Libertarianism and Austrian School economics are two different things. The former is normative, the latter is positive. Nevertheless, the two are frequently conflated. I understand why. Libertarians are individualist; Austrian School economics focuses on individual human action.That the two are conflated is understandable, but unfortunate. When libertarians get it wrong, it's assumed the Austrian School gets it wrong.
Gold is a ready example. Libertarians rhapsodize over gold, and gold is frequently associated with the Austrian School. Libertarians who claim Austrian School bone fides do Austrians no favor when they rhapsodize over gold. Gold has historically served as free-market money. Austrian School economists, after weighing benefits and costs to the individual of free markets opposed to an interfered markets, side with free markets because benefits in the analysis outweigh cost. Austrian School economists have no inmate preference for gold, or any form of money. What a free market dictates money should be is what counts. Nevertheless, Austrian School economists are viewed as gold-bugs, even if wrongly so.
In the minds of Austrian School detractors, perception is reality. Because perception matters, libertarians do Austrians no favor when they wax poetic on gold to elevate its savior status. I say that because libertarians get it wrong. They get it wrong, as do most gold enthusiasts. They get it wrong, and getting it wrong is the history of gold. I'm not alone in this observation. Man of letters Guillaume Thomas Raynal penned the following gold observation, invoking the wealth dichotomy between Spain and Holland, in 1770:
The Spaniards though possessed of all the gold in the world remained or became poor; the Dutch
presently acquired riches, without either lands or mines. Holland is a nation at the service of all the
rest, but who sells her services at a high price. As soon as she had taken refuge in the midst of the
sea, with industry and freedom, which are her tutelary gods, she perceived that she had not sufficient
quantity of land to support the sixth part of her inhabitants. She then chose the whole world for her
domain, and resolved to enjoy it by her navigation and commerce. She made all lands contribute
to her subsistence, and all nations supply her with the conveniences of life.
Antiquity frequently fails to confer the profundity we'd like to believe, but in Raynal’s case it does. Gold, universally accepted as free money of choice, provides no road to riches. As money, gold works. As an asset to build wealth, it stinks, and it always has, as Raynal well understood. Many libertarians fail to appreciate this fact.
Holland won, Spain lost. This is no surprise. Wealth and capital are created by transforming the inert into desired goods. To buy gold, or to buy a commodity, and sit and simply wait for someone to bid up its price in an effort to create value is a speculation. Waiting for someone to do the heavy lifting is antithetical to pro-active, entrepreneurial wealth creation. Did Ford, Rockefeller, Carnegie, Gates, Walton accumulate riches by speculatively accumulating gold and commodities, or did they accumulate riches by proactively elevating refined commodities to desirable consumer goods? The question is rhetorical.
But what about gold as insurance?
What about it? Gold is no better insurance against mayhem and tumult than an ownership position in a vibrant customer-satisfying enterprise. If all such enterprises were to collapse, what good would gold do? After a collapse nothing exists to exchange gold for.
The same is true of commodities in general. (To be clear, gold is technically an asset, not a commodity). What value is a commodity if entrepreneurs employing people, time, and capital are prevented from elevating a commodity to a usable, valued form? If someone were to dump a ton of raw aluminum ore on my driveway and there were no organizations to whom to sell, the aluminum would be worse than worthless; it would be a liability.
I suppose food commodities could be of immediate value, but even that proposition is iffy. Dump a ton of corn on my driveway, I could at least carry pan-sized scopes inside to boil and eat, but that’s about it. Limited culinary skills prevent me from even grinding corn into meal. Leave a live steer on my driveway, and I’d butcher it figuratively because I have no idea how to butcher it literally. I depend on entrepreneurs to elevate such commodities into more palatable form. Human ingenuity creates value, commodities in their raw state never do.
The problem metastasizes when the libertarian, Austrian-friendly, financial guru resorts to the hyperbolic, as too often occurs. The language is copiously peppered with “collapse” and “crash." Calamity awaits; gold is the anodyne, so go all in. It's all so off-putting to the skeptical mind.
Yes, market corrections occur, but collapses and crashes rarely do. The problem is usually more chronic; it's rarely acute. Therefore, the libertarian Cassandra is really the libertarian Chicken Little. Unfortunately, it's a bad look for the Austrian School when these libertarian apocalyptic prognostications are conflated with the Austrian School. Best for all not to make them.
