Michael Heilperin’s Error Was His Proposal for a Managed Gold Bullion Standard with Government as Money Manager

Like the more famous advocate of the gold standard, Jacques Rueff, Heilperin was long an opponent of the gold exchange standard and presented insightful and prophetic critiques of the system, especially as it operated during the Bretton Woods era (1946-1971). His prophecies of its eventual and inevitable collapse, though derided when they were initially advanced, were right on the money in light of later developments. This serves as an invaluable illustration of the usefulness of sound deductive economic theory in the forecasting of the evolution and devolution of broad patterns of economic activities. Moreover, Heilperin’s objections to the gold exchange standard have contemporary relevance in view of the support for a return to a system of the Bretton Woods type that has been voiced by a number of prominent supply siders and other advocates of a monetary “price rule.”

Contemporary proponents of a genuine gold standard can hopefully learn from the damaging mistakes committed by Heilperin in his characterization and defense of the international gold standard. His errors in this respect stem from a fundamental misconception, shared with most modern economic theorists and policymakers, of the nature and evolution of money and monetary institutions. It was this underlying “constructivist” approach to money that led Heilperin to propose a “semiautomatic” or “managed” gold bullion standard in which the government is accorded the role of money manager. The unfortunate fact is that proposals like Heilperin’s have lent credibility to the distorted portrayal of the gold standard as nothing more than a government price-fixing scheme carried out on a grand scale.

—Joseph T. Salerno, “Gold and the International Monetary System: The Contribution of Michael A. Heilperin,” in The Gold Standard: Perspectives in the Austrian School, ed. Llewellyn H. Rockwell Jr. (Auburn, AL: Ludwig von Mises Institute, 1992), 82.