Why Erdogan's Outburst Is No Accident

Outside of arguing to reduce our energy dependence, I normally stay away from Middle Eastern issues on this blog. I'll make an exception in the case of the Davos outburst. Turkish Prime Minister Recep Erdogan walked out of the Davos conference over a verbal confrontation with Israel's president.

It's no accident that Turkey is the only majority-Muslim country in NATO, the only majority-Muslim country with a chance in hell of joining the EU, and the wealthiest of the Muslim countries that didn't happen to pitch tents on oil deposits a century ago. Why? Because of a reality that not enough Westerners appreciate - Turkey's rigid separation of church and state. By throwing Islam out of government, they created the possibility for a real capitalist economy that could flourish in the absence of theocratic interference, and simultaneously created a real civil society. Consequently, in modern Turkey, women get college degrees and do research and become professionals and contribute to moving civilization forward, instead of hiding at home and wearing a veil. The same cannot be said of Iran or Saudi Arabia.

You'd think Turks would be upset if this beneficial order were threatened, and you'd be right; it's not accident that when an unabashed Islamist was set to become Prime Minister, a million patriotic Turks turned out to demonstrate in support of Turkey's secular democracy.



If only Americans could turn out in these numbers to defend our own Constitution!

It's no accident that the Islamist they were protesting is the one that just walked out of Davos, who is behaving conspicuously differently toward Israel than his predecessors. It's also no accident that Mahmoud Ahmedinejad thinks Erdogan is just super.

Every country has to eke out its own position, but as a Forbes editorial emphasizes, this swing toward solidarity based on religion instead of rational self-interest is troubling. Through the Cold War and the War on Terror has consistently been one of the most important members of NATO and allies of the West, as well as a real success story for secular democracy, and we're seeing the beginning of a regression.

North Korea Documentary at Sundance This Year

About time there's a documentary focusing on North Korean concentration camps, playing at Sundance this year. The filmmaker is amazed that the rest of the world hasn't risen in outrage about what's happening, and what's been happening for a while. Ever had the thought of "Why didn't the Allies do more about the concentration camps in World War II? Why didn't people believe it was happening?

Calling China's Bluff?

Foreign Policy Magazine has a good article title on Calling China's Bluff. The tone of the article isn't quite as strong as the editors would have you believe from the title, but it essentially boils down to an analysis of how the U.S. and China are locked into a global financial version of Mutually Assured Destruction. China is America's biggest creditor, hence the jitters on the Street over Geithner's yuan comments during his confirmation hearing. At the same time, China will be hurt badly if there is a major devaluation in the dollar, the most likely cause of which are the actions of China. The article also references CCP banker Gao Xiqing's comments in the Atlantic. Gao makes many pragmatic recommendations for the U.S. economy that shouldn't seem so profound to our own people. For example, save more money.

The democratic world's problem has never been the growth of China - the Rise of the Rest is emphatically good - the problem is the growth of an undemocratic China for whom our distraction in the Middle East couldn't come at a better time (does anyone remember our plane being forced down on Hainan Island summer 2001? Anybody?) In The Return of History and the End of Dreams Robert Kagan answers Francis Fukuyama's overoptimistic The End of History, and points out that we are in a weaker position ideologically than at the end of the Cold War. That is to say, in 1991, there seemed to be only one direction for history to go - toward liberal democracy, and away from socialism. Now, we have Russia assasinating its human rights lawyers and journalists, and we have China pouring cash into African resource enterprises and even encouraging its people to emigrate there to run them, without regard for the heinousness of the thugocracies running those countries. The world's thugs are wondering why they should listen to the West's talk of liberal reforms and allowing elections and freedom of religion, when their pockets are full of Chinese cash. The ideological choice, for them, seems to be between politically and financially troubled democracies like the U.S., and cash-rich havens of growth like China, that have no silly obsessions about freedom of speech. In those terms it seems like a no-brainer.

