Hobsbawm’s “What do Historians Owe to Karl Marx?”

Having read through historian Eric Hobsbawm’s chapter entitled, “What Do Historians Owe to Karl Marx?” I came to the conclusion that the answer is very little. A more pertinent question is what does humanity owe to Karl Marx? To which I’d answer that thanks to the ideas of Marx, millions of people died and there is a great deal more wanton suffering in the world. Historians could owe their entire discipline to Marx and it would pale in comparison to its real human impact. And thanks to historians like Hobsbawm, Marx’s ideas will continue to be such a delightful influence on man.

The Social Contract- Rousseau; Review

Emerging nationalism was one of the primary forces in shaping change in Europe throughout the late 18th and into the 19th centuries, in no small part due to the enormous influence of Jean-Jacques Rousseau’s Of the Social Contract, Or Principles of Political Right, written in 1762 in France. Rousseau’s Social Contract attempted to answer the question, “is it possible to establish some just and reliable rule of administration in civil affairs?”[1] Rousseau explicitly laid out that his essay was an attempt to find a justification for the institution of government over man—his bondage—since government is a fact of life, but that most governments seemed to be in possession of arbitrary authority.[2] Given that governments and nations existed throughout the world, if man was going to be limited by them, there should naturally arises a tendency to question how this can be legitimate.

Rousseau believed that people would give up their freedom they enjoy in nature only in order that they secure their own advantage thereby. Rousseau denies that rights can be establish by facts, just as David Hume did; as such, he notes that the existence of slavery is not evidence enough to induce that slavery is a part of the natural order. Rousseau dispatches with the moral principle that might makes right, understanding that if this were true, right would add nothing to might, given that a change in one necessarily means a change in the other, which is a flimsy basis for a right.[3]

Rousseau notes it is odd to extend the principle that an individual can alienate his freedom in exchange for subsistence—that is, to sell himself into slavery—to a king, since subjects do not depend on their king for their daily bread, rather the reverse is true. Men would not give up their freedom in order “that their property also shall be taken.” Rousseau ultimately denies even the ability to alienate one’s liberty and voluntarily become a slave, since this would be to renounce the very essence of humanity and be a self-contradictory proposition. Rousseau denies Dutch jurist Hugo Grotius’s claim that victors in war have the right to demand slavery from the subjects of their conquered for, since wars are between state and state, rather than between individuals, so the only spoils that rightfully belong to the victorious state are the possessions of the vanquished state; to assert otherwise is simply an extension of the earlier-refuted maxim that might makes right. [4]

In Chapter V, Rousseau attempts to establish what constitutes a people, or a nation, since Grotius asserts that a people can alienate itself to a king, meaning it had to have been a body politic already in order to have deliberated and made such a decision.[5] If these individuals had not been a body politic, to establish authority over every one, every individual would have had to unanimously vote to give up their liberties, for the ability of a majority to bind a minority is only operative anterior to the creation of a body politic. Here, Rousseau elucidates his social contract theory, whereby men determine that the state of nature being harsh and unforgiving with each individual acting only with regard to his own self-interest, they would find it in their best interest to form an association capable of protecting their persons and property by using the “whole force of the community” to protect each individual member.[6] Rousseau moves on in Chapter VII to note that a social compact having been agreed to, and a collective body having been formed, it is the sovereign which takes on the role of the individual, in that it under no obligation to be bound to itself, namely that it cannot “impose on itself a law it cannot transgress”; in essence, it is a body of unlimited authority. Rousseau also stipulates that individuals give up all rights to property they were in possession of to the State, which is of little significant to him because possession of property by the state is actually “more secure.”[7]

Rousseau comes to the conclusion that it is nationhood, under the collective agreement that creates a republic, that defines a people; and all of the corresponding duties attendant to it are one’s highest political duties. In a footnote on page 171, Rousseau notes that although once a social contract has been agreed to, unanimity is no longer necessary to give force to the general will, it is necessary that everyone be able to vote on what actions the general will should take, because to do otherwise makes it an expression of a particular will rather than the true general will. Democracy, then, becomes an important aspect of the legitimacy of acts of the State in reflecting the general will of the people rather than the fancies of its leaders.

