The Cultural Contradictions of the Goldbugs
Jason Kuznicki on Nov 22nd 2007
Being on Jim Babka’s radio show was a great experience. Above all I learned that I’m not used to expressing myself in twenty words and ten seconds or less. I had the sense that there were many, many topics left undiscussed, and I’d like to talk about one of them here. Another I’ll save for a post sometime over the long weekend, since I want to do some quote-finding for that one. (Mental note: Do this work in advance for future radio appearances.)
What I’d like to talk about is the survivalist/gold hoarding tendency found among some libertarians. We didn’t really discuss it at all on the air, but it lurked in the background the whole time: It was in the discussion we had of the Liberty Dollar, and it was very certainly in the advertisements that Babka’s show tends to host. I guess this is my ivory-towerism coming though, but I hadn’t given much thought to the survivalist/gold hording fringe as an aspect of libertarianism in quite some time — probably since I was an undergrad.
The mindset runs kind of like this:
In the face of a massive crisis, where the value of the dollar approached 0, it is true that gold in hand would be of little value compared to gun in hand, water in hand, or food in hand. There would be a time of chaos because the vast majority of people in this country do not understand what money is, and would not understand how to function in an economy where the US dollar was no longer money. There would be riots with demands for the government to somehow “do something” - as if they hadn’t done enough already! There would be martial law, supposedly justified by the riots, and central control over all economic transactions - to avoid that, you’ll have to be economically self-sufficient for a time. However, it would still be good to hold gold, for 2 reason:
1-If you saw it coming and left the country, or managed to get out during all the chaos, gold would be exchangeable into currency in the country you went to, US dollars would not.
2-With time, the natural economics of the free market would reassert itself, and a monetary unit would come into being. It might be gold, or it might not, but gold would still be valuable and therefore exchangeable into the new currency. Dollars, on the other hand, would carry only their value as paper.
So, if you are concerned about this scenario, you should be spending dollars on:
Foreign stocks and bonds
Non-perishable food
Desalinators and gravity-feed filters
Generators
Silver
Gold
Diamonds
etc.
To put it mildly, it does not occur to most people to think in these terms. Also unfamiliar:
Back in April 2001, I saw an ad in the WSJ offering US $20 gold pieces for $265. Vaguely remembering gold at over $800 an ounce, and never having seen or held a gold coin, I bought one as a curiosity.
When it arrived by mail a few days later, and took it out and held it in my hand, I was amazed at its size and weight and beauty. I suddenly realized what it must have been like, a hundred years ago, to have these coins in one’s pocket. It actually looked and felt valuable.
I now know what real money is like - and it’s nothing like the coins and paper we are familiar with. Those are just tokens - placeholders, if you will. The real stuff is awesome and powerful.
I didn’t know the thing would have this, well, aura about it. You can’t know what it’s like until you actually hold it in your hand yourself. Seeing it in a museum doesn’t do it. Amazing, that the average person used to be able to have this kind of power in his possession.
And:
Indeed. If you can ever get your hands on–even temporarily–a $20 Saint-Gaudens
Gold Double Eagle, do so. It’s like something from another planet.
You hold it and wonder what race of giants created it.
Then you feel both proud and crappy when you realize we did, a long time ago…
There’s a desire here and a concern for immediacy which sets survivalist economic thinking apart from other approaches. Libertarians are often different in precisely this direction, in that they view society and the economy that undergirds it as contingent and provisional, subject to infinite perturbations and thus potentially to destruction as well. Taking the highbrow approach, you get the law of unintended consequences and the intricate concern for the workings of civil society, which can be easy to destroy but very hard to replace. Put in more lowbrow terms, it’s quite possible that we’re all just gonna die — except for the lucky and the smart.
Where nonlibertarians tend to view state intervention in the economy as presumptively having little besides the desired effect, libertarians take it for granted that the desired effect will usually not come to pass, and that that other effects almost always will. (Indeed, the sheer fact that intervention is purportedly necessary is reason enough to suspect that whatever it is can’t be done efficiently under current economic conditions, and that unintended consequences — externalities — will be required.) We libertarians tend to believe that the side effects are where the real action is, and that these may be fatal not only to the project at hand, but one of these days to society itself. Without appreciating this mindset, even “sane” libertarians can seem loopy to outsiders. Yet often we’ve been right.