The good news about this version of M.A.D. is that yuan and renminbi and dollars don't kill people. The twenty-first century can be a gigantic win-win for China, the U.S., and every other human being on this planet if a more democratic China is in the offing. The problem is not that it's China with a footprint in the world's developing markets; if it was Japan doing the same thing, there wouldn't be a cause for concern. The problem is that it's an undemocratic power's footprint distorting the currents of geopolitics. As we already know democracy in China has not automatically followed from an increase in wealth in coastal cities - ask the people in Tibet and Xinjiang. Almost alone among Republicans, John McCain is not shy about pointing out the need for this improvement in China's government, which is why it was such a damn shame that he accepted that VP candidate. This is why I fervently hope that self-described conservatives will wake up and help steer a possibly over-idealistic Obama administration toward encouraging the growth of liberty in China. The longer we wait to take a firm but constructive approach with China, the harder it will become.

No Hang-Ups About Bioengineered Foods

...in China. One problem of course is that even if there were opposition, no doubt the CCP would have its way. But is there opposition? From what anyone can tell, there is no cohesive anti-GMO movement or sentiment in China. Why? Could it be because people want a strong economy? Could it be because China's bright and pragmatic people would have no use anyway for slick, well-connected anti-research anti-education special interests like the Discovery Institute, or animal rights terrorists? As I've said before, the CCP are an undemocratic kleptocracy, but they're a smart kleptocracy. The last thing anyone in China wants right now (least of all the CCP) is to hold back the education of the next generation of Chinese scientists and engineers. This is one more reason the U.S. will continue to fall behind in the biotech revolution, until our legislators stop listening to anti-education lobbyists.

Hanging up the Hat - For A While

I'm effectively retiring this blog, for now. I may post more in the future, but it probably won't be often. Between the time I spend on other blogs (like this one and this one), the med school interview process, and new work responsibilities, I just can't keep expending the same amount of effort on it. If you're coming across this blog from a search page or another blog's list, I invite you to read through my previous posts (which I tried to make relevant beyond the news of that day) or any of the excellent blogs in my list to the right. The next step, if I was really serious about growing my readership, would have been to promote my blog through media appearances and advertising.

Why did I start this blog? One day on the way to work I reflected that the world is actually in decent shape - and I still say that despite the recession we're in. Democracy, human rights are improving, and global violence is decreasing. I have no doubt that the pothole the global economy has hit will turn out to be exactly that, in the long term. Almost all of us have it much better than our grandparents, and most trends are positive ones. We are witnessing genuine progress.

That's all the more reason to pay attention to anything that could derail the process. There are three gigantic threats that could blow everything off the rails in the twenty-first century, and I wanted to do my 0.000000001% to create awareness in the people who should be aware and who can do something about it - Americans conservatives.

1. China.

I'm afraid conservatives are asleep at the wheel on this one. A country that makes a mockery of freedom of information and democracy is trouncing us in the economic game, and there are four of them for every one of us. I'm not even advocating for a very specific set of engagement objectives, but rather that Americans wake up, especially those that purport to be super-patriots. A head on military confrontation would be stupid, but ignoring the awakened dragon is just as bad. Even Napoleon saw this coming; we can't say we didn't know. Imagine Kruschev's USSR, with the economy of 1985 Japan. The Cold War was a warm-up, and the world's developing countries are wondering whether it's the American or the Chinese model they should be emulating.


2. Resources - Fuel resources present a triple threat to economic health, national security, and environmental damage.

In the American conservative mind, somehow getting America's economy and armed forces off an addiction to Middle Eastern oil has become associated with people hugging trees. Awareness of resource strategies, and the economic and physical effects of its consumption, is critical to our future. This strange resistance to a resource policy, particularly from the right, has to end.

3. Open societies and free markets are good, and ideological and religious fundamentalism are bad - especially when they creep into governments.