The significance of Rousseau’s Social Contract is that it gives parameters by which one can judge the legitimacy of governments in both their structure and substance. Governments must usually be democratic, because if they were not it means they are not attempting to ascertain the general will of the people. Similarly, leaders must act in accordance with the general will and those who contravene it are illegitimate; leaders who continue to act against popular sentiment have no right to rule under the social contract. Additionally, it seems to follow from Rousseau’s footnote on page 169 that government should redistribute wealth in order that they function efficiently, because too much inequality renders the social state only advantageous to the rich.[8] Furthermore, Rousseau’s ideas significantly impacted the French Revolutionaries of the late 18th century, whose motto was Liberté, Égalité, Fraternité. These revolutionaries rejected the authority of the king since he was contravening the above-mentioned principles and subordinating the general will and common good to his own particular good. Equality and reciprocity, moving forward, become important foundations of Rousseau’s political philosophy and the modern nation-state. Rousseau’s ideas reflected and reinforced the movements in the late 18th century, such as in France, and those throughout the 19th century to create unitary states, in which the sovereign possessed full authority and plenary power, rather than enduring in the fragmented, decentralized situation many European nations like Germany had been in. This drive attempted to shed the arbitrary authorities of kings, princes, and other leaders by establishing anew a modern nation representative of the general will of the people rather than the special interest of the king.

[1] Jean-Jacques Rousseau, The Social Contract and The First and Second Discourses, ed. Susan Dunn (New Haven; London: Yale University Press, 2002), 155.

[2]Ibid., 156. In Rousseau’s words: “Man was born free, and everywhere he is in chains….How has this change come about? I do not know. What can make it legitimate? I believe I can settle this question.”

[3] Ibid., 156-158. Likewise, Rousseau says, “If one is compelled to obey by force, there is no need to obey from duty’ and if one is no longer forced to obey, obligation is at an end.”

[4] Ibid., 159-161. The convention of taking slaves rather than killing enemy combatants presupposes a state of war and terminates at the establishment of peace, so this cannot justify an absolute authority of a ruler over his subjects either.

[5] Ibid., 162.

[6] Ibid., 163.

[7] Ibid., 167.

[8] Here, Rousseau says “Under bad governments, this equality is only apparent and illusory; it serves only to keep the poor in their misery and the rich in their usurpations. In fact, laws are always useful to those who possess and injurious to those that have nothing; whence it follows that the social state is advantageous to men only so far as they have something, and none of them has too much.”

Limited Liability and Libertarianism: A Thought Experiement

What follows will be a thought experiment on whether limited liability can be principally incorporated into libertarian theory or if it is antagonistic to the libertarian notions of restitution. I have read nothing regarding this matter—or at least nothing I can remember—and this is purely my own extrapolation from my understanding of libertarian theory and, therefore, may be rife with errors already addressed in libertarian literature regarding limited liability. Regardless, whether what follows is wrong, unoriginal, or unimportant, these are my own views ignorant of, and unreconciled with, contemporary libertarian theory regarding limited liability. I also have a limited understanding of the legal principles surrounding limited liability and corporations as it currently exists, but hopefully that shouldn’t hamper my foregoing analysis. Some of the terms in the post might be used inconsistently or incorrectly, but hopefully I have avoided most of these kinds of errors.

NOTE: Following the posting of this analysis, I plan to respond to my own analysis in an edit of this post after having read some conceptions of the compatibility of the limited liability principle (or any responses this post might garner). I think this is a useful exercise to test one’s freestanding knowledge of libertarian theory and the ability to extrapolate it to complex topics. If there are responses, some useful responses would be directing me to sources regarding the topic or commenting with your own freestanding thoughts of libertarian theory as applied to limited liability; I think it has the potential for a good discussion.

