Over the past week the well-known and quasi-libertarian blogger Megan McArdle has offered several critiques of the gold standard, and particularly Ron Paul’s case for it. Pete Boettke has kindly suggested that she should read what George Selgin and I have written on the topic of competitive monetary regimes, so forgive me for jumping in.

McArdle seems to believe that a parallel gold standard is already fully legal. Unfortunately, it isn’t so. One cannot, in fact, “buy a bunch of gold and melt it down to coins” without legal trouble. The Liberty Dollar folks tried that. The US Mint declared their production of coin-like gold and silver pieces illegal, and the feds raided the operation. The E-gold folks tried providing a gold-based online deposit-transfer system, and they were busted, charged with violating money laundering statues and with operating a money transfer service without the proper licenses.

If you tried to use gold or silver coins as a medium of exchange, you’d be subject to capital gains taxes as the nominal dollar price of gold or silver varied.

Even if these legal barriers didn’t exist, McArdle’s put-your-money-where-your-mouth-is challenge would still be a non sequitur:

So why haven't you done this? If you say, because no one would spend it, you've hit on the reason for government money; it massively reduces transaction costs to have a single accepted currency.

Yes, a single monetary standard does reduce transactions costs. That’s the reason why there is a strong tendency to converge on a common standard. But it isn’t the reason for government money – that’s an entirely different question. An analogy: a standard sized building brick reduces construction costs. That’s not a reason for government to specify the dimensions of the brick, much less to produce bricks.

Historically, we owe the achievement of a common monetary standard to medieval banks, which learned to denominate their notes and deposits in uniform silver units for the convenience of their customers. Not to governments, which undermined uniformity by debasing their coins.

Strong convergence is why parallel currencies have a hard time getting a foothold today, except where the incumbent currency is very bad. The post-Volcker fiat US dollar, granted, is not very bad. Thus US citizens are not adopting other currencies. That doesn’t show that the dollar is better than the Swiss Franc. Or better than gold.