Bitcoin Austrian Economic Study Group

[Cryptoman]

the book we will focus on is Man, Economy, and the State. Read chapter 1 by 12/18. Be prepared to discuss it next week.

OK, I'm in.  Thanks for organizing this, kiba.

[ribuck]

... to understand what freedom is, and why the free-market is so important.

For that purpose I would recommend Stefan Molyneux's "Everyday Anarchy" which is written in very readable modern language. It takes a while to get going, but it's a compelling read:
http://www.freedomainradio.com/FreeBooks/EverydayAnarchy.aspx

[Cryptoman]

I visited the Ludwig von Mises Institute in Auburn, Alabama USA today.  I got a tour of the facility and spoke with Doug French (the president) about Bitcoin.  It is a very nice campus that includes student housing, several classrooms and lecture halls, a library, garden and retail bookstore.  I picked up a copy of Study Guide to Man, Economy and State.    The library is very nice as it has original books that were owned by Mises, Rothbard and others.  I looked through a book that had Rothbard's underlining and handwritten notes in the margins.  The people there were very nice, and I encourage anyone who has a chance to visit the Institute.

Mr. French was not too receptive about Bitcoin because he thought it might be hard for the accountants to handle the receipt of donations that way.  Even though they share our ancap philosophy, they have to play everything by the book.  I suggested that they treat Bitcoin just like receiving cash donations.  He said he would take a look at it.  I will follow up with an email in a few days.

[matonis]

Thanks to kiba for launching this.  I am just now seeing this post so apologies for being a few days behind.  IMO, the reading material needs to be at a more 'granular and focused level' for direct relevance to bitcoin.  Human Action is indeed a powerhouse, but that can be read on one's free time/beach time.

The Austrians have been very specific in monetary theory, for instance:

1. Mises, The Theory of Money and Credit
2. Rothbard, What Has Government Done to Our Money?
3. Hayek, The Denationalization of Money and Competition in Currency

Additionally, I have painstakingly gone through all of the academic journals (1990-2010) for articles related to digital currency/digital cash/precursors to bitcoin/etc and the links are hosted at the right-hand side of the blog page for http://themonetaryfuture.blogspot.com

You can find it by scrolling down to the middle under the heading:
Selected Digital Currency Articles and Academic Papers (2000-current); and
Selected Digital Currency Articles and Academic Papers (1990-1999)

[kiba]

Doh! I forgot this study group. Will read up on chapter one tonight(or morning if necessary).

[kiba]

Blah, is anybody still reading the book?

The first chapter of MES is sure dense.

[MoonShadow]

Blah, is anybody still reading the book?

The first chapter of MES is sure dense.

I tried to warn others that, although I can understand the desire to aim high, most of the books mentioned were far from casual reading.  I recommended the 'Uncle Eric' series, which is targeted at teens, for just that reason.  They are though provoking, can be digested in distinct portions, and have a mild plot of sorts intended to keep the reader engaged.  The average forum member may be better educated in this field than the average Joe, but that does really say much.  If you desire to learn by group studies, then you should choose a reading list that respects the common skillset among the forum membership, at least in the begining.

Baby steps.

[harding]

I don't have time to start reading the week before Christmas, but I'm in for next week.

Also, I think these chapters are too long for one chapter a week.  What do you think about reading a constant 20 or 30 pages a week?  (Or 21 and 28 pages a week for 3 or 4 pages a day.)

-Dave

[The Script]

Hey, I just discovered this thread.  Is this still happening or did it die?  I think it's a great idea and would love to join, especially if it focuses on monetary issues. 

[praxeologist]

I think Bob Murphy's Lessons for the Young Economist is a much better starting point than Human Action of MES. I've read the latter two several times over though and can help if anyone has questions.

Praxeology goes beyond economics and I spend much more time working on the legal aspects and epistemology (when I even have time to do that), rather than economics, but I can try.

[Babylon]

Just because someone supports bitcoins that doesn't mean the person is an Austrian as far as their economic beliefs.

I feel that government stimulus does have a place in revitalizing the economy and that the reason for the recent stimulus failing was not because Keynes was fundamentally wrong but because it was aimed at the wrong people, the rich, who chose to save it, not the poor, who would have spent immediately and started money circulating.

[The Script]

Just because someone supports bitcoins that doesn't mean the person is an Austrian as far as their economic beliefs.

