The Gold Standard in Theory and History
Edited collection of the core academic papers.
Summary
Eichengreen and Flandreau edited a collection of the essential academic papers on the gold standard, with editorial introductions that connect them. The contributors include Bordo, Temin, Bernanke, Mundell, Triffin, McCloskey and Zecher, and Eichengreen himself.
The collection covers the central debates. How the classical gold standard actually worked, including whether the price-specie-flow mechanism described by Hume operated at all or whether capital flows and central bank cooperation did the adjusting. Whether the system's stability came from its rules or from the credibility that governments would not be forced to abandon parity by domestic political pressure. Why the interwar restoration failed, and the evidence that adherence to gold transmitted deflation internationally and that countries leaving earlier recovered earlier. The Bretton Woods system's design and the Triffin dilemma, which showed that a reserve currency issuer must run deficits to supply reserves and that doing so eventually undermines confidence in the currency.
The editorial material is what makes the collection usable, since Eichengreen and Flandreau explain what each paper established and where the literature stood.
The book is an academic reader and assumes economics training. It is not an introduction; readers wanting one should use Globalizing Capital, which presents the same conclusions accessibly. Its value is having the primary literature in one place with a guide to what each contribution settled and what remained open. The scholarship dates to the mid-1990s.
Key takeaways 7
- The classical gold standard's stability came from the credibility of governments' commitment to parity rather than from any automatic adjustment mechanism.
- The price-specie-flow mechanism described by Hume did not operate as described, and capital flows rather than gold movements did most of the adjusting.
- Domestic political pressure for employment did not exist in the classical period, which is what made the commitment to parity credible.
- Adherence to gold in the interwar period transmitted deflation internationally, and countries that abandoned parity earlier recovered earlier.
- Central bank cooperation was a real feature of the classical system and its absence in the interwar period contributed to the restoration's failure.
- The Triffin dilemma shows a reserve currency issuer must supply reserves through deficits, and that doing so eventually undermines confidence in the currency.
- A fixed exchange rate regime requires that governments be able to subordinate domestic objectives to the parity, which is a political condition rather than a technical one.
Who should read it
Economists and serious macro investors who want the primary academic literature on the gold standard with editorial guidance on what each paper settled.
About Barry Eichengreen
Professor of economics and political science at the University of California, Berkeley, and economic historian of international monetary systems.
Golden Fetters established the standard account of the interwar gold standard: fixed exchange rates transmitted deflation across borders, and recovery began in each country only after it left the peg. The later books apply that monetary-history method to reserve-currency status, the euro, sovereign debt capacity and the 2008 policy response.
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