This is also libertarianism at its most conservative, and it feeds directly into the goldbug mentality shown above. But, as even the quoted comments hint, the value of gold itself is contingent on the goods and services for which it can be traded. Shiny and pretty is nice, but it doesn’t put food on the table. Apart from physical beauty, a market is nearly the only thing that gives gold any worth, and in straitened circumstances, physical beauty is of low marginal value. Even gold’s industrial uses require sophisticated markets in jewelry or electronics.
Gold is not unique in this respect; the value of money in any form derives above all from its value as a medium of exchange, and the medium is only as interesting as the goods to which it conducts us. Hoarding gold for fear that society will collapse? If it does, gold will go with it, because all economic values are in this sense relative, and because the market will have far fewer goods to supply for your gold. (There’s a word for this, although goldbugs won’t like it: Inflation.)
There’s a related point that I’ve wanted to put into blogspace for quite some time, and I apologize if it’s a bit tangential or far out. Because — to be honest — I’m pretty sure it’s both.
The achievements of Ludwig von Mises and of the Austrian School in economics strike me (trained in the history of thought, with piles of Foucault books rotting on my shelves) as analogous to those of Einstein in physics, and at nearly the same time. I don’t just mean that von Mises was a very smart guy, although he was. I think that he and Einstein reached epistemologically similar stances with regard to their chosen fields.
In both disciplines, economics and physics, old laws formerly taken as universal were re-cast as special cases of a new and more comprehensive framework, one that required analogous intellectual commitments of anyone taking it on. In both of these disciplines, measures or properties taken as universal were now shown to be relative and subjective. In neither case did this require discarding all laws or regularities, but the things assumed to be regular, or those taken as the starting points of the discipline, shifted radically. Money’s intrinsic value, for von Mises, was essentially a fiction, and he was no gold fetishist.
This was because properly speaking, prices were not to be measured in money of any sort. Von Mises did maybe more than any other writer to demonstrate that money measurements were measures of relative value, susceptible of being made proportionate to money, but also of being made proportionate to any other good. Money itself is a value like any other, and it passes through its own changes over time. But these same relative values, so often expressed in money, could be expressed in sugar or wheat or silk stockings for that matter, and these proportions would in any case be neither more nor less relative than in any other. The Archimedian point on which the whole world turns is shown not to be the value of money, but the act of evaluating — a point that is itself unstable. (For more on this theme, see my piece “The Stars, Like Prices.”)
In physics, the notion of a fixed or neutral observer (under attack since Galileo’s time) finally collapsed at almost the same time. Where the Austrian economists dethroned money once and for all as the absolute measure of value, Einstein demonstrated that space was not uniform, but that it varied with respect to different observers and their speeds, masses, and positions with regard to each other. Mass, acceleration, and time are no longer Archimedian points, either: All are true only in reference to an observer.
In both disciplines, the fiction of the neutral observer, or of the neutral scale of values, finally was folded into the larger system of non-neutrality of which it had been a first approximation. I am tempted to suggest that these epistemic breaks are also related to the advent of modern art and of the hypermodern chess of Aron Nimzovich and Richard Réti. In modern art, traditional iconography and the traditional repertoire of techniques is abandoned, while the subjective experience of viewing remains nearly the only constant, and arguably takes on new importance. In hypermodern chess, the emphasis is no longer on the accumulation of small, objective advantages and the direct control of the center of the board, but on the speed with which a player can convert one advantage into another, and the ability of a player to exercise various options both in the center and on the flanks. Declining to commit — the better to commit when more information is known — implies a recognition that strategic objectives change in value over time, and that being able to choose, even in the constrained environment of a chess game, is itself a valuable objective.
All of these developments happened in a very short era of historical time — the first three decades of the twentieth century (although much Austrian economics did come earlier). It’s no exaggeration to say that the world has never been the same since. Relativistic modernism, to give it a name, is everywhere now, at least when I look at things. I could easily elaborate, but I’d like to wrap things up. I’ve gone on long enough.
