Mainstream Views of the Gold Standard
By Arnold Kling
The IGM economists are unanimously against a gold standard.
One of the arguments is that the relative price of gold is too volatile. That strikes me as the wrong argument to make. For one thing, if you had a gold standard, then the relative price of gold might behave differently than it does now. For another, I think that the main Keynesian argument against a gold standard is that its relative price is not volatile enough. In particular, the argument would be that wages tend to be fixed in monetary terms, which under a gold standard means that they tend to be too sticky in terms of ounces of gold.
I would have answered the question of whether price stability and employment would be better under a gold standard as “uncertain.” I am surprised that none of the economists took that view. I wonder if they are comparing what they think would happen under a gold standard to what they think should happen with (well-designed and well-executed) discretionary monetary policy, as opposed to what does happen. A case of mental substitution, perhaps?