To this end, I've tried to drag the GOP out of the clutches of the Religious Right, where it has been withering recently. To survive the GOP needs a twenty-first century renaissance, and if that's not obvious now, it never will be. The real GOP, and not the flag-huggers that have infiltrated it, is uniquely positioned in one of the world's freest countries, founded on the ability of free minds and free markets to make the world better. Economic growth in this century will come from keeping our university system the top in the world, attracting talent from everywhere else, and turning cutting-edge research into wealth. If we forget that, we're sunk.

Given my profession (clinical research, and now entering med school) one of my special areas of concern is health care, and fortunately Obama's pick for Surgeon General (CNN's Sanjay Gupta) is not a disaster. Perhaps the University of Chicago Hospital influenced the thinking of former administrator Michelle Obama's thinking in this regard?

The GOP has a responsibility to Americans to return to its core values of individual responsibility and free markets, and stop distracting the electorate with Terry Schiavo stunts. I hope my 0.0000001% helps.

Oklahoma and Mississippi: Questionable Priorities

I've written before about how science education is absolutely critical to keep the U.S. competitive in the global economy, and how if our elected officials don't ensure that happens, we're gonners. This is doubly critical as the U.S. faces its worst economic uncertainty since the Depression. And once again, lawmakers beholden to special interests just can't wait to sell out American schoolchildren, our education system, and our future economy.

A sure way to wreck your country is to let ideology infiltrate your educational system. It happened in the Soviet Union, which saw self-induced mass starvations in the 1950s because they thought the laws of science didn't apply to them.

Meanwhile in the U.S., 2009 isn't even a month old and it's already happened in Oklahoma and Mississippi. The economy is tanking, and these guys are trying to censor textbooks. Are you kidding me? Don't mistake this for a grassroots effort; remember the Dover, PA case a couple years ago? The same special interest groups are behind all of these legislative efforts.

These legislators are not only an insult to their constituents, they're damaging Mississippi's future economy, and they're reinforcing a lot of stereotypes that blue-state Americans hold about the country's heartland. Gary Chism (R-MS) should be singled out for special recognition here. Americans are at a point in history where we really have to decide, now, whether we're serious about economic success or not, and that means do you want your kids to learn challenging material in school, or just be sent for public baby-sitting until they're 18. Of course, if you're one of those pretend conservatives who think that the GOP is about using big governments to force your values on other people's kids, then you won't have a problem with this. That's fine; it turns out you're in good company. The religious thugs that rule much of the Middle East and Africa are still telling their kids that the world is flat, and that it's evil spirits and not germs that make them sick. And I invite you to join them - in the Middle East, and far away from the United States. (Incidentally, this must explain why the Middle East and Africa have such great economies.)

If you're a moderate and you think, "Why does this matter that much?", please think of the students in China that your kids will be competing against twenty years from now - and that you will be competing against five years from now. They won't be hobbled by being taught that solar eclipses are caused by dragons swallowing the sun; they used to believe that, and they got over it. One thing that China does not censor is science education, and it's showing already.

Conservatives, ask yourself honestly: In 2012, will the GOP win back the White House and Congress if it's stuck with fundamentalist nutbars like Gary Chism who spend taxpayer dollars censoring textbooks? Is it going to be people who mock the very research and development that gives us the technical edge over our competition? Or is it going to be candidates who bring the GOP back to the true conservatism of real-facts-and-figures based values of self-reliance, smart foreign policy, and innovation?

What Is Going On In the GOP?

I have no pretensions of knowing the answer to the title question, but after the "Magic Negro" song scandal broke, I really started to wonder.

The only explanation (assuming we're dealing with rational self-interest, even if it's immoral) is that there's an internal struggle going on, and someone was trying to smear Chip Saltsman. Of course, you wonder what Saltsman was thinking doing something like this in the first place. Regardless of your reaction to the song parody, at the very least the guy must be a moron to be a political professional and still record (or be associated with) something like this.

The end result is that the whole Republican Party ends up looking like it's run by racist grandpas. Good going guys. That'll really help the country in the 2010 and 2012 elections.

The Resource Bludgeon

I had a really interesting conversation with one of the docents during a tour of the floating museum-cum-aircraft carrier U.S.S. Hornet, docked in Alameda, California.

