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How My Naïve Perception of the Economics Profession Eventually Changed
It was my senior year of high school at Trinity Christian High School. I was required to write a 20-30 page senior thesis throughout the year in order to graduate, and that thesis was required to outline 3 things: my personal religious beliefs, a defense/argument for a particular issue, and (most importantly) how my worldview would influence my professional career.
At this point in my life, I knew I wanted to major in economics — but now as I think back, I have no idea why. It was 2009, so the financial crisis was still at its peak, and for some reason I was fascinated by the title, “economist.” I thought that after years of studying economics, I would be able to intelligently and accurately predict and explain economic conditions. I really had no idea what that meant. When I told people my plan to major in economics in college, they would comment by saying, “Oh, that’s great! We need bright people like you who will figure out how to get us out of this mess.”
I agreed with them.
For my thesis, I had to personally interview an economist, and looking back at questions I had for him, I realize how naïve I really was. My questions assumed a lot of things. I assumed that economists could prescribe policies to combat recessions, that their main mission was to provide the most good for the most people, and that through years of study, a few economists could get together in room and fix things because they were intelligent and well-schooled. I guess I was excited to eventually become the hero who could make a positive impact on the world through economic policy. Continue reading
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Last week, Dr. Jeffrey Herbener (a professor of mine at Grove City College) testified before Congress on the issue of the Federal Reserve and sound money. Among many things, here is one particular statement he made in his written testimony that often proves quite contentious:
“The primary step in monetary reform, then, is to turn [Federal Reserve Notes] into 100-percent-reserve redemption claims for gold coins.”
In layman’s terms, Dr. Herbener is arguing here that to establish sound money, the Federal Reserve ought to issue notes that can be backed by some commodity (gold) and thus regulated by profit-and-loss, like the production of every other economic good. Seems reasonable. But at least one part of the reason why such a claim is often contended is that it is commonly believed that the gold standard will limit the size of the American economy. If the Federal Reserve cannot print more money as it is needed, how will the economy grow?
This concern is a myth, however. The gold standard–while certainly not conducive to a policy of artificial credit expansion–by no means “limits” the growth of the American economy. Indeed, a gold standard will likely facilitate greater economic stability and, in turn, more rapid growth over time.
The belief that a gold standard will limit the size of the economy is established on the faulty premise that the money supply must grow in order for economic growth to occur–that money sustains economic activity. This is shown to be false by the mere fact that doubling or tripling the money supply in third-world countries will (obviously) not create better economic conditions (see Zimbabwe). Increasing the money stock may create the illusion of prosperity, but it cannot possibly do anything to raise actual standards of living for an extended period of time. Continue reading
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