Dr. David Beckworth courtesy of wku.edu
Originally posted on Tuesday, March 11th, 2014
Professor David Beckworth is an assistant professor of economics at Western Kentucky University in Bowling Green, Kentucky. His interests are not limited to Running, Marathons, Basketball, Softball, Krispy Kreme Doughnuts, Vegetarian Foods, Family, Nature, Travel, and God.
He also, among other things, is the author of a highly regarded blog, Macro and Other Market Musings. Along with Prof. Scott Sumner, author of a blog called The Money Illusion, Prof. Beckworth widely is considered one of the leading academic proponents of the monetary theory called NGDP targeting.
Prof. Beckworth devoted a long essay in the February 10th issue of National Review, with a shorter reprise of his thinking on March 5th in Macro and Other Market Musings to writings of Lehrman Institute founder and chairman Lewis E. Lehrman on the classical gold standard contained in Money, Gold, and History. As Prof. Beckworth is a significant public intellectual and lead proponent of a rival theory, this conversation is very welcome.
Prof Beckworth presents an argument that “The Gold Standard Was An Accident of History.” He observes:
Though the classical gold standard of 1870-1914 did work relatively well, the history of gold as money is far more nuanced than portrayed by Lehrman. … “That the U.S. gold standard was an accident of history and that its longest unchallenged, continuous run was only a quarter of a century suggests the question: Was it was the gold standard, per se, that created the long-run price stability of the 18th and 19th centuries, or was it a deeper political and institutional commitment to price stability?” I go on to make the case that it is not price stability per se we want, but monetary stability. I argue that is best accomplished by stabilizing the expected path of total dollar spending growth.
This writer, as well as Lewis E. Lehrman, come to the very different conclusion, buttressed by abundant evidence: the gold standard was very much part of a complex and sophisticated political process rather than an accident. Moreover, it respectfully is submitted that there is abundant nuance to Lehrman’s arguments both in the book reviewed and presented in many other venues.
Prof. Beckworth’s claim of lack of nuance appears to reside in the partial elision of the role of silver in the deep history of the gold standard — as established by savants such as Copernicus and Newton and as practiced. The role of a subsidiary precious metal in the monetary system presents, at this point in history, as of mostly academic interest. It thus has not attracted extended attention in Lehrman’s, or this writer’s, writings.
The really important nuance, it is submitted, is in making the distinction between the classical gold standard and the gold-exchange standard, such as that of Bretton Woods. This is a critical nuance which Lehrman addresses meticulously.
Of far greater significance, however, than the stated concern over the relatively short shrift given by Lehrman (and this writer) to the debates about bimetallism, is the respectful tone with which Prof. Beckworth addresses Lehrman’s analysis. This respect is of acute contemporary significance: both NGDP targeting and the gold standard are two of the six monetary regimes enumerated for study in the Brady-Cornyn Centennial Monetary Commission.
Prof. Beckworth’s gracious acknowledgement that “the classical gold standard of 1870-1914 did work relatively well” strikes a tone worthy of a scholar and a gentleman. That portends well for the quality of debate that will be conducted by the monetary commission, when established. Such a commission assuredly would give Prof. Beckworth and Prof. Sumner the highest visibility venue to date in which to present their case for NGDP targeting. It therefore is to be abundantly hoped that the establishment of such a commission will enjoy their, and their allies, unequivocal support. May the best policy win!
For readers unfamiliar with the concept, NGDP targeting it as described by the Wikipedia, as “A nominal income target is a policy conducted by a central bank that targets the future level of economic activity in nominal terms (i.e. not adjusted for inflation). The central bank could target Nominal Gross domestic product (NGDP) or Nominal Gross domestic income (GDI) and use monetary policy, including conventional tools such as interest rate targeting or open market operations and unconventional tools….”
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