Roger Erickson, blogging at “Mike Norman Economics,” rails against the alleged “illogical” advocacy for a gold standard by using a horrible example used in favor of his idea that the only constraint on production is the lack of credit.

Second, there’s no way for rate of change of a commodity supply to match the agility of public initiative. WWII was a prime example. We mobilized incredible increases in coordination, alignment & output literally overnight, with no possible way to expand the world’s gold supply at the same rate.

First of all, it probably should be “figuratively overnight.” Second of all, what kind of coordination occurred during the massive wartime production economy of the Second World War? Sure, inputs were allocated towards production and an incredible amount — of course, “incredible” only to someone not willing to fathom the sheer amount of output any modern healthy economy producers during peacetime — of outputs: rifles, tanks, military aircraft, et cetera. But, all this wartime production was not any more an example of coordination as the production that took place during Stalin’s administration of the Soviet Union. It certainly was not a fruitful act of coordination to the tens of thousands of American consumers who suffered from price controls and war time rationing.

Neither is money (or credit or whatever other money-substitute) the fundamental good that allows for an economy’s productivity. That distinction goes to the capital good, or the “input” which allows for the creation of some “output.” And, the essential limit to productivity, of course, is scarcity: something that money creation cannot do away with. Within this context, and knowing that economics is a study of the allotment of scarce means towards ends, the true concept of economic coordination involves how a division of labor distributes the means of production to produce the most highly valued final (consumer) goods. Yes, this requires money (without money, after all, there are no money prices), but it does not require the manipulation of money. In fact, monetary manipulation can have the consequence of distorting economic coordination!

Using wartime production during the Second World War sounds appealing because it followed what is today perceived to be an era of deep depression (although, productivity did rise between 1933–36). Thus, the mass production of war material sounds superior to the “idleness” of the 1930s. But, weapons are — or close to — a form of consumer good, and thus what the Second World War represents is a long period of mass capital consumption. We left the war poorer than we entered it, whether the war was necessary or not. Assuming away the worldwide political necessities of the late 1930s and early 1940s, a better alternative would have been a peacetime recovery. A recovery where scarce goods were used towards the most valued ends.