I feel that government stimulus does have a place in revitalizing the economy and that the reason for the recent stimulus failing was not because Keynes was fundamentally wrong but because it was aimed at the wrong people, the rich, who chose to save it, not the poor, who would have spent immediately and started money circulating.

That's fine.  There's no assumption that all bitcoiners follow the Austrian school of economic thought.  If it was assumed that all bitcoiners were Austrians then the post would probably be titled "Economic Study Group", with the implicit understanding that all the books to be read were Austrian.  However, the post title clearly states it is for those who are interested in Austrian economics.  If you disagree with Austrian economics you don't have to post on this thread.  If you would like to learn about Austrian economics and are open-minded enough to seriously consider its ideas then by all means stick around.

[praxeologist]

Yeah, monetary debasement is still monetary debasement. You just get a different flavor of malinvestment if government plays Robin Hood. Look at consumption in houses and cars leading up to and after the car and home credits. If government really followed Keynesian doctrine they would cut spending during booms. In reality their counterfeiting is targeted at their rich cronies much more so than the poor they "represent". It seems gullible to me to foresee them ever doing any drastic cuts in spending without a serious crisis already fully underway, and then it's too late.

It seems like most I've encountered who are opposed to Austrian economics are also ignorant of it. Please educate yourself Babylon. Money not "flowing" was only a proximate cause of trouble in the past two years. Ultimately, various forms of government intervention only either cause crises or exaggerate normal business cycles. In this crisis, you have safety nets offered to those engaged in recklessly trading MBS's, legislation passed enabling looser loan underwriting than would have otherwise been in place and the manipulation of interest rates by central planners, to just name the big ones. Any recovery we experience will be in spite of, not because of, government intervention in the economy. With the second round of quantitative easing, the US is now inflating the money supply in order to support government's spending habits. It's the last out for any banana republic.

"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."–Murray N. Rothbard.

[The Script]

It seems like most I've encountered who are opposed to Austrian economics are also ignorant of it.

"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."–Murray N. Rothbard.

+1

[Babylon]

Yeah, monetary debasement is still monetary debasement. You just get a different flavor of malinvestment if government plays Robin Hood. Look at consumption in houses and cars leading up to and after the car and home credits. If government really followed Keynesian doctrine they would cut spending during booms. In reality their counterfeiting is targeted at their rich cronies much more so than the poor they "represent". It seems gullible to me to foresee them ever doing any drastic cuts in spending without a serious crisis already fully underway, and then it's too late.

It seems like most I've encountered who are opposed to Austrian economics are also ignorant of it. Please educate yourself Babylon. Money not "flowing" was only a proximate cause of trouble in the past two years. Ultimately, various forms of government intervention only either cause crises or exaggerate normal business cycles. In this crisis, you have safety nets offered to those engaged in recklessly trading MBS's, legislation passed enabling looser loan underwriting than would have otherwise been in place and the manipulation of interest rates by central planners, to just name the big ones. Any recovery we experience will be in spite of, not because of, government intervention in the economy. With the second round of quantitative easing, the US is now inflating the money supply in order to support government's spending habits. It's the last out for any banana republic.

"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."–Murray N. Rothbard.

I don't have a problem with inflation of the dollar either.  Inflation is good for people that are in debt and a debt jubilee is long overdue in American society.  With tightening of bankruptcy regulations the only way out ends up being through inflation.

My understanding of Austrian economics is that markets are self correcting and government should not tamper in them.  They tend to favor a hard currency reserve to back government money and oppose government spending in general.

By enforcing debt collections, protecting private property, and spending on inevitable things like military and police however the government already has a significant effect on the market. Choosing not to direct this effect is simply irresponsible.

I agree that there should have been cuts during boom times and that government stimulus has been directed at the rich and has thus done no good whatsoever in the current crisis. 

[The Script]

I don't have a problem with inflation of the dollar either.  Inflation is good for people that are in debt and a debt jubilee is long overdue in American society.  With tightening of bankruptcy regulations the only way out ends up being through inflation.

My understanding of Austrian economics is that markets are self correcting and government should not tamper in them.  They tend to favor a hard currency reserve to back government money and oppose government spending in general.

Inflation is bad for retired people, people with savings and people on fixed incomes.  Technically inflation is good for relieving debt, but not if the government changes the laws to favor those who are owed the debt (as might happen). 

By enforcing debt collections, protecting private property, and spending on inevitable things like military and police however the government already has a significant effect on the market. Choosing not to direct this effect is simply irresponsible.

Which is why a lot of Austrians are anti-government. 

