The Cato Institute usually doesn’t mess around with the way-outside-the-mainstream elements of the libertarian worldview (see Chris Hayes for some of this) and certainly not with the elements of hard-core anti-statism that the business community would find very distressing. But with the economy in crisis, a lot of people are feeling somewhat ideologically discombobulated (myself included, at times) so I suppose it’s not shocking to see some loopy ideas moving closer to the mainstream. At the same time, there’s another trend that Brad DeLong’s been calling attention to, namely the fact that the present crisis has reached a level where even Milton Friedman’s ideas suggest that we should be doing stimulus. Brad, with touching naiveté, seems to think that that means that people normally inclined to admire Friedman should start agreeing that stimulus is a good idea. What’s happening, in fact, is that people normally inclined to admire Friedman are embracing fringy “Austrian” ideas (or Ayn Rand books) since the point of admiring Friedman is to reach the conclusion that government intervention is always economically ruinous.

All of which is by way of introducing the fact that Cato Institute Executive Vice President David Boaz apparently thinks we should adopt the gold standard and abandon “fiat money.” Of course, contractionary monetary policy amidst a sharp worldwide recession would doom us to years and years of misery. And during the Great Depression, nations’ ability to recover was strongly linked to their willingness to abandon gold.

Paul Krugman’s old post on “The Goldbug Variations” is always worth re-reading.

Cato Institute senior fellow William Poole offers us the latest version of the new right-wing fad for 1920s-vintage economic thinking:

Federal policy is damaging the economy’s prospects. It fails to provide the needed tax incentives for investment in factories and equipment, incentives that were central to efforts to revive the economy during the Kennedy-Johnson era and under Ronald Reagan. But government spending can’t lead the way to sustained recovery, because its stimulating effect will be offset by anticipated higher taxes and the need to finance the deficit.

One could imagine a world populated by beings who respond to government deficit spending by decreasing their own spending on a one-to-one basis in order to offset anticipated higher future taxes. Even then, it’s not entirely clear that you would get zero stimulative effect, but certainly it would be hard to conduct fiscal expansion in a planet populated by such beings. At the same time, it’s somewhat difficult to understand how these supremely calculating beings with no rate of time preference would ever manage to get involved in speculative bubbles or large debts in the first place. And it’s truly mysterious why this effect would exist during deficits caused by increased spending, but not by deficits caused by decreased revenues. And last of all, I find it baffling that a lot of people on the right persist in talking as if the stimulus plan was 100 percent spending and zero percent taxes when it was, in fact, almost 40 percent tax cuts—one of the biggest tax cuts ever. Perhaps if Obama had contrived to concentrate all the benefits at the very top of the income distribution he could get some credit as a tax cutter.

Paul Krugman offers some of the academic background on how we came to this point.

CNBC had a segment last night in which Cato’s David Boaz and CAP’s Heather Boushey debated whether Ronald Reagan or FDR would make the best model for Barack Obama. It’s striking that the host starts out by saying that “FDR and Reagan both faced similar crises in their presidencies” even though they didn’t, in fact, face similar crises. Reagan faced a situation when the inflation rate was very high. This led the Fed to raise interest rates and strangle the economy in an effort to choke inflation. That worked, but it created a big recession. This is nothing like our current recession, where we’re trying to ward off the possibility of deflation:

Heather makes this point straight out of the gate. At this point, the anchor seems to agree that her intro was totally off-base, but it makes you wonder why she said it in the first place. Boaz, meanwhile, agrees that the situation doesn’t resemble the situation Reagan faced, but then just says we need Reaganite policies anyway! Which I suppose is a pretty good encapsulation of libertarianism’s one-note approach to public policy.

But the fact remains that these are different situations and the differences are important. We shouldn’t just emulate what FDR did. But that’s because some of the things FDR did were bad ideas. What we need is to do something similar to what we would advise FDR to do if we had a time machine. To model our approach on what worked in Depression-era policymaking (not just in the U.S., but abroad) and that avoids what didn’t work or what was counterproductive. The Reagan era is just irrelevant. Reagan did some good things, like remaining relatively steadfast in the face of the short-term pain caused by Volcker’s interest rate policies. And he did a lot of bad things. But you don’t want to emulate either of those things because the situation is different.

I did a post last month on some of the differences between classical liberalism and modern libertarianism but I don’t think I was making myself very clear. A practical example, however, helps.

Nowhere in the works of Adam Smith or John Stuart Mill, for example, is there anything about how if science indicates that certain form of human activity that was long thought to be harmless to others is, in fact, doing massive, hard-to-reverse damage to the long-term interests of billions of people that the correct response is to retreat into dogma and ignorance. And yet here’s Cato Institute Executive Vice President David Boaz teaming up with Washington Post columnist George Will to push the idea that there was a 1970s-era scientific consensus that we were facing dangerous “global cooling” and that, therefore, we shouldn’t take today’s warnings about global warming seriously.

The fact of the matter is that there was a bunch of media hype in the 1970s about a cooling trend. Now as probably know, the media sometimes hypes up bogus trend stories with no real basis in evidence. Neither Will nor Boaz are small children or lobotomy victims, so presumably they understand this, too. And that’s exactly what was happening in the 70s:

The supposed “global cooling” consensus among scientists in the 1970s — frequently offered by global-warming skeptics as proof that climatologists can’t make up their minds — is a myth, according to a survey of the scientific literature of the era.

The ’70s was an unusually cold decade. Newsweek, Time, The New York Times and National Geographic published articles at the time speculating on the causes of the unusual cold and about the possibility of a new ice age.

But Thomas Peterson of the National Climatic Data Center surveyed dozens of peer-reviewed scientific articles from 1965 to 1979 and found that only seven supported global cooling, while 44 predicted warming. Peterson says 20 others were neutral in their assessments of climate trends.

Yes, that’s right, even in the 60s and 70s the bulk of scientific concern was about warming. The evidence was, at that time, tenuous. But it’s grown steadily in every passing decade. This is not media hype. It’s real science. It’s possible, of course, that the vast majority of competent scientists are all part of a vast conspiracy to defraud the public into believing that human activity is causing the planet to warm. But it’s hard to see why that would happen. It is, however, easy to see why polluting industries and their hirelings in the think tank world would want to pretend that this is what’s happening.