What Would Carl Menger Think Of Bitcoin? \ stacker news ~libertarian

What Would Carl Menger Think Of Bitcoin?

3369 sats \ 35 comments \ @siggy47 15 Apr libertarian

I read Mises Institute articles more often than I have in years, mainly as a result of @Undisciplined's consistent posting. I found this one, though, on Zero Hedge: https://mises.org/mises-wire/carl-mengers-overlooked-vital-evolutionary-insights

It got me wondering what Carl Menger , who really began the Austrian School, would have thought of bitcoin, and, more broadly, how (and should) libertarians think of bitcoin as money.

The article points out that Menger, like Herbert Spencer, did not

“... belong to the believers in the mathematical method as a way to deal with our science. . . . Mathematics is not a method for . . . economic research.”

He equated economics more as akin to an organism that grew through evolution than as a structure that could be planned or designed through mathematics:

Just like the human body organism and the numerous “systems” that coordinate it—like the respiratory-nervous-digestive systems—are the result of the actions of some seventy trillion human and bacterial cells but obviously NOT the result of any conscious planning or designing by them. And thanks to the likes of Darwin and a modern understanding of genetics, we can hypothesize how natural selection was the inadvertent “designer” of such systems and complex order.

Ludwig von Mises and F.A. Hayek later built upon these ideas.

Drawing on this concept, here is what Menger had to say about money:

Menger’s vital insight regarding money is that he showed how money, just like language, was an evolved and NOT designed innovation. Since money was an evolved and NOT designed innovation, this also means that all the other vital mechanisms that, taken together, make up the market process like profit-loss calculation and economic competition, they too are largely evolved/undesigned mechanisms.

It's been a while since I got into the weeds of libertarian thought. My bitcoin journey began long after I stopped obsessively reading Austrian economists.

Maybe it's a little late, but I recently started wondering about the number of libertarians who embrace bitcoin. For Austrians, money must clearly evolve, and not be designed. There's no question Satoshi designed bitcoin. It is built on cryptography and certainly involved a good deal of planning. I'm hard pressed to make an argument that it evolved.

Perhaps strict libertarians should see bitcoin more as property than as money?

I'm curious how other libertarians resolve what seems to me to clearly be an issue.

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144 sats \ 8 replies \ @Undisciplined 15 Apr

This was (and probably still is) a big sticking point for many Austro-libertarians. I most often heard Mises' regression theorem invoked by that group of bitcoin skeptics.

Bob Murphy talked about this somewhere and explained why that specifically was misguided. The Regression Theorem is about prices not being arbitrary, so you can't just call something money and assign it a value. Money has to emerge from something and find its value through repeated exchanges.

The manner in which Bitcoin "emerged" was that a couple of nerds were talking about this new application of existing technologies and decided to trade some of it for a couple of pizzas. That set an initial price and from there normal price mechanisms could start working on it.

71 sats \ 7 replies \ @siggy47 OP 15 Apr

Yes, I know. I think you have posted about this before in a different context? I just don't know if I buy that argument. For purposes of this discussion bitcoin was deliberately created. I don't see how you can honestly say it emerged.

96 sats \ 6 replies \ @Undisciplined 15 Apr

I'm not as familiar with Menger, so I'm not sure if there is a great argument that bitcoin "evolved" in the way he was thinking.

It's not clear to me, though, why it's not an evolution of existing money, accounting, and cryptography concepts.

There have been plenty of innovations that required synthesizing several different ideas. That certainly would not be news to Menger. Neither would the idea that big projects often require a lot of planning. That makes me think he's talking about something slightly different.

61 sats \ 1 reply \ @siggy47 OP 15 Apr

I just re read what you said. I think I'm starting to see your point. Is this the standard libertarian bitcoiner argument? Like I said, I've been out of touch for a while.

106 sats \ 0 replies \ @Undisciplined 15 Apr

I'm not sure if many libertarians care about this and, as we know, many of the Austrians are behind the curve on Bitcoin.

I had heard a bunch of pretty unconvincing arguments, prior to Bob's, that just seemed like rationalization to me.

I guess that's a long way of saying "I don't know."

61 sats \ 3 replies \ @siggy47 OP 15 Apr

I can't help but think that what Menger is referring to is the natural money that emerges in a community, like in Szabo's Shelling Out: https://www.goodreads.com/book/show/36329520-shelling-out

Sea shells, beads, wampum.

We can agree to disagree.

Ultimately, it won't matter to me. Bitcoin is too important for me to worry about shoe horning it into a philosophy for armchair discussion. It is important to think about, though, when we consider the free market and our own criticism of manufactured fiat.

