Waiting for a delayed plan

Paul Krugman this afternoon is, intentionally or not, "waiting for a delayed plan at O'Hare". Perhaps his flight is on Geithn Air? (sorry)

While waiting, he discusses Eichengreen and Temin's paper about the "gold mentality". I strongly agree that the gold standard, equated by some "not just with prosperity, but with morality, decency, civilization itself" is a dangerous thing; and it's a symptom of a wider illusion.

Those who fetishize the manufacturing sector and say a service-based economy is "hollowed-out"; those who say gold is the only real currency and fiat money is a fraud; those who think everything needs to be manufactured within the borders of their own country (but presumably don't take that to its logical conclusion, by operating a car factory, iron mine and arable farm inside their own house) - these people are suffering from a delusion about what reality consists of.

If they think that only physical objects are real and that perceptions, promises, knowledge, processes, contracts, laws, assumptions, relationships, language and human contact do not matter, they are really missing out on a lot. What a barren life it would be if only the material world mattered.


PunditusMaximus said…
Yes, but if only those concepts existed, we'd be Ancient Greeks, with their standard of living.
OldNick666 said…
As my education developed through various levels of understanding one of the big leaps was the understanding of abstraction. I am not sure what proportion of the population reaches this stage of understanding. The problem is that everyone has to deal with money but few realise that it is an abstraction with various forms of physical representation. Indeed few realise that gold is in fact a fiat currency but differs from others currencies by the limited quantity of the physical representation. The main problem with gold is that with increasing demand for currency with which to trade, a constant revaluation would be required which would be jolly inconvenient.

The problem with fiat currencies represented by paper etc is that they are susceptible to dishonest manipulation.

I remember, at university, a fellow student who was changing course from philosophy to engineering, having difficulty understanding mass. The physics lecturer came up with a poor explanation and the applied maths department another. Neither of these satisfied. When I explained that mass was an abstraction that could not be directly perceived by a human the penny dropped. It was fortunate that I was talking to someone who had studied philosophy.

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