Your blogger, following subliminal orders from his wife.




This is the on-board computer dating from the 1950s. When I took this picture I told the docent I was a time-traveling Soviet spy.


I don't think they had to worry about computer viruses. What genre would come between steampunk and cyberpunk? Eisenhowerpunk?


The hydraulics that launched the planes on the deck above our heads.




The Hornet was one of many ships that engaged in the final battle with the famous Yamato (serious link here, fun links here and here). The first round confirmed to have struck Yamato was from this ship. As it turns out, the Yamato was hobbled and unable or unwilling to operate at full capacity. Why? It was conserving fuel. It was the end of the war, and Japan was running out of oil, because we had strategically cut off Japan's resources.

Didn't someone once say that war is mostly logistics? This is true at every scale, from World Wars to Indian wars. The Modoc War of 1872-3 was one of America's last full-on Indian wars, and pitted 200 Modoc men, women and children against 2,000 Union regulars. The Modoc held out in the moon-like lava fields of inland northern California for six months. What finally broke the resistance? Not a frontal assault by the Union regulars. The Union cut off the Modoc from their water supply.

The use of resources in global struggle isn't new. In Czar Putin's current deprivation of Europe of natural gas, we have only the most current example. Resources matter, and we should expect countries to fight over them (as China and the U.S. in Africa), or use them for leverage. Getting off fossil fuel should be, first and foremost, a long-term strategic national security objective. Then we can stop worrying about what anybody thinks in Russia, Venezuela and Saudi Arabia.

Why am I worried? I have the strong impression that American liberals understand this message more clearly than American conservatives, but are unwilling to make the hard foreign policy decisions that will assure a better future for democracy.

In oddly related news, that same weekend I saw my first Tesla on the road. Tesla is the same company that announced plans in September to build a plant in San Jose, despite the economic headwind. Tesla is to my knowledge the only car company to be building plants in the U.S., rather than shutting them down. Economic success depends more than ever on technological innovation. Zakaria points out the links between foreign policy strategy and economic success. The San Francisco Bay Area, is, oddly, continuing to set an example that modern conservatives would do well to observe.

Stem Cell Miracles

Wired published a Top Ten list of bioresearch breakthroughs in 2008. One of them is truly incredible. Medical scientists used a woman's stem cells to regrow her trachea.

This is a testament not only to human innovation but to our commitment to helping fellow humans and making the world better. You might ask where this giant medical step for mankind happened. Boston? San Francisco? New York? Of course not! It was in Italy! Come on now. Did you really think it could happen in the US? Get serious. We've decided that pleasing extremists like pretend-conservative Sam Brownback is more important than keeping our economy competitive and helping people. How did we get to this place? When do we say "enough"?

It would be an interesting experiment to take one country and split it in half, with fundamentalist nuts in charge of one and a modern secular government in charge of the other. It would be even more interesting if that had already been done, like in Singapore and Malaysia. I can tie this back to bioresearch with personal experience. In the last six months I have interviewed at a Singaporean biotech company. But somehow, Muslim Malaysia does not have, shall we say, a thriving medical research sector.

China Is Policing Google For Your Own Good

Isn't this nice of China? The Chinese government has taken it upon itself to to "purify the Internet's cultural environment and protect the healthy development of minors." Funny how it's always to protect children, no matter where it happens. This means demanding the Google remove whatever they consider objectionable. This means 2 things: pornography (to protect children), and websites critical of the Chinese government, like the one you're visiting at the moment (to protect - who?).

It's no surprise when the world's biggest country walks all over freedom of information and expression. What's even scarier is when supposedly free countries like Australia start imitating them. If the rest of the world keeps allowing China to pressure media and internet companies, maybe we won't have to wait for own governments to start censoring news.

