I would like to give a toast today to two Austrian scholars – libertarian publisher and thinker Jeffrey Tucker and Austrian economist Robert P. Murphy, for their recent articles on Bitcoin – especially in relation to Mises’ regression theorem.
First is Tucker’s article Is Bitcoin Real or Not?. Here’s a sampling:
A frightening story this week in The New Yorker tells of a Texas couple that headed toward the Texas-Louisiana border to buy a used car. They were carrying all their savings in cash. They were stopped by the police. The police found cash and a tiny pipe, and arrested them both. [ . . . ]
Now consider a different scenario. The couple was stopped and had no cash at all. Instead, they were carrying a different kind of currency that lives inside a smartphone. When they made it to their destination, they cashed out this currency and bought their used car.
It does raise the question: Is Bitcoin a possible defense against civil asset forfeiture?
Next is Murphy’s article Why Misesians Need to Tread Cautiously When Disparaging Bitcoin, in which he tries to explain Bitcoin in relation to the regression theorem:
So my point is, the certain group of Misesians who keep deriding Bitcoin and saying it will eventually collapse, it’s a passing fad, it will never take off beyond internet geeks, etc. etc., because of Mises’ regression theorem, aren’t making any sense. Mises’ regression theorem wasn’t making an empirical prediction about a medium of exchange never attaining the status of money, unless it started out as a regular commodity. No, Mises is saying we can’t conceive of even a medium of exchange (which is a weaker condition than money) that didn’t start out as a regular commodity. Bitcoin is clearly, unequivocally a medium of exchange right now. There are websites where people trade Bitcoins directly for “real” goods. There are people who will sell a “real” good for Bitcoin, intending only to trade away the Bitcoin in the future for something else “real.” Thus Bitcoin is right now a medium of exchange, no doubt about it.
So, am I saying Mises was wrong? Not necessarily. If you want to reconcile his claims with the existence of Bitcoin, you can argue along the following lines: What actually happened is that in the very beginning, when Bitcoin was first introduced and no one had any idea of its purchasing power, the very first people to trade for it did so because it provided them with direct utility because they knew there was at least a chance that it would serve to chafe the governments of the world with their printing presses. So just as someone might chip in a nickel to someone raising donations for his plan to hand out copies of What Has Government Done to Our Money?, by the same token, the early adopters of Bitcoin were doing it for ideological reasons, not for pecuniary reasons. Then, once Bitcoin got off the ground because of such motivations, people had a framework for evaluating its purchasing power, and then it was off to the races in terms of standard Misesian theory.
Those are my two favorite articles of theirs. Here are some others
- Bitcoin for Beginners, Tucker’s excellent introduction to the history and workings of Bitcoin
- If Bitcoin Is a Bubble, Is All Money Always In a Bubble? Murphy’s response to Gary North and others.
- Has the Fed Met Its Match? Tucker takes on some arguments against Bitcoin.