Gold is a ready example. Libertarians rhapsodize over gold, and gold is frequently associated with the Austrian School. Libertarians who claim Austrian School bone fides do Austrians no favor when they rhapsodize over gold. Gold has historically served as free-market money. Austrian School economists, after weighing benefits and costs to the individual of free markets opposed to an interfered markets, side with free markets because benefits in the analysis outweigh cost. Austrian School economists have no inmate preference for gold, or any form of money. What a free market dictates money should be is what counts. Nevertheless, Austrian School economists are viewed as gold-bugs, even if wrongly so.
In the minds of Austrian School detractors, perception is reality. Because perception matters, libertarians do Austrians no favor when they wax poetic on gold to elevate its savior status. I say that because libertarians get it wrong. They get it wrong, as do most gold enthusiasts. They get it wrong, and getting it wrong is the history of gold. I'm not alone in this observation. Man of letters Guillaume Thomas Raynal penned the following gold observation, invoking the wealth dichotomy between Spain and Holland, in 1770:
The Spaniards though possessed of all the gold in the world remained or became poor; the Dutch
presently acquired riches, without either lands or mines. Holland is a nation at the service of all the
rest, but who sells her services at a high price. As soon as she had taken refuge in the midst of the
sea, with industry and freedom, which are her tutelary gods, she perceived that she had not sufficient
quantity of land to support the sixth part of her inhabitants. She then chose the whole world for her
domain, and resolved to enjoy it by her navigation and commerce. She made all lands contribute
to her subsistence, and all nations supply her with the conveniences of life.
Antiquity frequently fails to confer the profundity we'd like to believe, but in Raynal’s case it does. Gold, universally accepted as free money of choice, provides no road to riches. As money, gold works. As an asset to build wealth, it stinks, and it always has, as Raynal well understood. Many libertarians fail to appreciate this fact.
Holland won, Spain lost. This is no surprise. Wealth and capital are created by transforming the inert into desired goods. To buy gold, or to buy a commodity, and sit and simply wait for someone to bid up its price in an effort to create value is a speculation. Waiting for someone to do the heavy lifting is antithetical to pro-active, entrepreneurial wealth creation. Did Ford, Rockefeller, Carnegie, Gates, Walton accumulate riches by speculatively accumulating gold and commodities, or did they accumulate riches by proactively elevating refined commodities to desirable consumer goods? The question is rhetorical.
But what about gold as insurance?
What about it? Gold is no better insurance against mayhem and tumult than an ownership position in a vibrant customer-satisfying enterprise. If all such enterprises were to collapse, what good would gold do? After a collapse nothing exists to exchange gold for.
The same is true of commodities in general. (To be clear, gold is technically an asset, not a commodity). What value is a commodity if entrepreneurs employing people, time, and capital are prevented from elevating a commodity to a usable, valued form? If someone were to dump a ton of raw aluminum ore on my driveway and there were no organizations to whom to sell, the aluminum would be worse than worthless; it would be a liability.
I suppose food commodities could be of immediate value, but even that proposition is iffy. Dump a ton of corn on my driveway, I could at least carry pan-sized scopes inside to boil and eat, but that’s about it. Limited culinary skills prevent me from even grinding corn into meal. Leave a live steer on my driveway, and I’d butcher it figuratively because I have no idea how to butcher it literally. I depend on entrepreneurs to elevate such commodities into more palatable form. Human ingenuity creates value, commodities in their raw state never do.
The problem metastasizes when the libertarian, Austrian-friendly, financial guru resorts to the hyperbolic, as too often occurs. The language is copiously peppered with “collapse” and “crash." Calamity awaits; gold is the anodyne, so go all in. It's all so off-putting to the skeptical mind.
Yes, market corrections occur, but collapses and crashes rarely do. The problem is usually more chronic; it's rarely acute. Therefore, the libertarian Cassandra is really the libertarian Chicken Little. Unfortunately, it's a bad look for the Austrian School when these libertarian apocalyptic prognostications are conflated with the Austrian School. Best for all not to make them.
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