Gold and intrinsic value

A loyal reader points me to this interesting article, which repeats the often-made claim that gold has no intrinsic value (“to a reasonable first approximation”).  This claim is accepted by almost everyone, except for a few who believe that gold is the only sound foundation of value.  Unfortunately these people are crazy.

President Ulysses S. Grant says in his memoirs: ‘Both winters  [at school] were spent in going over the same old arithmetic… and repeating: “A noun is the name of a thing,” which I had also heard my Georgetown teachers repeat until I had come to believe it.’  (thanks to another loyal reader for pointing me to this).  Are we like Grant?  Have we heard about gold’s worthlessness so often that we have come to believe it?

We might argue that gold has no intrinsic value, for it does not allow us to survive, as does bread for food, coal for heat, or guns for defense.  But by this argument, few things would have intrinsic value.  What, we might ask, is the intrinsic value of a rose?  Perhaps it produces a nice smell, which at one time was thought to protect against plague.  But in these modern times, surely we recognize this as a barbarous relic, and that roses can be imitated in plastic at a great advantage in cost and durability.

And yet, people still persist in wanting roses, and wanting gold.  Don’t they realize that gold has no intrinsic value?  Would they not be happier with lumps of coal?  Or should we perhaps accept that beauty has some value to people, as does food and heat, and that many find gold and roses beautiful?  And if a rose has some intrinsic value, then how much more should gold, which does not perish or attract bugs?  Perhaps not a thousand dollars an ounce, but significantly more than zero, it seems.

Now, we should not abandon all reason here.  A tulip has intrinsic value, but its price may exceed that value greatly at times.  But we should remember that there is more to life than calories, BTUs, and rounds of ammunition.

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One Response to “Gold and intrinsic value”

  1. Scott Locklin Says:

    “we should remember that there is more to life than calories, BTUs, and rounds of ammunition.”

    Sorry; someone had to say it.

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