China in Guinea

Guinea is in the news due to a coup, which the US, EU, and AU have condemned. Africa certainly doesn't need any more coups, but it also doesn't need any more direct interference from Chinese mineral concerns. As Africans rightly ask, what's the problem with free trade? The problem is that where free trade with liberal democracies is about benefiting individuals and their voluntary organizations (companies) in those countries, trade with China is about benefiting China - and once the trade link is established, China's doctrine of supposedly not interfering with other countries' internal workings is right out the window. In 2006 China offered to build a soccer stadium for Guinea and in 2008 a hydroelectric dam in exchange for bauxite (aluminum ore) rights.

So far so good. Now look at Zambia. Zambia is an excellent example of the effect of Chinese mineral attention. It's a country whose mineral wealth in the form of copper is being rapidly removed from the country through the backbreaking and poorly compensated labor of Zambians, and to the profit of China. Zambians know this all too well, and in 2006 they came close to electing a candidate (Michael Sata) mostly because his position could be reduced to disliking the Chinese. China stated that should he be elected, they would have broken off all diplomatic ties to Zambia. It's hard to see how that's "non-interference"; I think we English speakers must be mistranslating a word that more accurately means "we should be able to do whatever we want with Tibet and Taiwan".

Unfortunately it seems Zambians recently have only had the choice of either a government that sells them out to Chinese state-run mineral interests, or (in Michael Sata) a student of Bobby Mugabe. Maybe this is why Sata is suddenly more receptive to Chinese investment, as Mugabe has always been.

Should we be surprised by China's neo-colonialism in Africa? Hardly. "In 2001, the Politburo set down its global zou chuqu ("go out") directive, instructing state-owned enterprises to seek long-term access to natural resources." Does this sound familiar? The Chinese government reached the same conclusion that the PNAC did, and they've been acting on it - and more effectively than the US to boot.

There is a way to focus foreign policy and incentivize investment and free trade in commodity-rich (resource-cursed) countries while encouraging the development of infrastructure and liberal democracy in a place where people have struggled with it. It's harder to do it this way, the right way, than to just be overt imperialists, and China is much better at moving in and exploiting moments of vulnerability. What do I mean? We thought "the oil would pay for the war" - and yet China is the first foreign government to sign an oil deal with post-war Iraq. China has the advantage of not having to trouble themselves about the incompetence, barbarism and human rights nightmares of dictators when signing deals with them; and those dictators like not being hounded about reforms, so they're natural allies. Steal elections, arrest and execute your opposition while your people die of cholera and have inflation of literally eleven million percent? No problem! Not for China, not if you have platinum.

A new Great Game has started in Africa; China has had the ball for the whole first quarter of the game, because the West is only now realizing that clock has started. It's difficult not to speak in adversarial terms, and indeed, China and the West still think we're playing two different games. It's critical that China is brought further onto the same playing field in the twenty-first century.


Credit: Economist

Australia is Making a Mistake

Apparently the Australian government now thinks that China is the country to imitate.

Telecommunications Minister Stephen Conroy has called for a Great Australian Firewall that would block websites (sound familiar?). The trial began Christmas Eve, and there's not even any legal mechanism to determine what goes on the blocked-list - just government fiat.

As with most first steps by big government into telling its citizens what they're allowed to see and read, he's acting under the guise of protecting the children. It's an old strategy - you dare speak out against burning witches? Then you must be one too! Speak out against protecting children? You must be an evil pervert! It's deadly for politicians to take a stand for something abstract like freedom of information when they can be cast as taking a stand against something concrete like the safety of children. Australia has been a vibrant democracy and I hope its citizens speak out against this outrage and keep it that way.

First Quake-Related Lawsuit in China

The first Sichuan-quake-related lawsuit is being filed. Briefly there seemed to be a promise of Chinese glasnost after the Sichuan quake, with an unusually open Chinese government; then the openness stopped, and it was back to business as usual. And obviously, no one noticed this more, or suffered more as a result, than the people of Sichuan Province.

Far from being a cynical celebration that another nation has joined the U.S. in litigiousness, I welcome this as a test to see if China is a modern state, a nation of laws and not of men, with citizens entitled to demand redress from their government for shoddy buildings that took human lives. If it is indeed the People's Republic of China, they should be.

