Yale Professor Disses Gold, Ron Paul

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William Nordhaus, the Sterling Professor of Economics at Yale University, on Thursday night attacked gold and Ron Paul in one of the meanest comments I have seen in some time. WSJ reports:

…at a panel Thursday night in New Haven… Nordhaus dismissed notions of scrapping the central bank, as well as criticism of its chairman, Ben Bernanke, as “partisan” and “ignorant.”

“Return to the gold standard? Give me a break. We’re not in Kansas. This is an integrated world economy,” he said. And forget doing away with the Fed: “Every country has a central bank. Money cannot manage itself.”

The critic that Nordhaus doesn’t name is, of course, Ron Paul. But calling Dr. Paul ignorant and partisan is absurd. Dr. Paul is the most principled man in Congress and is not attacking Bernanke on any type of partisan basis. He was just as critical of Bernanke and Alan Greenspan during Republican Administrations.

As far as ignorance, I’d like to see Nordhaus try and go up against Dr. Paul on the intricacies of the regression theorem and the proper methodology which should be applied to the science of economics.

And what’s this about an integrated world? What is more integrated than gold as a hedge against the money printing of central bankers? Further what’s this "Money can’t manage itself" comment? Managed currency is at the core of central planning. Karl Marx called for it in the Communist Manifesto. If you want to talk about ignorance it is Nordhaus’ view that money can’t manage itself. It means Nordhaus fails to understand Hayek’s deep and sophisticated meaning of "unintended consequences", which means for example the development of money as an "unintended consequence", not planned by anyone. It means Nordhaus has no idea of Ludwig von Mises’ detailed explanation in his book, The Theory of Money and Credit, of how money developed.

Further, I’ll match the record of gold against centrally planned money any day. In fact, I am willing to exchange all day with Nordhaus the central bank printed million dollar notes of the Weimar republic, Zimbabwe and Yugoslavia, each for an "unmanaged" ounce of gold. When do we start Nordy?

Nordhaus, btw, updates the college text Economics, which was originally written by that other gold hater, Paul Samuelson. What’s not very well known is that while Samuelson spewed hate on gold as a money, he made a bundle by being long gold in the late 1970’s, through a commodities trading firm, Commodity Corp., that he was affiliated with.

The words of one gold hater are now updated by another gold hater. That text Economics must be one helluva a book. These characters are simply apologists for the state. They downplay the inflation that is created by central banks, an inflation which benefits the state. Murray Rothbard nailed it when he reviewed a Samuelson edition of the text:

Before turning to the specifics of the ninth edition, let it be said that, as in the case of the preceding eight, the text suffers from the standard major ills of contemporary American economics: notably the sterile emphasis on the conditions of a static equilibrium which never can (and never should) exist, and the repeated sonorities of the Keynesian model presented without so much as indicating its major flaws and fallacies. Finally, like its predecessors, Samuelson’s ninth scarcely equips the reader for facing the real world of ever-accelerating inflation or of the recurring reality of inflationary recession. No cogent explanation of these burgeoning and unwelcome phenomena is offered.

Reprinted with permission from Economic Policy Journal.

2011 Economic Policy Journal

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