First, let’s begin with the basics. A group of individuals come together and agree to pool their assets together to create a corporate body, stipulating among themselves the assets they agreed to pool constitute the boundaries of their required obligation to the corporate body. Should one of the members of the body cause demonstrable harm through its business dealings to an outside individual, they further agree that this individual should not be liable for damages, resulting from lawsuit, greater than the share of assets they contributed to the corporate body. These owners may end up losing all the assets they contributed to the arrangement, but have agreed this is the extent of their liability. So far, so good; a voluntary arrangement has been formed among capable parties causing no physical invasions of another’s person or property.

But, how can this principle be applied to individuals outside of the arrangement? Indeed prima facie if someone outside this agreement is harmed by one of these individuals, the demands of restitution would suggest they are entitled to full restitution and are not bound by the limits imposed by the agreement that had formed the corporate body and established the limited liability regarding the stakeholders.

In practice, there are multiple ways in which a consumer coming into contact with the corporation might assume the obligation to honor the principle of limited liability should they ever be harmed by any of the parties to the corporate body. First, visiting a physical location owned by the corporate body might entail agreeing to be allowed to sue the corporation only to the extent of the pooled assets of the stakeholders as condition of admittance to the property. Thus, consumers would be bound to respect this agreement in any lawsuit they bring up against the corporate body given that they voluntarily assented to the limited liability. Similarly, customers of online establishments may be enticed to digitally sign an agreement stipulating limited liability of the corporate body should any of its products, the website, or its agents cause harm to the consumer in the course of its relations; access to the website would be limited to those who agree to this limited liability stipulation. Thirdly, if a corporate body delegates agents (employees) to carry out its functions—whether in a physical location owned by the corporation or owned by the consumer, i.e. traveling salesmen—it may require the signing of the arrangement detailing limited liability in order to continue doing business with its agents. Thus, the consumer dealing with agents of the corporate body would only be capable of suing for restitution to this limited extent, given the voluntary assent of the consumer to accept this principle in order to continue relations with the agent.

Now, what about cases in which no explicit or tacit agreement has been reached regarding limited liability? For the sake of example, we can use fracking to illustrate how it might work. Let’s say the agents of Frack Corp. engage in some fracking, causing the death of Farmer Joe’s cattle when they eat radioactive grass that had been contaminated by the runoff of the fracturing process. Farmer Joe has never visited the property of Frack Corp., never visited their website, and never done business with any of its agents; hence, he has never agreed to abide by the limited liability charter created by the stakeholders of Frack Corp. In this case, the requirements of restitution entail Farmer Joe can sue both the corporate body as well as the agents that engaged in the behavior causing harm to farmer Joe. Depending on the exact situation, the owners may be responsible for restitution from their own assets depending on their complicity in the harmful behavior. This would put agents in a precarious position if their employment duties could entail a significant risk of being subject to lawsuit for property violations. However, the agent could negotiate a contract with their employer requiring the owner to be responsible for restitution of the agent if they sued by a third party in the carrying out of the agent’s duties as prescribed by the corporate body—the principal. Regardless, in cases such as this, where a third party outside of the agreement is harmed by actions undertaken by the corporate body, liability greater than the value of the corporation’s assets could be spilled over to agents and or principals responsible for physical harms caused by their actions, just as in cases involving non-corporate actors who have not come to any kind of agreement.

In summary, it seems that the way corporations operate in a libertarian society would be fundamentally the same as they operate in the current system, save that corporations would likely be more explicit with consumers that doing business with them entails to agreeing to limited liability should they be harmed by the corporate body or its agents. Where it would deviate the most is that in harms caused to third parties not privy to any agreement with the corporate body regarding limited liability, corporations and the parties responsible for demonstrable harms, potentially including the owners, would be responsible for full restitution of the injured party, which would not be limited by the extent of the pooled assets of the stakeholders of the corporation.

