Economy (London: Institute
resource costs, primarily in the form of the
of Economic Affairs, 1997).
deadweight costs of inflation. All in all, because
11. Greenspan must have meant inflation rates
the costs of a gold standard are reasonably
rather than price levels. His testimony is available
small in relation to its benefits, the gold stan-
at www.usagold.com/gildedopinion/greenspan-
dard is not a crazy idea.
gold.html.
12. Milton Friedman, "Commodity-Reserve Curren-
Notes
cy," Journal of Political Economy 59 (June 1951): 20332,
reprinted in Milton Friedman, Essays in Positive Eco-
1. See Hugh Rockoff, "Some Evidence on the Real
nomics (Chicago: University of Chicago Press, 1953);
Price of Gold, Its Cost of Production, and Commod-
Milton Friedman, A Program for Monetary Stability
ity Prices," in A Retrospective on the Classical Gold
(New York: Fordham University Press, 1960).
Standard, 18211931, ed. Michael D. Bordo and Anna
Jacobson Schwartz (Chicago: University of Chicago
13. See Lawrence H. White, The Theory of Monetary
Press, 1983). In economists' jargon, these were move-
Institutions (Oxford: Blackwell, 1999), p. 47.
ments along the (relatively flat) long-run supply
14. Milton Friedman, "The Resource Cost of Irre-
curve, not shifts of the curve.
deemable Paper Money," Journal of Political Economy
2. Louis D. Johnston and Samuel H. Williamson,
94 (June 1986): 64247.
"The Annual Real and Nominal GDP for the
15. Milton Friedman, "Monetary Policy for the
United States, 1790Present." Economic History
1980s" in To Promote Prosperity: U.S. Domestic Policy
Services, October 2005, www.eh.net/hmit/gdp/.
in the Mid-1980s, ed. John H. Moore (Stanford, CA:
3. Rockoff, p. 614.
Hoover Institution Press, 1984). Reprinted in
Kurt Leube, ed., The Essence of Friedman (Stanford,
4. Arthur J. Rolnick and Warren E. Weber, "Money,
CA: Hoover Institution Press, 1987).
Inflation, and Output under Fiat and Commodity
Standards," Journal of Political Economy 105 (Decem-
16. Transcript at http://divisionoflabour.com/ar
ber 1997): 13081321.
chives/004047.php.
5. Ibid., p. 1317.
17. Finn Kydland and Edward C. Prescott, "Rules
Rather than Discretion: The Inconsistency of Optimal
6. Ibid., p. 1318
Plans," Journal of Political Economy 85 (June 1977):
47392.
7. Megan McArdle, "There's Gold in Them Thar
Standards!" Asymmetrical Information blog, Sep-
18. Thus it is no surprise that inflation rose after
tember 4, 2007, http://meganmcardle.theatlantic.
gold was abandoned. See Robert Barro and David
com/archives/2007/09/theres_gold_in_them_tha
B. Gordon, "A Positive Theory of Monetary Policy
r_stand.php.
in a Natural Rate Model," Journal of Political Econ-
omy 91 (August 1983): 589610.
8. Peter Bernholz, "The Importance of Reorganizing
Money, Credit, and Banking When Decentralizing
19. Michael D. Bordo and Finn E. Kydland, "The
Economic Decisionmaking," Economic Reform in China,
Gold Standard as a Rule: An Essay in Exploration,"
ed. James A. Dorn and Wang Xi (Chicago: University of
Explorations in Economic History 32 (October 1995):
Chicago Press, 1990), p. 104, citing Michael Parkin and
42364.
Robin Bade, "Central Bank Laws and Monetary Policy.
A Preliminary Investigation," The Australian Monetary
20. See George Selgin and Lawrence H. White,
System in the 1970s, ed. M. A. Porter (Melbourne:
"Credible Currency: A Constitutional Perspective,"
Monash University, 1978), pp. 24-39.
Constitutional Political Economy 16 (March 2005):
7183.
9. Johnston and Williamson.
21. Richard H. Timberlake, "The Central Banking
10. For a thorough account of the benefits of
Role of Clearinghouse Associations," Journal of
allowing a productivity-driven deflation, see
Money, Credit, and Banking 16 (February 1984): 115.
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