96 sats \ 2 replies \ @Undisciplined 15 Apr

what Menger is referring to is the natural money that emerges in a community, like in Szabo's Shelling Out

I have no doubt about that.

I was basically taking your question as whether or not Menger would understand Bob's point, given that Bitcoin has seemingly established itself, or if he would be skeptical of it because of how it originated.

61 sats \ 1 reply \ @siggy47 OP 15 Apr

I see. I guess we'll never know.

96 sats \ 0 replies \ @Undisciplined 15 Apr

No, but I want to think Menger would get it, because Bob's explanation is so true to Menger's insight about subjective value.

106 sats \ 0 replies \ @Satosora 15 Apr

When I read this title, I thought you were talking about Charlie Munger from Berkshire Hathaway. What a dunce.

96 sats \ 3 replies \ @davidw 15 Apr

he showed how money, just like language, was an evolved and NOT designed innovation.

Interesting angle. I wouldn’t put words in his mouth but I interpret it that he was eluding to the need & onset of natural decentralisation without actually saying so.

The building blocks did not come in the pursuit of money. That’s what I would say. Encryption, PoW, the internet itself were not designed to recreate money. Bitcoin on Day 1, arguably was not yet money.

Gold coins didn’t magically appear pristine in their final form under the dirt. Man chose to turn the shiny rock into pocketable stores of money and wealth that lasted for hundreds of years. It took deliberate action to turn gold into practical money just like it took foresight to package the ingredients that bitcoin has into the SoV it is today.

81 sats \ 2 replies \ @siggy47 OP 15 Apr

Before gold coins, the ancients were using this as money

I would submit that what you describe was an evolution into refined coins without central planning.

96 sats \ 1 reply \ @davidw 15 Apr

Could we not say that the more society develops, the more developed it's money must become?

Those rocks look to us like mere pebbles, but to people in the day they would have looked rare and valuable. Bitcoin may not seem a natural conception to some people, but to many in the future it may seem a miracle or a boring relic.

21 sats \ 0 replies \ @siggy47 OP 15 Apr

True. Maybe it could also be looked at as a natural evolution of cryptography as technology destroyed human freedom.

96 sats \ 0 replies \ @davidw 15 Apr

Not long from now, people will write about the great philosophers & learners amongst us.

Tuur is our modern day Menger. P. Lewis our Von Mises, Breedlove our Von Wieser and Andreas our Hayek.

96 sats \ 2 replies \ @StillStackinAfterAllTheseYears 15 Apr

I'm hardly an expert on Austrian economics (though I feel like I know a ton more than I did a few months ago), but isn't the evolution here not the design Satoshi did, but the choices made by BTC users to start using BTC as money, as well as how they use it (Lightning, etc)?

42 sats \ 0 replies \ @riberet19 15 Apr

The way people use it is also correlated with the aspects of the network, the high commissions of the mainnet have made many people use the Lightning network, which is partly evolution.

42 sats \ 0 replies \ @siggy47 OP 15 Apr

I don't think it would be intellectually honest to skip past the deliberate design at its origin, though I would like to. 😀

75 sats \ 0 replies \ @Coinsreporter 15 Apr

Perhaps strict libertarians should see bitcoin more as property than as money?

This is exactly what I meant here

#477449

I don't even want to force bitcoin into the notion of a currency. It's definitely more like a property and should be seen that way.

75 sats \ 0 replies \ @jgbtc 15 Apr

Dude looks like the original Chad.

75 sats \ 2 replies \ @SpaceHodler 15 Apr

“... belong to the believers in the mathematical method as a way to deal with our science. . . . Mathematics is not a method for . . . economic research.”

I think what was meant here was arithmetic, statistics, mathematical analysis etc. Branches having to do with number crunching and formulae over ℝ (the real numbers), which non-mathematical people synonymize with mathematics.

To me, human action, which the Austrian economic thought arises from (even though it was only framed so by Mises, not Menger) is very mathematical; arguably more mathematical than the numerical stuff. With the action axiom, and everything else arising from it through logical, a priori reasoning.

For Austrians, money must clearly evolve, and not be designed. There's no question Satoshi designed bitcoin.

Did gold evolve or was it designed?

I can't cite a source, but I've heard from a physicist that if you changed one of the fundamental physical constants (speed of light in vacuum c, gravitational constant G, Planck constant h, electric constant ε0, elementary charge e) by as little as 2%, the periodic table of the elements would contract to just hydrogen. Hydrogen would be the only element possible. Looks like not only Bitcoin, but also our universe is a solid piece of engineering, gold included.