I am afraid that developing this idea more fully would take at least a book, and I am not confident that I am able to write any of its chapters without a good deal of input from others. What matters though is the sense of profound uncertainty that this epistemic break injected into each of the disciplines and, together, into modern life as well. (Head out of the clouds: Yes, there was the Great War as well, which clearly helped things along. What would relativistic modernism look like without it? We’ll never know.) Modern life in the relativistic age has powerful new tools for explaining the world, but it is also profoundly unsure of itself, in part because of the radically unsettling nature of the tools themselves: There are no ostensible and enduring values — which is absolutely not to say that there are no values. Yet most find the distinction minute.
To return to the topic at hand: Gold — its weight, its luster, its aura — seems to endure. It may or may not be a technically feasible as a money any longer, but as a throwback to a more certain age, it’ll obviously do. The modern-day goldbugs have all of the anxieties provoked by Austrian economics, but none of its epistemic complexity. Those who wish to preserve something of value should be partisans not of gold, but of the civil society and the market that make money of any type worth holding.
Filed in The Boardroom
Jason, One Point and Two Questions…
1) And this point is for EVERYONE, the owner of my network started off as a metals and coins dealer, and after buying lots of advertising on radio, decided to go into the radio business. I have control over only one commercial slot per break. Some of the commercials on my network, which does indeed have a survivalist bent, make me shudder. But overall, working with them has been a positive experience and they’ve made it possible for me put on the show I want to put on. Most people buy their radio time. I don’t. Most people are told what they can or cannot say, and that’s never happened to me.
2) Since there are no ostensible and enduring values, what do you do with the phrase, “We hold these truths to be self-evident… endowed… with rights.”
3) On what grounds can you make such an absolute claim?
Excellent post Jason. I think your argument is right on. The goldbugs have all the right worries, but many of the wrong solutions.
2) Since there are no ostensible and enduring values, what do you do with the phrase, “We hold these truths to be self-evident… endowed… with rights.”
3) On what grounds can you make such an absolute claim?
Excellent questions. I meant only that economic values are neither ostensible nor enduring, but that they exist only in relation to human evaluation. But the more fundamental things, like basic rights, are (to my mind at least) beyond economic valuing. Questions of right and wrong aren’t up for barter any more than they are up for a vote.
(Obligatory disclaimer: Yes, I know that the law and economics school will disagree here. There’s a post in this somewhere, but I’ve got some thinking to do first.)
On the sociology of the libertarian movement I believe that you are quite right. The “gold bugs” understand, more or less intuitively, some of the possible scenarios we might find ourselves in, but only very crudely understand the appropriate responses to those scenarios. They are, thus, what is usually referred to in political discussions as “cranks” - those who recognize certain “problems” but have only ONE BIG ANSWER for those and all related problems.
Fine so far.
Not so fine, however, when you get to the history of Economic thought. I understand what you are saying, it is that Mises brought relativity to Classical Economics just as Einstein did to Newtonian Physics, particularly with regard to monetary questions. That is, however, dead wrong, and is typical of the crankish way in which those people who have read only “Austrian Economics” see the history of Economics. [E.G., there was Adam Smith and, maybe, David Ricardo, but then nothing happened thereafter until Menger, Bohm-Bawerk and Mises.]
In fact, there was a considerably more sophisticated development of Economics in the English speaking world in the period from Ricardo’s Principles through WWI than there was in the German speaking world. Nassau Senior in the early 1850s had effectively “relativized” value theory, albeit he presented neither graphical nor mathematical demonstrations of what he was saying. William Stanley Jevons, in the late 1870s had the math and a much more rigorous exposition than the Austrians ever developed of “subjective value theory,” and Alfred Marshall in 1890 had a full blown exposition of neoclassical microtheory, including the monetary aspects thereof. Ludwig von Mises was BORN in 1881 and did not issue his first treatise on money until 1912,
Mises’ original contributions to Economic theory lie exclusively in (1) the socialist calculation debate, where he expressed a considerably more sophisticated understanding of what a market does in a mass society than anyone since Bastiat [albeit, for those who want to make their way through the mathematics, Leon Walras was probably more analytically rigorous on the same topic], and (2) in his primitive understanding of what later became known as public choice theory and property rights economcs - neither of which he developed beyond some initial observations.
Mises was also one of the last and the most stalwart defender of classical liberalism, but that isn’t the same thing as Economic theory and his contributions to that different area were largely contributions to propagandizing rather than developing the political theory [which goes back to at least 300 years prior to his birth].