The Bitcoin Revolution: The Digital Money Paradigm and the Financial Crisis

Below, I have attached a link to a PDF file of my paper entitled, “The Bitcoin Revolution: The Digital Money Paradigm and the Financial Crisis.” I would greatly appreciate any suggestions, edits, errors, comments, or omissions you may have noticed.

My paper looks at the history of cryptocurrency/cryptography, how this relates to Bitcoin, and how cryptoanarchist concerns regarding government interference with digital communications and digital money appear to have been fleshed out by the 2007-2008 financial crisis.

The Bitcoin Revolution

Enjoy

Addressing Objections to Libertarianism

Spoken in class today by a leftist student of unknown ideology who probably loves Salon articles: “Some libertarians think individuals with vast economic power have the right to turn people into paupers.” They seem to misunderstand one of the most basic characteristics present in any human society.
No matter what the structure of society, there will always be some individuals who have more power than others. Further, in any society, there will always be some individuals who actively use their power to the detriment of others; this certainly is not limited to any particular ideology, class of individuals, or structure of society. To think otherwise is hopelessly naive and would deny the existence of sociopaths. If someone was actually concerned about instances of the misuse of power, they should take a look at government. Government has vastly greater power than any business or private individual could ever hope of having and the instances of abuse of this power are painfully obvious: 260 million individuals killed by governments in the 20th century and countless other abuses and violations of individual rights. Some people are so tunnel-visioned about the potential for power abuse in their pejorative hypothetical libertarian state they forget the catastrophic reality they are living in. And let’s be realistic here, unless they are supporters of some genre of anarchism, they ultimately accept the idea that the state may wield power and turn people into paupers through taxation. Awfully hypocritcal, wouldn’t you say?

Target Credit Card Breach, Bitcoin, and Misplaced Blame

On Thursday, Target acknowledged that credit information of up to 40 million of its customers was stolen between November 27th and December 15th in one of the largest digital thefts in history. Frustrated customers are going around blaming Target for its lack of security and even showing a mistrust for credit card transactions if businesses such as Target are not able to keep their information safe and prevent fraud. Many target users are thinking using cash might be safer, since a cash transaction will not result in any of their information being kept and put in a position that may be vulnerable to theft.

This theft is reminiscent of some of the “Bitcoin heists” that have been making rounds on the internet over the past couple years. In one such theft, $500k (25k BTC, what would be $15 million at today’s exchange rate) was stolen, from a user named “allinvain” on the Bitcoin forums, in which the user claims their online wallet was hacked and had an unauthorized transaction sent to an unknown Bitcoin address. In another such heist, up to $100 million was either siphoned off by a hacker or the owners of the website Sheep Marketplace over the course of about a week, prompting the shutdown of the website. In another, the popular MtGox bitcoin exchange website had the user information of all its users publicly posted somewhere, thus compromising all these users accounts with the exchange.

As is typical of some of the coverage of these thefts, Bitcoin itself’s legitimacy is usually questioned and writers wonder whether the Bitcoin network is really secure and free from the possibility of fraudulent duplication of its currency and hacking. However, this fear is always misplaced. Bitcoin itself is not what has been vulnerable in these attacks, but third party users or third party wallet software. For Bitcoin to be vulnerable, an attack would have to be carried out on the network itself using an overwhelming amount of computer power allowing it to create a false blockchain longer than the legitimate blockchain created by honest users, a nearly impossible feat that has not happened and likely never will. As some have noted, if an attacker had acquired enough computing power to have over 50% of the network’s computing power in one place, it would probably be more beneficial for them to use that computing power legitimately and mine for bitcoins, which would likely lead to their amassing of a greater number of bitcoins and not create a panic like a massive fraud would. Thus, the Bitcoin protocol itself is essentially impregnable to an attack by hackers (with today’s technology).

