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(This item originally appeared at Forbes.com on February 8, 2023.) In 1958, economist William Phillips wrote a paper which found a relationship between unemployment and wages. Less unemployment led to higher wages; more unemployment led to lower wages (or slower wage growth). People have been arguing over this ever since. The basic problem here has been distinguishing between “monetary” and “non-monetary” causes of “inflation” — a topic we wrote about extensively in our new book Inflation (2022), because we knew this was going to be an issue. You may have noticed the excessive use of quotes above. Unfortunately, even these words are rather vague, and I use them mostly because other people use them. “Inflation” to some people means a specifically monetary process (what we called “monetary inflation.”) For others, it means the change in some common price indicator like the Consumer Price Index, which can certainly be affected by “non-monetary” factors. Sometimes the same people go back and forth on these connotations from sentence to sentence. No wonder they are confused. In our book, we make the point that prices (like the CPI) can be affected by “monetary” and “nonmonetary” factors. We all know that some countries (today Venezuela or Argentina) can have even “hyperinflation,” and this is entirely monetary in character. Also, we know that sometimes the supply and demand of individual goods or services (today eggs) can change prices dramatically. If this sounds very obvious, it’s because it is. Sometimes you can have both factors simultaneously. They even interact to a certain degree. Economics today cleaves rather precisely along this “monetary”/”non-monetary” line. Unfortunately, this has left us with some people who insist that “inflation is always a monetary phenomenon,” and some people who tend to ignore monetary factors altogehter, and are wholly in the supply/demand framework, which

Today, we have the entirety of Part II, Book V, Chapter V of The Brothers Karamazov (1880), a famous chapter known as “The Grand Inquisitor.” It is basically a commentary on what we now call Socialism, and has much relevance even today. Chapter V.The Grand Inquisitor “Even this must have a preface—that is, a literary preface,” laughed Ivan, “and I am a poor hand at making one. You see, my action takes place in the sixteenth century, and at that time, as you probably learnt at school, it was customary in poetry to bring down heavenly powers on earth. Not to speak of Dante, in France, clerks, as well as the monks in the monasteries, used to give regular performances in which the Madonna, the saints, the angels, Christ, and God himself were brought on the stage. In those days it was done in all simplicity. In Victor Hugo’s Notre Dame de Paris an edifying and gratuitous spectacle was provided for the people in the Hôtel de Ville of Paris in the reign of Louis XI. in honor of the birth of the dauphin. It was called Le bon jugement de la très sainte et gracieuse Vierge Marie, and she appears herself on the stage and pronounces her bon jugement. Similar plays, chiefly from the Old Testament, were occasionally performed in Moscow too, up to the times of Peter the Great. But besides plays there were all sorts of legends and ballads scattered about the world, in which the saints and angels and all the powers of Heaven took part when required. In our monasteries the monks busied themselves in translating, copying, and even composing such poems—and even under the Tatars. There is, for instance, one such poem (of course, from the Greek), The Wanderings of Our Lady through Hell, with descriptions as bold as

In 2022, I finished the Harvard Classics, a six-year project. I originally undertook this as a sort of homeschooling foundation. I fell into a group of ambitious homeschoolers, at tjed.org. They explicitly recognize the generational education deficit we have today, where parents have not been educated to the level that they would like their children to be educated. This deficit has to be remedied, with parental effort. Basically, you give yourself the education that you should have got when you were younger, but didn’t. Then, you can pass this on to your children. The TJ-ed people assert that it is not really possible to educate children to a level above or outside what you have yourself done. I think this is basically true, so, after doing it for several years, I agree that the “education deficit” view of things is valid. The TJ-ed people recommend that this deficit be remedied by roughly two hours a day of study, by parents, over a period of ten years. This can be done while the children are younger. I don’t think I met that lofty standard (more like one hour a day, on average), but nevertheless I got a lot done. The two-hours-a-day pace is suggested primarily for the stay-at-home Moms who are usually responsible for homeschooling. Also, there is a large cohort of adults today, mostly educated at the better universities, who nevertheless feel that they have not been sufficiently educated. They feel this lack. So, even if you don’t have any homeschool ambitions, but you would like an organized program of Liberal Arts education, the Harvard Classics is a good one. A lot of the contents I was not at all familiar with. I wondered if it would be worthwhile. I can say that every selection was worthwhile and rewarding. It

(This item appeared at Forbes.com on January 8, 2023.) For most of US history — 1789 to 1971, a period of 182 years — the United States embraced the idea of a currency that is stable, reliable, and definite. In practice, this meant a currency whose value was linked to gold, the best real-world way to achieve these goals. There was nothing very creative about this. Britain had done the same for hundreds of years prior, as did all the leading countries for many centuries. The result was that the US became the wealthiest country in the world, the US dollar became the world’s leading currency, and New York became the world’s financial center. As long as the US stuck to this principle, there was never an “inflation” problem. As we explained in our new book Inflation (2022), when currency values go down, prices rise to compensate. It’s funny that, in all the talk about “inflation” in every major outlet over the past year, this idea almost never comes up. In the book, we make the example of the Mexican peso. It used to trade around 3/dollar in the early 1990s. Today, it is around 20/dollar. Guess what — the CPI in Mexico has risen about 10x over that time. This surprises exactly nobody, especially Mexicans, who have lived all their lives with this kind of corrosive nonsense. That’s why most countries today — not including Mexico, unfortunately, but including El Salvador, which used to have the same problems, only worse — link their currencies to some external benchmark, usually the USD or EUR. Why do they do this? Because, they learned that having an independent floating currency, like the Mexican peso, tends to lead, over time, to a chronic pattern of currency depreciation. All along the way, their central