So my suggestion is that now that you have successfully recognized the difference between Gold Bugs and a more mature and sophisticated view on monetary questions, go back and do the same for Economics as a whole. This “the Austrians did it all” view appears t as silly to someone who actually is familiar with the history and present state of Economics, somewhat like the Gold Bugs appear to be “just silly” to traders in international currencies.
Craig –
You may well be right. I’ve read far more of the Austrians than of others. But the idea that value can be measured accurately over time, and that prices in money can be used to do this, is both common to neoclassical economics and also not very relativistic in its approach. I’d be interested to hear what you had to say about this, since skepticism on just this point seems to be distinctly Austrian, and not at all neoclassical.
To the first quoted source, who said:
There would be a time of chaos because the vast majority of people in this country do not understand what money is
Nonsense. Eliminate a fiat currency and a money good will spring up almost instantly. The Soviets used vodka, inmates use cigarrettes. Americans would probably use Starbucks. Economists didn’t invent money, they just have a good explanation for what it is and how we got it. People don’t need anyone to teach them how to converge on a money good (or small handful of them).
To Jason,
Gold is not unique in this respect; the value of money in any form derives above all from its value as a medium of exchange, and the medium is only as interesting as the goods to which it conducts us.
A good can only become a medium of exchange if it is either 1) valued very broadly within the population, so that one can be sure of being able to trade it in the future to a vast array of potential trading partners or 2) valued by a single potential trading partner whom anyone can easily access and who has an insatiable desire for the money good and a vast array of other goods to trade. When one is talking about money goods, one cannot cleanly divorce the good’s value from it’s use as a medium of exchange.
But the idea that value can be measured accurately over time, and that prices in money can be used to do this, is both common to neoclassical economics and also not very relativistic in its approach.
Contrary to popular opinion, neoclassical measures of utility are ordinal, not cardinal. So values are not measured (or, more precisely, modelled) over time. Preference rankings are. And it doesn’t get more relativistic than that.
“But the idea that value can be measured accurately over time, and that prices in money can be used to do this, is both common to neoclassical economics and also not very relativistic in its approach. I’d be interested to hear what you had to say about this, since skepticism on just this point seems to be distinctly Austrian, and not at all neoclassical.”
Jason, I am not even quite certain that I understand the issue you are concerned about. Of course MARKET VALUES are measurable over time in money - since money is the one and only “measure of [such] values”. Individual valuations are not measurable in that way, but they are valuations, not value.
Perhaps this points out what I see as a flaw in the Austrian approach and you don’t. To me, Austrians are obscessed with only individual valuation. There are relative wants in their world, but no real consideration of how such wants are met. In the real world there are also “production functions” [specified by technology and resource availability] and supply curves. Market prices are created by the interaction of demand and supply - by the interaction of human wants OF ALL HUMANS INTERACTING IN THE MARKET PLUS THE GOODS AND SERVICES THAT MAY BE RECREATED EACH PERIOD TO SATISFY THOSE WANTS, not just demand acting upon fixed and “given” supplies.
If you followed the socialist calculation debate - which is the principal formative debate in Austrianism - then you know that Mises was indisputable at the market level, principally by pointing out that the socialists took prefernces as “givens” - but then seemed to get rather lost once he moved “back” into capital markets. Even Hayek notes this in his summary of the debate and Steele makes it a principal point of his account.
Sorry to post again so soon, Jason, but I just ran across this quotation from Mises’ Liberalism which seems to indicate that we’re both somewhat off base in our views of at least his Austrianism:
“Capitalist economic calculation, which alone makes rational production possible, is based on monetary calculation. Only because the prices of all goods and services in the market can be expressed in terms of money is it possible for them, in spite of their heterogeneity, to enter into a calculation involving homogeneous units of measurement. In a socialist society, where all the means of production are owned by the community, and where, consequently, there is no market and no exchange of productive goods and services, there can also be no money prices for goods and services of higher order. Such a social system would thus, of necessity, be lacking in the means for the rational management of business enterprises, viz., economic calculation.”
Wow, what an amazing job you did of completely missing the point of hard money.
The point of hard money is not that it is physically hard, gold, which is a reasonable choice for a monetary metal, is relatively soft. It is not that it is shiny. It is not that it is heavy, and it is not that it is pretty.