What has proved vulnerable is wallet software and online businesses. Just as with Target, online Bitcoin businesses who do not have adequate security protocols become vulnerable to hackers who exploit any information they come across and can use to access the system. With Target, some suspect a Target employee may have clicked on an e-mail that introduced a bug into the system. Similarly with wallet software, if you, as a user, leave your encryption password lying around somewhere that has no security features and that could be easily accessed, such as in a word document, you are not being secure in how you treat your bitcoin account and can have your account attacked relatively easily. Whether it’s Target, MtGox, a Bitcoin wallet, or anything else, when information is left in unsecure places or users do not follow adequate protocols to ensure their system is not compromised, theft is bound to occur. We do not see the EFT (electronic funds transfer) system being blamed in the Target theft, do we? Or the U.S. dollar, the unit of currency denominating balances? Yet all the time Bitcoin is blamed or suspected to be vulnerable in occurrences of theft.

What is to blame is particular users of these systems who do not treat their digital information with care to ensure security is not compromised. Human error is consistently to blame in these thefts and that is where blame should be placed, not in the networks in which funds reside, or the funds themselves, which remain secure and are relatively unassailable from attackers without any revealing information unknowingly divulged by users. Individuals also need to be more careful with whom they do business with because, as the Sheep Marketplace theft proves, not every business in existence has good intentions and can be trusted with large sums of money. The omnipresence of financial institutions, banks, and regulations have only served to dull our duty to make responsible decisions with our money that would reduce the incidence of theft or underhanded actions by those who would seek to deceive us. Those dealing in Bitcoins have learned this lesson the hard way and will continue to do so as long as carelessness continues to be employed in the use of money. Leaving digital information unsecured is no different than leaving a gold bar or stack of hundreds on ones doorstep, and it seems as if only negative reinforcement has been jarring enough to imbue this lesson to the same extent (or has left the wrong lesson!).

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The Bitcoin Divide: Austrian Economics, Mises, and Money

Bitcoin

There has been a lot of talk recently regarding whether Bitcoin is money, simply a medium of exchange, or a fiat bubble waiting to burst. I thought I’d weigh in on the debate with some salient critiques on situation. I have more to say about this but these are my immediate thoughts.

The Emergence of Money

The need for money arises from the problems inherent in direct exchange between individuals in a barter economy. In a barter economy, one good is directly exchanged for another good; Person A exchanges their bread for Person B’s beef, and so on. The problem arises from the unlikelihood an individual will find someone willing to exchange the particular good(s) they possess for the particular good(s) someone else possesses. If Person A is looking to exchange his bushel of grapes for a loaf of bread, what is the possibility of finding a Person B with a loaf of bread who is willing to exchange it for A’s grapes? This mutual or double coincidence of wants expresses the unlikelihood of each party to an exchange possessing the particular good (in the particular quantity) that the other wants, at any one point in time. Hence, the need for a medium of exchange arises to correct this problem, allowing the medium to be exchanged in lieu of trading actual goods to facilitate an exchange; this is known as indirect exchange.

Austrian economist Ludwig von Mises is often cited by Austrian economists for his regression theorem, which asserted that all money arises out of a particular good becoming universally accepted, as a succinct theory upon which all money must theoretically adhere to.The implication of this theory is that in every instance of money emerging, it was at one time a good with value independent of its use as money; as a nonmonetary good. We can see this with gold; before it came to prominence as money, it had other nonmonetary uses in jewelry, ornamentation, decoration, etc. Its value derived from these nonmonetary uses until, at some point in time (we of course can never know exactly when), it began being used as a medium of exchange to such an extent that it achieved wide acceptance and ascended to money status.

