December, 2018

Central Banking without Romance

  • Thomas L. Hogan

    Fellow in Public Finance, Baker Institute Center for Public Finance, Rice University
  • Daniel J. Smith

    Associate Professor of Economics, Troy University
  • Robin Aguilar-Hicks

Contact us
To speak with a scholar or learn more on this topic, visit our contact page.
Additional details

Read the article here.

Many economists, including former Federal Reserve chairman Ben Bernanke, believe that the gold standard generates poor economic outcomes including output volatility, price instability, financial panics, the spread of recessions via the exchange rate, and speculation-induced collapse. These problems, however, do not by themselves demonstrate the superiority of central banks over the gold standard. Comparative institutional analysis requires demonstrating that the relevant alternative, in this case a central bank, can improve upon these outcomes in practice. We use this standard to compare central banking and the gold standard in the United States. Recent theoretical and empirical evidence suggests that the Fed has not been able to measurably improve upon the gold standard even when it comes to these deficiencies.