Another Broken Promise

The Olympics are over and now, with less international attention, China re-blocks websites. Surprise, the Great Firewall is back up, strong as ever! Given that I do get hits from China (hello progressives, you're not alone!), it's even possible that you're reading one of them.

Animal Activist Gets Jail Time

Another moron carted off to the clink. Whether or not you agree with his apparent assertion that it's more important to keep an animal alive than to try to cure AIDS or cancer, terrorist acts are never justified - and that's what these kinds of actions are. Same goes for the vandals in Santa Cruz this week).

As repugnant as their behavior is, the trial shows that the justice system works, even without the Patriot Act repealing the basic protections that Americans have fought for. And now that it's Obama's people reviewing the tapes, does the Patriot Act still seem like a good idea to you?

First Memorable Mistake of Obama Administration

This CNN article is clear about why picking Rick Warren was divisive. If Obama wanted a minister at his swearing-in, there are thousands of others he could have chosen from. The Religious Right is not going to start suddenly trusting Obama because he picks Rick Warren, but reasonable Americans of all stripes might start to wonder if "bridge-building" means "favoritism politics".

Subversion of Science and Education for Politics

Here is yet another case of politics intimidating science, and the nation damaging its economy and badly losing. Just because evolution and genetics is threatening to a certain group of people doesn't mean it's not true, and certainly doesn't mean that it should be replaced in universities by dogmatic, unquestionable pseudoscience. Am I belly-aching again about evangelicals trying to force creationism on our kids?

Funny, I guess there is a similarity - but I was talking about Stalin's Biology Director Trofim Lysenko, partly responsible for the famines in 1950s Russia in which millions died. He liked to shout at scientists who dared disagree with his party-line science that they were unpatriotic, or elitists, or out-of-touch. One of his favorite rejoinders was to call dissenting Russian scientists "fly-lovers and people-haters". I know the election is over, but I can't help being reminded of a very similar comment made by someone else.

Need a Laugh? Get One at Hugo Chavez's Expense

Sr. Chavez - ¿Está Fidel llamándote de veras? I ran across this a couple weeks ago. Kudos to Enrique Santos and Joe Ferrero at WXDJ in Miami for actually getting through on the phone to Hugo Chavez pretending to be Fidel Castro. Article here; call here (in Spanish). They tricked Castro too but somehow that's not as funny to me.

Sentencing for Tibetan Resistance

China carefully timed this sentencing to coincide with the global distraction of the U.S. election, so people around the world wouldn't be reminded of what had happened in Tibet in March and April before the Olympics. I wonder if any of the Nepal protesters were "extradited".

Why Should Currency Standards Be *Gold* Standards?

A more updated version of this article can be found at one of my other blogs, The Late Enlightenment.

My question is not whether or not we should be on any kind of standard at all, but rather why it should be gold. So, fiat currency exorcists, please spare me your arguments about the evils thereof. There isn't a single currency based on gold today so in any event your work is cut out for you, and I concede that this is an academic exercise. Still, it's a question that's interested me for a while, and it's curious that there seems to be no solid, rational answer to the question of "why gold?"

The traditional arguments in favor of gold as the most rational exchange medium are invariably a combination of some or all of the following, all of which are undone by modern technology or empirical data:

1) It's easily divisible.

2) It's identifiable (and elemental - it can't be created ab initio).

3) It's durable.

4) It's rare.

5) It's useful.

Gold certainly qualifies for these categories, but today, so do most of the other transition metals. Let's dispense with 1, 2, and 3 immediately since they're no longer unique features of gold. Modern technology lets us work with and machine and divide into coins all metals - and identify them as well (we now have better techniques than color, oxidation and specific gravity). No, this technology wasn't available to past governments, but it's available to us, and we're talking about why would gold still be the standard now, not historically - or at least why it would be the fall-back.