Intuitively, Mises’s regression theorem is logical and concise; for anything to become universally accepted as a medium of exchange in a barter economy, it must be have been a good with uses independent of exchange, because no one would have originally accepted it as payment if they had no use for it; it would have been valueless. Mises’s regression theorem is a bottom-up theory of the spontaneous emergence of money; the alternative for this is a top-down constructivist approach by which some authority (government) establishes something as money by decree. The constructivist approach is a coercive mechanism bypassing the temporal element of achieving a universally accepted medium of exchange by dictating everyone must accept the government instituted currency, or else. In this way, money need not be a store of value at all; more than likely the government is going to choose a commodity with almost no value (pieces of paper with printed numbers on them) in order to enrich itself at the expense of the public, and allow, through the inflation of the currency, an expansion of government spending without using the more visible methods of taxation or debt financing because they are more politically unpopular. To wean the public from their logical desire to use commodities as their currency, the government uses paper certificates redeemable in denoted quantities of the favored commodity. When the government decides to stop the charade after it realizes redeemability imposes constraints on its ability to inflate or debase the currency, and thus on its spending ability, it halts redeemability of the currency and finally divorces itself from the original commodity it was intended to represent. As we can see, the coercive constructivist method may “work” in that it achieves universal acceptance as a medium of exchange, but the coercive mechanism, imposing this on individuals is illegitimate from a libertarian standpoint and therefore invalid if one is inquiring how money emerges on the market.

Characteristics

From an Austrian perspective, the traditional characteristics upon which all money may be evaluated are six fold: Divisibility, durability, portability, scarcity, recognizability, and fungibility. The first characteristic is divisibility, or the ability of money to be divided into definite, measurable quantities. The second characteristic is portability, or the ability to carry large quantities of the money with little transaction costs, i.e. it is easy to carry (value dense). The third characteristic is durability, or the ability to withstand daily usage without significant wear and tear that would impair or destroy its value. The fourth characteristic is recognizablility, which goes back to the point emphasizing individuals accept it as a medium of its change and recognize its value. The fifth characteristic is scarcity because no one wants to have a medium of exchange that is not superabundant and is not too rare either. The last characteristic is fungibility which refers to uniformity; one unit of money must be identical to, and equal in value to, every other unit of the currency. Gold has theoretically and historically fit these criteria well in many cultures because it is very uniform, divisible, scarce, a recognizable store of value, portable and durable.

The Divide

There are two strains of individuals who, as per se Austrian economists, do not accept Bitcoin as a form of money. The first strain can be characterized as those who use Mises’s regression theorem to reject Bitcoin as money. These economists have accepted Mises’s regression theorem unequivocally as sacrosanct; they (e.g. Gary North) challenge individuals to not just praise the positive features Bitcoin may possess compared to other monies and note all the challenges it poses to the state money monopoly (obviously a great thing), but, understandably, to develop a paradigm subject to reasoned evaluation defining money and describing the characteristics distinguishing money from a humble medium of exchange. The implication is these individuals will not accept Bitcoin as a form of money (or at least a legitimate form) regardless of how widely accepted Bitcoin becomes. They believe to become money, it is fundamental it must originate from a nonmonetary use as a commodity good. Ideally, they reject a definition of money as simply a universally or generally accepted medium of exchange if this definition does adhere to Mises’s theorem. Austrian economics assumes all of economics is logically deductible from basic premises, but for a lot of people it probably seems like North’s refusal to consider that Bitcoin may achieve money status in the future is an irrational clinging to gold and hard money in an age when technological advances may prove digital currencies to be superior to hard money currency.

The second strain of Austrian economists who reject Bitcoin as money are those who understand Bitcoin is used as a medium of exchange in smaller circles, but until Bitcoin gains a wider (general, or near universal) acceptance as a form of money in “restaurants, supermarkets, movies,” as well as for utilities and other commercial entities, it cannot be considered money. Likely, these individuals (Block, Gordon, Murphy, etc.) accept the validity of Mises’ regression theorem as a highly accurate predictor of the spontaneous emergence of money on the market, but also accept deviations from this theorem based on the reality of the situation; if everyone accepts Bitcoin and pays for goods in Bitcoin, how can we not call Bitcoin money? Similarly, as unfortunate and illegitimate as it may be, the dollar is money because it is universally accepted as payment for goods and services even though it achieved this status by a condition of coercion.

