George Mason University economist Tyler Cowen, in a critique of the gold standard and free banking on another economics blog, clarifies where he draws the line at free market solutions and thinks statism is to be preferred. The economic performance resulting form a gold standard, he says, would have improved the economy in the 1970s (if it were in place) but would have hindered the economy in the 1990s (again, if it were in place). Nonetheless, we should not have a gold standard, argues Cowen, because it can still be manipulated by government--a remarkable standard, which raises the question, what can’t be manipulated by the government, and if nothing can’t, then perhaps Cowen believes that laissez-faire theorists should simply roll up their sleeping bags and go home? Free banking also gets dismissed by Cowen as something that, despite its virtues, could not improve economic performance in the same way that monetary policies of the last 20 years have. Huh? Cowen must be referring to a twenty-year period that excludes the last three. He also must believe that free banking would have resulted in economic performance that is characterized by something worse than the credit-induced unsustainable growth of the 1990s. (N.B.: Free banking, in its heyday, provided enough liquidity to sustain the industrial revolution.) Cowen’s comments amount to pretty interesting musings from a representative of what is otherwise considered to be one of the leading doctorate-granting free market economics departments in the US.
