The political class and the public “economists” still believed in the 1960′s that government bureaucrats could better allocate resources than the market

Declaring murder, robbery, extortion, and fraud out of bounds is also intervention into pure freedom.

No market can work efficiently without basic rules. Buchanan argues that the stability of the unit of account should be one of them - that the entire system would function more efficiently if everyone's financial calculations weren't subject to radical aggregate revaluation.

What government bureaucrats or anyone else believed and what they did in the 1960s is beside the point.

I don't see why you attribute bad faith or cowardice to him. He had a different specialty. That his analysis overlaps with yours doesn't mean he sees things the same way you do at all. He may think that attempting to go back to the gold standard would be even worse, and his analysis seems to imply that doing so would be regressive.

Thing is, I don't think it's conservative orthodoxy at all that money should be commodity-based. That's mainly fringe group-y, Ron Paul, don't scare the children stuff. Free market purism is much closer to a conservative orthodoxy.

I also didn't get anywhere near as much chauvinism from Buchanan. Until and unless there's a world currency, "sovereign" governments will be charged with establishing how each currency is valued, to the extent its within their power. As we can see from Greece in the Euro Zone, not having the power to re-value one's own currency puts strict limits on how to adjust with economic crises - i.e., puts a limit on sovereignty when it matters most.

If there were a world currency, then the choice would be the same: seek to stabilize its value, or let it be subject to financial anarchy.

Whatever you think of Buchanan's argument on the merits, it's not inherently left/right - which is one of the most appealing things about it, to me.

I got the impression that he favors a pretty thoroughgoing, democratic progressivist/protectionist intervention on behalf of the working classes, but also on behalf of true venture capital, against rent-seekers/collectors/speculators - a revival of what he was calling the American school.

@ bob:
I'm curious as to what aspect of the Buchanan message struck you as "conservative orthodoxy." It seems to me that there are numerous aspects of it that are totally anti-orthodox from a mainstream conservative point of view - most of all the way he runs right into and administers a pants-down paddling to free market purism. Without monetary discipline, he says, the free market is financial anarchy. The implications for our tax structure would eventually be immense, too, even if we didn't go all the way to Mike Hudson's neo-progressivism - my term, not his. Hudson probably counts as a market socialist in conventional terms - though I'd be curious to hear how describes himself.

What might make the argument particularly appealing to some of the far lefties would be if, in addition to being presented as a kick in the teeth to Wall St speculators (though not to real businesspeople), it was presented in conjunction with some variation on the Big Writedown/Jubilee, and maybe some version of Mike Hudson's revamp of the tax system. Might as well swing for the fences.

Just to expand further on my observation of the Rex v World arguments - the final points of contention between him and people like our dear departed JEM and JED, or mainstream-ish conservatives like David Frum, were always that, 1) it's not a magic answer, as the day after we went back on the gold standard, we would possess the same political ability as we did in the past to futz with and eventually bypass it (for the same reasons as before or some version), and 2), related, gold or other potential commodity-backing might impose limits, a good thing if you buy the arguments of economists on Rex's side, but those limits are artificial and overly constraining (i.e., relating to the actual physical quantity of particular resources whose value may not really be as "eternal" as their proponents claim), not to mention alien to most people alive today - in other words, they lack the conceptual and practical efficiency and flexibility of the fiat/floating system.

Buchanan's proposal answers both criticisms as well as they can be answered in our system. I really think Rex should consider fully adopting it: He could continue to wax eloquently on the past benefits of the gold standard and the harms of fiat anarchy, but wouldn't get caught up on the "wrong" side of historical debates with the ghosts of Roosevelt, Churchill, and others.

bob wrote:

I guess I’m assuming that Buchanan’s proposal is intended as a back door method for Rex’s view. Otherwise, what’s the point?

Back door? More like the front entrance, with searchlights, marquee, red carpet, and rope line.

Though the protection against "majority faction" is about as you describe, it's as much a protection against short-term expediency and the ability of a powerful minority - financial speculators in particular - to control the lives of everyone else. I wouldn't begin to offer an assessment of its political viability, but I think its selling points to progressives would be as strong as its selling points to conservatives.

I don't get your demographics argument.

Rex Caruthers wrote:

#3 is the only rational policy,unless you prefer short term advantages like Bubbles and Boom Bust Cycles.