Those who believe Bitcoin is money likewise fall into two categories. One group of supports reject Mises’ regression theorem as a thing of the past. In their view, Bitcoin is revolutionary and requires upsetting the existing paradigms, both in Austrian economic theory and in the government monopoly on the supply and “coining” of money. Many of these individuals are young, tech-savvy, and optimistic about the future progress of technology. These individuals seem very concerned with “hacking the state” and using technology and ingenuity to bring about the inevitable demise of government monopolization in every manifestation. They consistently identify the virtues of Bitcoin and believe it’s strengths make it superior to both fiat currency and gold.

Others who support Bitcoin as money seem to simply have a low threshold for what qualifies as “money” under their definition. Some, such as William Anderson, believe since Bitcoin is accepted (somewhere) for payment of goods, thus facilitating indirect exchange, and since it operates as a parallel currency (somewhere) it qualifies as money. Therefore, they do not believe it needs to be universally accepted to qualify as money; if it functions as a medium of exchange and can be accepted as a form of payment, it must be money. At this point, some of them think Bitcoin has become recognizable enough to be accepted by a large enough number of people to qualify as money. (Some from each category likely are not aware of Mises’s regression theorem or implicitly reject Mises’s theorem by adopting such a low standard for a definition of money.)

Lawrence H. White, an economist at George Mason University, thinks a little bit differently; his train of thought is very useful when examining Bitcoin as a form of money so I will go through it briefly here. In this perspective, to define whether something operates as money, one needs to define the audience. Nothing, no commodity, currency, or anything else, is universally accepted as a medium of exchange. At particular points in time, gold and the U.S. dollar have each been in large-scale acceptance by huge swaths of the world population, but nothing has ever achieved universal acceptance throughout the earth. Hence, we cannot define money as requiring universal acceptance. Each country has her own currency; in that circle, defined by their borders (their population), the currency operates as money. In many cases, it is the coercive element of legal tender laws that forced acceptance, but it operates as money nonetheless.

Murray Rothbard had his own regression theorem of international anarchy, which can prove useful to apply to the theory of money. Rothbard said if we accept anarchy at the inter-State level, why should we limit anarchy’s validity only between states? Why not regress this down to the most basic level and accept the plausibility of anarchy at the individual level? Similarly, if we accept that money can occur without universal acceptance globally and depends on the circle of users, we must accept money can manifest even in some of the smallest circles, such as the cryptohippie circle (e.g. Paul Rosenberg). Ultimately, in certain circles where individuals readily give and receive Bitcoin as a medium of exchange, it is operating as money in these circles. In many cases, economists define money with respect to society as a whole; that is why many Austrian economists say Bitcoin is not yet money, but may be at some point in the future. This is not wrong since they are implicitly looking at whether Bitcoin operates as money across the whole of society, which Bitcoins clearly do not. However, I would argue the definition of money cannot be limited to whether it is universally accepted across all of human society, but must include smaller circles to be valid. To define whether a currency is operating as money, you must define your audience. From here, it becomes academic and arbitrary how we decide exactly when a medium of exchange becomes generally accepted by a population. In many cases, we can easily tell when something is or is not functioning as money; the U.S. dollar functions as money in the U.S. economy, Bitcoin does not.

Another obstacle Lawrence White brings up regards the problem with anointing Bitcoin as a medium of exchange. He says although the $30 million per day Bitcoin volume is significant, “not all Bitcoin transactions represent purchases of goods and services, and thus not all use is monetary use. I suspect that purchases of goods and services are only a small fraction of Bitcoin transaction volume…When John Doe buys Bitcoins with dollars in order to speculate against dollars, and expects to later sell his Bitcoin holdings for dollars, he is not using those Bitcoins as money.” In the U.S. economy, Bitcoin is functioning largely as a speculative (or hedging) financial tool and is an extremely volatile asset. Further, all of the problems Gary North constantly references to this nature, such as the bitcoin heist of $100 million (small pie compared to government theft through fiat money) need to be rectified if bitcoin is ever to reach money status in America. Bitcoin will need to over and over prove its utility as a secure payment processing tool to allay the fears of the general public and get them to adopt bitcoin. Further, brick and mortar businesses as well as traditional online retailers must participate in order for bitcoin to become money. (If someone like Amazon started allowing purchases to be made using bitcoin, it would lend a huge boost to bitcoin’s legitimacy and its ability to operate as a currency).

