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Forum - Austrian economists' Malthusianism about gold.

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advancedatheistPosted: Apr 21, 2010 - 21:27
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Austrian economists, Objectivists and similar cranks hold contradictory beliefs about resources. On the one hand they celebrate man's ingenuity in the free market to create or discover new resources, increase the productivity of existing resources, find substitutes for resources and so forth -- basically reiterating the late Julian L. Simon's argument of the human mind as the "ultimate resource" against the limits-to-growth thesis. (Ironically, in personal correspondence with Simon in the early 1990's, he told me that he didn't think highly of Ayn Rand's novels and philosophy.)

Yet on the other hands, these same people want to chain the world's economy to a fixed quantity of gold. (We can't do much now to add to the supply through additional mining.) Apparently it hasn't occurred to them that the human mind invented fiat money as a cheap substitute for the scarcity of refined gold on the planet. In effect they object to the exercise of human intelligence regarding gold that they celebrate regarding other resources.

But, as I suspect, they'll never acknowledge the cognitive dissonance, given how Austrian economics, Objectivism and libertarianism tend to attract people with Dunning-Kruger tendencies.

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DianePosted: Apr 22, 2010 - 05:13
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The thing they seem to hate about fiat money is that it puts significant power over the economy in the hands of the government. And that, for them, is the big no-no.

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advancedatheistPosted: Apr 22, 2010 - 09:16
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Fiat money has value because the government punishes people who steal it. What if the government announced that it would no longer investigate and prosecute thefts of anything made of gold? That would remove the state's interference in the ownership of gold, as Austrian economists want; but it would also make the value of gold collapse overnight.

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DianePosted: Apr 22, 2010 - 10:21
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Correct. They seem to think that the only valid role of government is to enforce private property.

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advancedatheistPosted: Apr 22, 2010 - 12:31
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I wonder how Objectivists resolve the cognitive dissonance: Because they want to give gold a privileged status among resources, they forbid the human mind from trying to find substitutes for it, like fiat money.

By contrast, they leave freethinking about every other resource up for grabs.

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advancedatheistPosted: Apr 22, 2010 - 13:06
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Julian L. Simon says we want the "services" provided by resources, not the resources in and of themselves:

http://www.juliansimon.com/writings/Ultimate_Resource/TCHAR03A.txt</p>

As economists or as consumers we are interested, not in the resources themselves, but in the particular services that resources yield. Examples of such services are a capacity to conduct electricity, an ability to support weight, energy to fuel autos or electrical generators, and food calories.

The supply of a service will depend upon (a) which raw materials can supply that service with the existing technology, (b) the availabilities of these materials at various qualities, (c) the costs of extracting and processing them, (d) the amounts needed at the present level of technology to supply the services that we want, (e) the extent to which the previously extracted materials can be recycled, (f) the cost of recycling, (g) the cost of transporting the raw materials and services, and (h) the social and institutional arrangements in force. What is relevant to us is not whether we can find any lead in existing lead mines but whether we can have the services of lead batteries at a reasonable price; it does not matter to us whether this is accomplished by recycling lead, by making batteries last forever, or by replacing lead batteries with another contraption. Similarly, we want intercontinental telephone and television communication, and, as long as we get it, we do not care whether this requires 100,000 tons of copper for cables, or a pile of sand for optical fibers, or just a single quarter-ton communications satellite in space that uses almost no material at all. And we want the plumbing in our homes to carry water; if PVC plastic has replaced the copper that formerly was used to do the job - well, that's just fine.

So if fiat money provides the "services" of gold without having to increase the physical supply of gold ad infinitum, then, according to Simon, this represents progress

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