Consensus in scientific fields is a curious thing. It often indicates a blind spot. Science does not regularly yield consensus, but varying conjectures, each one in confrontation with evidence in an unending process of refinement and rethinking. If conjectures align, the scientific process has probably atrophied. “Settled science” is an oxymoron, even as Al Gore hyped climate change with that contradiction in terms.
In contemporary economics, there are perhaps only two contentions that enjoy the endorsement of the entire discipline. The first is the beneficial nature of free trade. The second is that the gold standard is dangerous and obsolete.
All in exchange for good money
Mathematician Stanislaw Ulam once threw down the challenge that economists could not make non-trivial statements. An example of a trivial statement is “climate change.” Systems are either static or dynamic. To say the climate is dynamic is to place it in the largest category of all things in the universe, which is to distinguish it in just about no way.
It took a while, but economics major domo Paul Samuelson answered Ulam’s challenge with one theory: that of comparative advantage. Comparative advantage, as spelled out by David Ricardo two centuries ago, holds if that individuals and societies produce only what they are best at producing, and trade for the rest, everyone will be better off than in all other scenarios. Just make port wine, Ricardo urged the product’s namesake Portugal, and exchange with it, and you’ll be richer in food, clothing, shelter, and luxuries (all imported) than otherwise possible.
Since the 1970s, economists have been fearsome in their defense of free trade. This represented a shift, in that the discipline got going, in the 19th century, specifically at the University of Pennsylvania’s Wharton School (which would later graduate Donald J. Trump), as a shill for business interests who wanted hefty duties on the imports of competitors. (See political economist extraordinaire Phil Magness’s work on these issues.) In the early 20th century, the Harvard branch of economics, under the leadership of Frank Taussig, attacked Penn’s managed-trade “American School,” culminating in the famous fruitless letter of 1,000 economists urging President Herbert Hoover, in the spring of 1930, not to sign the Smoot-Hawley tariff which would plunge the world into the Great Depression.
When Donald Trump attended Penn in the 1960s, Wharton was probably still smarting from getting bested by Harvard, whose free-trade consensus won over the field care first of Taussig and then its wunderkind Ph.D. Samuelson, who as a faculty member at M.I.T. helped set up the premier scientific economics department of its time. When Samuelson won the Nobel Prize in 1970, advocacy of managed trade had washed out. Everybody believed in free trade. Exceptions were by definition “cranks,” the likes of Peter Navarro at U.C. Irvine, currently the administration’s top trade advisor.
Just then, in the 1970s, consensus #2 congealed as well. Everybody in economics—tout le monde per Tom Wolfe—came to agree that the gold standard was awful. The given reasons were numerous and dizzying. A gold standard would constrain central banks in time of a crisis. It would crunch down spending and “demand.” History has proven it a disaster. And what does some non-ferrous metal have to do with anything, let alone guiding the world monetary system? Once the top economists (very much including Ben Bernanke at Princeton) loudly laughed at the gold standard, lessers at provincial places got in step lest they be revealed as cranks.