Is the economic mainstream right to marginalize you as a nutcase for advocating a return to the gold standard?
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If you look at the 3 time periods studied, and were nutty enough to credit a single economic variable for the differences in GDP growth between those 3 time periods, you could conclude that higher income tax rates were responsible for the higher growth rates:
1870-1913: good
1973-2012: better
1948-1972: best
Looking at the paper, it is clear that the authors are not expressing a preference for the gold standard (indeed, gold has no role in their recommendations for reform of the international monetary and financial system – IMFS).
Instead, the authors segregated the periods for the purpose of discussing the ways in which each IFMS regime type succeed or fail to meet the authors vision of an ideal IFMS. The ideal has 3 objectives. Each of the IMFS regime types fail at achieving 1 of the 3, with each type optimizing a different pair of the 3 objectives.
The authors believe that an ideal IFMS “should satisfy the following objectives:(1)
• Internal balance — the IMFS should enable countries to use macroeconomic policies to achieve non-inflationary growth.
• Allocative efficiency — the IMFS should facilitate the efficient allocation of capital by allowing flows to respond to relative price signals.
• Financial stability — the IMFS should help to minimise the risks to financial stability.”
The authors specifically warn against drawing the types of conclusions that Amity Shlaes does, noting:
“Of course these summary statistics should be treated with caution, as the variables included will also have been influenced by a wide range of third factors — such as globalisation, financial liberalisation and regulation.”
And:
“And, of course, different countries participated in the different systems, further complicating comparisons. In particular, today’s system has many more members than the BWS. Period averages can also mask differences.”
The near-complete agreement amongst economists that putting a modern economy on the gold standard is a very bad idea is based on a number of sound reasons, none of which include the misconception that economic growth and financial stability were poor in the Bretton Woods era.
Nice response. Shlaes has a reputation in my book of cherry picking facts to support whatever side of the argument she’s making.