In terms of durability, although gold is more resistant to oxidation than other metals, once mined and refined, metals are stored under contolled conditions (like vaults or pockets) that make the durability question moot. Pure gold nicks and bends easily too; many other metals do not.

So I ask again: why gold? In terms of usefulness, gold does have industrial and medical applications, but in that regard it's sure no uranium or silicon, and in any event it would be hard to quantify the innate industrial value of an element. That leaves us with only one physical attribute to be the source of gold's central role in human economics.


Rarity

I had always assumed that value correlated with rarity, but realized I'd never seen data on this. Therefore, to determine which metal would be the best value reserve, I looked at the value to rarity ratio by comparing the relative abundance of metallic elements in the Earth's crust and their modern values; most values came from the Los Alamos periodic table pages, or from current commodities markets for those metals that are commonly traded. For practical purposes, we can rule out as a potential value reserve for humans any elemental metals which are unstable or unhealthy to handle at room temperature. For example: radium is radioactive, tellurium stinks, cesium explodes, and francium exists only momentarily and as part of a nuclear decay path (which means it's both radioactive and becomes cesium, which explodes).

Ruling out the intolerables, we find that osmium and iridium are both rarer and more expensive than gold. Before you start celebrating the inherent rationality of the human valuation of metals, a) iridium is rarer yet cheaper, and b) please find me someone advocating an osmium standard for a currency, or a single currency or economy that has ever been based on either osmium or iridium. By the reasons given for gold as the basic commodity metal, currencies should be based on osmium, at least now that we can collect and refine it. Then again, maybe two centuries from now the foolish age of fiat currencies will have passed and the world economy will be on an iridium standard and I will be hailed as a visionary. (Use the right side of my profile on coins, please.) Of course, I'm not making coin-portrait appointments yet, because on further investigation, any semblance of economic logic breaks down:



Platinum has the same value as gold (or historically, often higher) even though it's substantially less rare in the Earth's crust. It bears mentioning that for some reason platinum has never been the basis for any economies either. Palladium is about twice as common than gold. Rhenium is slightly rarer than gold but about a third the value. Rhodium is about 4x rarer than gold but only about 15% more valuable. Ruthenium is about three times rarer than gold but has similar value, even though it's more industrially useful, even if still obscure. Even so, you don't see it being traded in Chicago, and there have never been currencies based on it, or to my knowledge even the suggestion thereof.

One objection to my theory is that a commodity that's too rare is useless as a basis for wealth, and that there is a rarity "sweet spot" for precious metals. While self-evidently true, this really doesn't tell us anything since it's a circular argument. That is to say, by this argument gold has "just the right level of rareness", which we know because it's what people use, so it must be just right. No dice. I might concede that iridium, which is almost 9 times rarer than even gold, wouldn't be a great choice for a standard, but why not palladium or rhenium? They're both of similar abundance to gold, and they're both industrially useful too.

You might object that just because an element is in the Earth's crust, it's not jumping out of the ground, and that production is a measure of said element's availability to human activities. So I ordered elements by global production as well:




There's a slight trend here, but it's still not the ordering you might expect to see. One thing I noticed was that (not surprisingly) gold was produced far out of proportion to its crustal abundance, which suggests that economic value isn't just a function of ease of extraction. So I also ordered the elements in terms of the ratio of production to abundance. Without showing you the scatterplot, the first ten most "overproduced" relative to their natural abundance were, in decreasing order, carbon, nitrogen, gold, lead, antimony, bismuth, tellurium, phosphorus, sulfur, and mercury. Gold is in there with some rather economically indistinguished elements.

Oddly enough, copper is 20,000x more common in the Earth's crust than gold, and yet it has been used as currency, as has silver. What's going on? There are three things going on: oxidation potentials, animal behavior, and habituation.


A Behavioral Explanation

I added this paragraph after the fact, because of the timely eruption of a tailor-made scandal driving home my point: if you don't think irrational grouppthink psychology plays a major role in human economic behavior, how did the Japan Enten scandal happen? I added this later because it was tailor-made for this article. If you're still not convinced, take the time to read MacKay's Extraordinary Popular Delusions and the Madness of Crowds.