We must also remember gold is not immune to some of these same problems bitcoin has; a heavily armed individual might rob any individual, and business, or any gold storage facility and steal significant amounts of wealth from legitimate owners. $100 million might be a spectacular sum, but theft on this scale is very rare and speaks to the problems inherent in any organization entrusted with the deposits of numerous individuals. There is always the possibility of a disreputable individual taking advantage of unsuspecting users and stealing from then. I think people are so alarmed because of how easily someone might disappear and evade tracking than anything. It also doesn’t speak to a flaw in bitcoin itself but a flaw in the nature of human users who might be too trustworthy or too mischievous. Lax security and carelessness in the storage and transfer of any form of money will result in significant risks of theft or loss.

Although Bitcoin’s lack of extensive use as money in transactions for tangible goods has continued to be used against it, this may present a case for Bitcoin as having a nonmonetary use (similar to gold), which at some point may become generally accepted and meet Mises’ regression theorem. From what I understand, Bitcoin began as a good before it became a medium of exchange. The only option for original Bitcoin owners would have been to trade them for U.S. dollars or some other currency; no goods would have been available for purchase in Bitcoin until later because sites accepting Bitcoin in exchange for goods were not yet in existence. Bitcoin’s utility comes from its use as a quick, anonymous, and nearly cost-less payment processor. The network of users supporting the payment verification is nearly impossible to duplicate by a central authority, making this aspect very valuable. Bitcoin has been a very volatile asset over its short lifespan and is likely not going to change anytime soon. This does not preclude its ability to stabilize and become money at some point in the future, however.

To analogize with the past, the Bitcoin network is akin to a Wells Fargo in the 19th century, except instead of holding money in banks and transporting money using stagecoaches,  sailing ships, and steamers, Bitcoin holds money in “virtual wallets” and uses its advanced network to transfer Bitcoins over vast distances almost instantaneously. This is an explicitly nonmonetary use for Bitcoin and can satisfy Mises’s regression theorem. Bitcoin would likely not emerge from a state of barter as the most saleable good; that much is certain. However, as a society progresses and becomes more technologically advanced, the good that was once the most saleable may no longer be the most saleable good. Menger explicitly acknowledges this when he mentions that cows, before gold, were the most saleable good and were thus the generally accepted medium of exchange, until society advanced sufficiently enough and cows were supplanted by gold because gold meshed better in a more advanced societal framework. There is no reason to think Bitcoin, or some other currency, cannot replace gold in the indefinite future for various reasons, many of which are not evident to us today. As technology pervades our daily life more and more, Bitcoin becomes ever more viable as an alternative to gold as the most saleable good.

Thus, we do not need to throw out Mises’ regression theorem. However, we do need to take a novel view of the theorem in that financial instruments could be considered candidates for developing into money if the right conditions emerge to facilitate general acceptance as a medium of exchange. Mises’ theorem still applies to market-driven, spontaneously emerging currencies, and only time will tell whether enough individuals will come to accept bitcoins as money. What is clear is that if we define money within the scope of particular groups using it as a medium of exchange, we can absolutely see bitcoin does operate as money in small groups who covet the qualities Bitcoin possesses.

The future looks promising; more and more bitcoin-based businesses are appearing, nonprofits are becoming bitcoin friendly, websites are accepting bitcoin donations, there is a lot of opportunity for growth in the use of bitcoins as money.To refuse to accept the possibility of Bitcoin as money in the future either seems incredibly short-sighted or does not adequately understand the bitcoin network’s value.

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