The point of hard money is that it is hard to produce more of it! That means that the Federal Reserve cannot dump lots and lots of newly created gold on the market and cause inflation. The neoclassical economists, though they got many things right, reversed the cause and effect of the business cycle. The think that when economic growth is “too fast” that inflation is inevitable. This is absolutely false. The reality is, when government dumps huge quantities of money into the economy, it create the illusion of an economic boom. This comes with lots of malinvestment, which has to be liquidated, eventually. At this point, there is a bust, which causes great misery, but must be endured to return the economy to health.
Examples of this are:
Huge inflation during the “roaring twenties” followed by the Great Depression (which, according to my parents, wasn’t really that great — downright unpleasant, the truth be told)
The dot-com boom and bust.
The housing boom and bust.
All the little booms and busts in between.
Have a look at the Austrian theory of the business cycle. Then have a loot at Murry Rothbard’s “The Cast Against the Fed”.
———-
It has been said that a pedant is one who prefers that his opinions be true.
A “goldbug” is one who prefers that his money have value. Personally, I don’t care if it’s gold, or silver, or oil, or anything else of real value. It needs to be divisible, it needs to have high value in relation to it’s size and weight, and it needs to be durable. Gold works fine, but if you have superstitions which cause you hostility toward gold, choose something else. But not government paper of no real value, which they can print anytime they want, choosing to destroy the economy rather than suffering the need to raise taxes or cut spending.
The point of hard money is not that it is physically hard, gold, which is a reasonable choice for a monetary metal, is relatively soft.
You’ve missed my point. Gold is valuable because people value it. Beyond that, there is no such thing as real value.
Nothing can be valuable, except to people. Animals do not value. So nothing can be valuable, except if people value it.
Then again, the industrial, ornamental, and other uses of gold are not going anywhere. Even if people ceased to value it as a store of value, it’s value, unlike that of trash money, cannot drop to zero.
Study the hyperinflation in Germany in the 1920’s, which led directly to Hitler’s rise. Study the misery now in Africa. As long as one group of people can inflate the money supply, and virtually steal the value of our money without stealing the money itself, there can be no economic sanity, and our lives will be at the mercy of those people. And being government employees, they are no known for their mercy.
1. The “Hyperinflation” is less than a myth.
Why do those who fetishize “hard money” never take into account non-monetary factors? Germany had drastically under-produced in the “Domestic” sector for years — vast amounts of raw materials had been dumped down the trash-chute of “war production”. Additionally, large numbers of men were conscripted to be turned into cannon-fodder (when they could otherwise have been farming, or working in factories, etc.)
Add to that the vast amount of destruction which — well, let’s be honest here, IS the primary purpose of warfare, and you have a definite pattern:
A. There was drastic underproduction on the domestic side.
B. large amounts of stuff being destroyed.
C. Large numbers of young men being slaughtered needlessly.
D. Large displacements of population due to warfare, etc.
Looking at all of that, whether the Germans used “hard” currency or not becomes completely meaningless. Nobody in their right mind is going to give two shits about so-called ‘precious” metals under even moderate sociopolitical strain, and the State’s “monetary policy” is going to be moot, as well: I want every “hard-currency” fetishist to head on over to Google Video, and watch a film called “Threads”. It deals with the likely outcome of sociopolitical collapse due to a thermonuclear war, and how that would effect Brittain.
One of the key points of this film (which woke ME up out of the LIbertarian/conspiracy-buff haze in which I’d been languishing for some time), was the part where the surviving remnants of the State seized the surviving food-stocks and weapons, in order to compel the survivors to do as they desired:
Under any sort of sociopolitical collapse, “market forces” are going to completely dissapear, and be replaced by REAL force (i.e. those who can hoard/gather/loot food/shelter/guns.) “Money” is basically a mass delusion which can only be sustained as long as REAL goods and services are being produced and traded. That’s why barter systems were prior to the creation of money.
And, no, nobody is going to be in any position to worry about gold as a “luxury good” — the only “luxuries” will be shelter/food/survival.
So, no — nonsense about the “aura” of gold and it’s use as a “store of value” will be rendered completely moot under EXACTLY the conditions the survivalist/goldbug types are hoarding it against.
“Economics” is, if you think about it, an elaborate form of “mental masturbation” in which only the halfway affluent and secure can “afford” to engage. (pun intended.)