First, gold, silver and copper are the only metals likely to be found at the Earth's surface that have negative oxidation potentials for the transition from pure to oxidized metal (meaning they can be found in nature in their unoxidized forms). Okay; so one day a few thousand years ago, someone was wading up a creek, and found gold nuggets glinting under the water. So what? Why was he interested in the physical properties of shiny gold nuggets any more than wood or rock or water?

It bears constant repeating that when we talk about economics, we're talking about the behavior of a specific animal. Economists concede today that Homo sapiens is not the perfectly rationally self-interested and profit-maximizing animal it was sometimes previously thought to be. Having said that, in asking "why gold?", it seems to me the principle factor that's overlooked is entirely irrational and human-dependent, and it best explains why modern humans might be predisposed to maintain gold as a store of value. That factor is that we're monkeys, and we like shiny things.

I mean that to be taken literally and seriously. Though gold does have industrial applications, we still use it primarily for decoration. On the other hand, I've never seen a palladium necklace at Tiffany's. My wife is a monkey who likes shiny things, and I'm a monkey who likes her, so I went to Tiffany's to get her shiny things. So does everyone else. So gold is valuable.

Now add several thousand years on top of our initial monkey-fascination with gold (which keeps it from being like, say, tulips) and you have considerable historical inertia. By this I mean many (but not all) civilizations independently adopted gold as their exchange standard and store of value, and now that billions of us are all trading, it would be even more impossible to change. To do so, you'd somehow have to simultaneously convince all humans who now recognize gold as inherently more valuable than most other metals (the majority of humans, including wives) that another medium was more valuable; this would be true even if there were no other reasons to use gold as a standard. Even the effective removal of monetary gold from circulation in the U.S. in the 1930s had little impact. It would be very difficult to convince people to switch to a different metal, because everyone already is programmed by history to value gold, and would you trust your neighbor to stop considering it valuable at the same moment you do? It's for this same reason that Ithaca hours, among other quirky currencies, have largely died out. When people in your town take Ithaca hours and American dollars, and no one in the town next door takes Ithaca hours, you get pretty nervous about, say, opening your 401K in Ithaca dollars.

One frequent objection is that if the use of gold were really just an economic legacy system or in game theoretic terms a massive and long-running coordination game, then there should have been economies that assigned higher values to shiny metals other than gold. And of course there were. For centuries China valued silver more highly than gold (whether you can say they were on a silver standard is another question). Isaac Newton even wrote on the topic for the British government, and illustrated his concern over the trade imbalances that would result for the two ends of the Old World if economies on opposite sides of Eurasia used different standards. Note that he didn't state that one was better than the other, just that having two value systems operating simultaneously was unhealthy. Today the gold/silver price ratio in China is the same as in the rest of the world. China's system was Betamax to Europe and the Middle East's VHS; I make this analogy to stress that, like Newton, I don't think that gold is necessarily better either, just that more people were using gold, and those people happened to colonize the rest of the world, so it was a matter of time before China's commodity valuations would have to adjust if they were to keep trading with everyone else.

CONCLUSION

I'm no commodities expert which is why I took advantage of a friend's recent visit to pick his brain. He does trade commodities, and works as a geologist for a major U.S. government contractor. When I asked him "why gold", he made the usual jokes about going on a selenium standard, and then said, "I don't know. Historical reasons I guess."

I'm not interested in convincing anybody to stop using gold. If you're going to use a precious metal as a store of value, everybody should use the same one, and gold is the one that humans have settled on at this point in history; it's still a kind of stable value reserve, even if it doesn't anchor currencies anymore. Some economists have predicted that it will eventually lose its value, as matter becomes smarter and labor continues to get more valuable, but we'll see. I asked the question "why gold" purely out of curiosity, but it's interesting to note that no anti-fiat-currency websites have begun calling for a rhodium standard, and that no one has provided an argument that explains the tenacity of gold as well as primate inertia.