10 sats \ 1 reply \ @siggy47 OP 15 Apr

So, in your view is there such a thing as an "invisible hand?"

85 sats \ 0 replies \ @SpaceHodler 15 Apr

I try not to get attached to any views on the nature of reality. There are many ways to look at the same thing. I actually like multiverse theory, it does away with the need to explain why things are the way they are. It's no wonder our universe has everything we need, in the ones that don't there is no one to ask questions.

Also, any invention can be reduced (in NP time, if you know what that is) to a discovery. Maybe Satoshi randomly generated a long string of characters and when he looked at it, he realized "Hmm, interesting, this looks like a white paper, let's have a closer look" and verified that it made sense.

47 sats \ 0 replies \ @CarlBMenger 20 Apr

According to Menger, money emerged spontaneously through the self-interested actions of individuals. No single person SAT back and conceived of a universal medium of exchange, and no government compulsion was necessary to effect the transition from a condition of barter to a money economy. In essence he believed that the most saleable good in a marketplace becomes money. Thus it is fair to believe that Menger would be very bullish on #Bitcoin.

If you want to dive deeper into the Austrian School and their theories on money, you can check out my Substack episode "How money evolves": https://carlbmenger.substack.com/p/how-money-evolves and/or read the book „On the Origin of Money“ by Menger himself.

Feedback always highly appreciated!

27 sats \ 0 replies \ @telcobert 21 Apr

Answers below already explain some aspects how Bitcoin is not imposed by law and is very much evolving in a Darwinistic way from prior experiments in digital money, beginning with David Chaum, etc.

Bitcoin is also still evolving as it is not yet competitive with USD, as evidenced by the lack of mass adoption vs. dollar notes, dollar deposits and USDT tokens, due to its 6 to 10 times higher volatility. Bitcoin only sees some use as a Store of Value (hedge/investment), negligible use as a Medium of Exchange, and no use as a Unit of Account.

Therefore, the next step in Bitcoin's undoubted evolution will likely be some mechanism, system, and institution which give it the requisite elastic supply so its volatility can be competitive with the big nation state fiat currencies.

27 sats \ 0 replies \ @CarlBMenger 20 Apr

I am fucking bullish on Bitcoin, so that it even hurts when I pee.

27 sats \ 0 replies \ @0xIlmari 16 Apr

He wasn't wrong in that economics is not unlike a living organism and therefore difficult to describe. But concluding from that that mathematics as a tool should be discarded is a mistake. He was just born too early and maybe didn't anticipate the tools that were to be invented in the future, such as:

Chaos theory
Modern econometrics and financial engineering
Entirely new branches of mathematics (like stochastic processes) to describe and solve some of the problems
Computers to allow assist in solving and simulating

42 sats \ 0 replies \ @nym 15 Apr

I agree with the premise that economics is more of an organism that grew through evolution than as a structure that could be planned or designed through mathematics.

31 sats \ 1 reply \ @kilianbuhn 15 Apr

Let's ask the expert: @CarlBMenger

😂

0 sats \ 0 replies \ @CarlBMenger 20 Apr

Feedback always highly appreciated!

10 sats \ 2 replies \ @BitcoinGuru 15 Apr

There's no question Satoshi designed bitcoin

But Bitcoin for me is clearly an evolution, not a design.

0 sats \ 1 reply \ @siggy47 OP 15 Apr

Can you explain a little more why you think this?

21 sats \ 0 replies \ @BitcoinGuru 15 Apr

Because Bitcoin has been in the making since Banks have debased their Gold standard of money. Evolution in the sense because we needed change in money form and it evolved in the form of Bitcoin.

31 sats \ 0 replies \ @freetx 15 Apr

Austrians, money must clearly evolve, and not be designed

"Money" as a concept was emergent and was not designed. However, specific implementation of a money can be designed and they are known as a "currency".

That is to say, Money is an abstract ideal. It is intangible and conceptual. But the specific tangible item you use as its representation is a currency.

Currencies logically must be designed since their goal is to make the intangible into tangible.

0 sats \ 0 replies \ @_stacktoshi 15 Apr

Here's a 10,000 foot view that I picked up from Vijay Boyaparti on the WiM podcast:

Mises was just describing money as something that had evolved, using the Regression Theorem. It was Rothbard that actually said that it was the only way, at least according to Vijay.

That all said, bitcoin has been used as a medium of exchange and is continuing to evolve as it gains adoption. When we're all flying around in our Millennium Falcons, we're not going to be handing shiny rocks to each other as a form of payment, so I wouldn't fret what the Rothbardians have to say on the matter.