I wanted to say something useful about the problems of Monetarism. We get a lot of Monetarism today particularly among the more conservative- or right-leaning groups. The Monetarist economists usually promote vaguely free-enterprise, small government principles, although typically not so much in actual practice. Where are the Flat Tax (or FairTax) fans among the Monetarists? They would probably agree with the idea, in principle, but their involvement ends with a nod of approval. As we will see, this is the natural and expected consequence of their adherence to certain fallacious notions, where Money is the beginning and end of all things. This is an extension of the “Prices, Interest, Money Box” that Classical economists got into toward the end of the 19th century, in the process effectively scrubbing all economic understanding of everything that lay outside of this box. The Keynesians were not much better, adding “government spending” to “Prices, Interest and Money,” among their toolkit of macroeconomic manipulation. The “Austrians” today have the same difficulties. I discussed the “Price, Interest, Money Box” in Gold: The Final Standard. July 10, 2016: The Tyranny of Prices, Interest, and MoneyNovember 27, 2016: The Tyranny of Prices, Interest, and Money #2: The Old Historicism Notable examples of this embrace of Monetarism among conservatives is the Cato Institute, always a hardcore Monetarist hangout, and the Independent Institute. I would say that even the American Institute of Economic Research, which has a long history of gold-standard advocacy, has been crippled by Monetarists in their ranks. in recent years. Where today can you find a single organization in favor of the gold standard, or even, if you do not like gold so much, the principle of Stable Value? Besides some very small operations like the Sound Money Defense League, this is hard to find. But, actually,

Today, we have some “book notes” on the book Less than Zero (1997), by George Selgin, who recently retired from his position at the Center for Monetary and Financial Alternatives at the Cato Institute. I use the term “book notes” to refer to comments on books that I have not actually read cover-to-cover, in detail. But, I think we can get a pretty good idea of the basic arguments, as illustrated by some lengthy quotes that I will provide. Basically, it is Nominal GDP Targeting, with a bit of a curveball argument for a lower NGDP target than some others prefer. A lower NGDP target implies a lower CPI or GDP Deflator, perhaps even one that is, on average, negative. The Cato Institute has been a Monetarist hangout from its beginning in 1977. Some people think this is why Murray Rothbard, a cofounder of Cato, soon parted ways and helped establish the Mises Institute in 1982, which is much more gold-standard-friendly, just as Mises himself was always a gold standard fan. I’ve always considered Monetarism an error. In the case of Milton Friedman, its chief proponent, I think it was an intentionally subversive effort. Over and over again, Friedman said things that I do not think he really believed. Most politicians are no great economists, and Milton Friedman bamboozled them with pleasant free-market platitudes, as in Free To Choose. This indeed served a productive role against the big government Keynesian/Socialist movements of the time, in typical Controlled Opposition fashion. But, then Friedman would slip in his Monetarist doctrines, effectively splitting conservatives between Monetarists and gold-standard or “sound money” fans. In actual practice, he personally blocked Ronald Reagan’s efforts to move back toward a gold standard in the early 1980s. Reagan, born 1911, lived the first sixty years of his life

(This item originally appeared at Forbes.com on December 14, 2022.) Even though most adults today have lived all their lives within the floating fiat monetary system that emerged, accidentally, in August 1971, many today still probably find it rather strange that we spend so much time talking about the Federal Reserve’s current, ever-changing policy of macroeconomic manipulation, and that we actually allow this committee of mediocrities so much influence on our lives and well-being. This is not how we did things for most of US history. Before 1971, we had a very simple policy: The value of the dollar would be linked to gold, specifically at $35/oz., the gold parity that Franklin Roosevelt defined in 1933-34. Before 1933, the dollar/gold parity was $20.67/oz. This had been our basic policy since 1789 (it is actually in the Constitution, in Article I Section 10), and it helped the United States become the wealthiest country the world had ever seen. Some people think that, even despite many technological advances, the US middle class has still never had it better than it did in the mid-1960s, when the dollar was “as good as gold.” It wasn’t just the United States. Germany, Japan, Britain, France, Mexico — and even the Soviet Union and communist China — also linked their currencies to gold, in the 1960s. As long as the United States (and all the other countries) stuck to this principle, there never was a problem with “inflation.” Today, it takes about $1800 dollars to buy an ounce of gold, not $35, as was the case during the Kennedy Administration. The US dollar today is worth about 1/50th of its prior value, compared to gold. (I call it “the two cent dollar.”) Just as it takes more dollars to buy an ounce of gold, it now