Exactly - I was just responding to the idea that the Constitutional Value Squad would have to bend the rest of the world to its will in order to act to guard the dollar's value. I assume that it would be more in the manner of a current Fed meeting, where economic data were carefully analyzed, and the Squad would decide on appropriate measures to counteract #1 or #2. So if banks or GSEs or entitlements or massive speculation or anything else was threatening an "aggregate revaluation," the CVS would, for example, tighten up on credit - no doubt causing people to scream in agony, like toddlers at the grocery line denied their candy bars or, very similarly, like LBJ told he couldn't have his War and his Great Society, but, because it was CONSTITUTIONAL, Americans would presumably grumble a bit, but fall in line.

@ bob:
To argue Buchanan's point for him, and I suspect Rex would agree, the justified doubts about the worthiness of the dollar as global reserve currency are intimately tied to its uncontrolled, anarchistic virtual devaluation. In the meantime, there are grave doubts as to whether the status of the dollar as reserve currency under current conditions has been a net positive for the long-term health of the U.S. economy. It's enabled us to build up an elephantine, intrinsically unproductive financial services sector, while supporting massive trade imbalances, deficits, and the offshoring of manufacturing and employment.

"Globalization" can mean different things in different contexts: It can mean increasingly globalized trade, communications, politics, etc., or it can mean what actually has transpired during the period marked by globalization. It's putting the U.S. in a position where, to guard our accustomed relative prosperity, we have to assert ourselves politically - that is, in the end, by force - because more and more of the real productive labor upon which we depend is accomplished outside of our sovereign borders, less and less within them. We are materially dependent on our former customers. Over the long term, the tendencies/choices would be 1) attempt to restore our national economy, 2) adjust to a severe downward adjustment in relative prosperity and influence, or 3) imperialism. Looks to me like we're implementing all three at once, with shifting emphases - not clear yet which if any will predominate.

bob wrote:

The globlalized economy depends on fiat money and the US no longer has the critical mass to bend the world economy to its will.

The US dollar is still the world's reserve currency, and the manner in which the CVS worked to stabilize the value of the dollar wouldn't necessarily be all that more radical than what the Fed does now. That doesn't mean it would be perfectly successful at all times, and anyway you couldn't run a moment to moment adjustment of currency in circulation ensuring that the theoretical exchange value of every single dollar was exactly the same permanently.

Sovereign nations can re-value their currencies or let them float - that's a big part of what makes them sovereign. Buchanan, as opposed to Rex, seems to embrace Smith's understanding of money. He just wants to see that understanding understood in its practical implications, with an agency above and before majoritarian politics protecting the integrity and stability of the economic system as relating to monetary values.

I read his brief comment on the role of the dollar in the world to suggest that it would likely maintain its position, and that its usefulness to the world would increase.

@ Rex Caruthers:
I don't think we should underestimate though how radical Buchanan's analysis is. He appears to be saying that there's no real justification for any kind of leverage via the banking system in a fiat system. Doesn't that mean that the entire magical mysterious process by which we "create" money, including letting the banks maintain a fractional reserve relative to what they disburse in lending, is a relic of the past - that eventually we should have a situation where what we pass around is what we pass around, you can't lend it if you can't get it, you can't get it if it's not there, and it won't be there unless the Constitutional Value Squad says it's there?

What he leads me to envision is that the CVS would say that this is how many dollars there are and what a dollar is worth - say, 1/200,000,000,000,000th of the total value of all publically and privately held property in the U.S. on some particular date, and, the total amount made available to the financial system on all levels would be adjusted to retain that value relative to actual fluctuations in the economic system and market forces - I presume the dollar would still be traded. How the reserve system functioned might still be outwardly similar in some respects.

bob wrote:

If you want to argue that this proposal produces the right mix of the two impulses, let’s hear it.

You also seem to be saying this proposal will turn back the clock on globalization. I just don’t see that as possible.

Since Rex is unaccountably absent from his usual battle-station, I'll horn in on the action and say in my opinion he favors a set-up in which the eternal play of selfishness and altruism is more to our long-term benefit than one in which the the incentives are mainly in the other direction.

@ Rex Caruthers:
Is it the number that matters or the socio-economic effect? Is being unemployed today the same, worse, or better than being unemployed in a prior epoch?

I think the Republicans are "happy" with the number as is - for short-term political purposes - and don't appear to have any good idea about coping with the underlying problem, however you measure it. They may hope that they can enact some consensual/coalition-acceptable economic program that looks like Reaganism (or what people think Reaganism was), then hope that they catch a cyclical wave. Or, if such a wave is coming, it may come soon enough to rescue Obama. Either way, we may not see any fundamental changes in economic policy, including how we measure and discuss the economy, until the next major crisis, or until the lack of restored employment growth becomes an inescapable reality.