I agree that there should have been cuts during boom times and that government stimulus has been directed at the rich and has thus done no good whatsoever in the current crisis. 

Which is inevitably what happens when government 'directs' the economies.  The rich bankers and special interests who influence the government benefit while everyone else loses.  This happens time and time again.  Furthermore, government stimulus and bailouts are fundamentally flawed, because by definition government has to take this money from the people themselves (through either taxes or inflation).  So the logic is essentially to take money from the people in order to give it back to them to "help" them.  Except that when the government redistributes it, it gets spent in ways that the people wouldn't have chosen to: to the bankers and other government favorites.  If you want to help people, leave them with their money so they can choose how to spend it (or save it) to help the economy. 

I've also heard arguments that if people are left with their money they will choose to not to spend it "hurting" the economy.  This is also flawed thinking, because the majority of people when they save their money do not keep it in a bag under their bed, but rather in a bank.  This increases the banks' reserves allowing them to loan out more to entrepreneurs who need capital to start or expand businesses.  This is how an economy grows.
   

[FreeMoney]

If people don't see anything worth more to them than their money this is a very important signal; it will manifest through a higher value of money if the government does not or cannot destroy the signal by printing to compensate.

In our present situation a time of increased savings gives the government excellent cover; they can print and most of the devaluation is 'hypothetical'; it manifests itself mostly through lack of deflation and not explicit inflation (I mean inflation in the price sense, obviously the money supply increases immediately). Only later when spending moves back to previous levels does the damage become apparent.

[praxeologist]

By enforcing debt collections, protecting private property, and spending on inevitable things like military and police however the government already has a significant effect on the market. Choosing not to direct this effect is simply irresponsible.

This is the most important error out of all his silliness. If we're to presuppose as "good" things like protecting property rights, enforcing contracts, punishing crimes like rape, murder and theft (and I agree), then we can say that government is able to perform some of these "good" functions; however, none of these "good" things ever take place without the people taking part in government doing "bad" things. Mostly we're talking about extortion and robbery (AKA taxes), but it includes things like military conquest as well here.

This is the first thing any statist is going to struggle with, simply acknowledging the reality of the essential nature of states. If they can even start to do that, then it becomes a matter of thinking that these aggressive actions are justified on some sort of utilitarian grounds. At this stage comes a lot of wishful thinking along with whatever pseudo-economics, "If we just elect the right people, they'll be handing out new counterfeited notes to the poor next time."

After that, we're to the classical "But who will build the roads?" stage. Much more so in law than in economics is there work to be done in showing how problems are solved. Libertarian theory is in some ways quite new and still developing, though in some others time-tested, age-old wisdom. So, I agree that not only is not "directing" my actions toward (at least paying for) the protection of private property irresponsible, but knowingly directing my actions toward an inferior means (i.e. a state) of accomplishing the goals in mind is irresponsible. States only do "good" things by doing "bad" things first, so if we can figure out how to do more good with less bad, I'm for it, and bitcoin is an example of a way.

This is not to disparage solely you Babylon, the anti-capitalistic mentality is a common affliction, but I am really not interested in the type of faulty arguments you are putting forth. I'm not here to debate someone who isn't going to learn about what they wish to argue against. Please try to read some of the books people have suggested because there is a wealth of information out there. Bitcoin is a real life experiment regarding Gresham's law, viz. bad money driving away the good. See here for instance, What Has Government Done to Our Money? -- Fiat Money and Gresham's Law.

Even this is really an advanced concept. I suggest again Murphy's book or the first couple hundred pages of Mises' Human Action in order to understand the fundamentals.

[Babylon]

By enforcing debt collections, protecting private property, and spending on inevitable things like military and police however the government already has a significant effect on the market. Choosing not to direct this effect is simply irresponsible.

This is the most important error out of all his silliness. If we're to presuppose as "good" things like protecting property rights, enforcing contracts, punishing crimes like rape, murder and theft (and I agree), then we can say that government is able to perform some of these "good" functions; however, none of these "good" things ever take place without the people taking part in government doing "bad" things. Mostly we're talking about extortion and robbery (AKA taxes), but it includes things like military conquest as well here.

This is the first thing any statist is going to struggle with, simply acknowledging the reality of the essential nature of states. If they can even start to do that, then it becomes a matter of thinking that these aggressive actions are justified on some sort of utilitarian grounds. At this stage comes a lot of wishful thinking along with whatever pseudo-economics, "If we just elect the right people, they'll be handing out new counterfeited notes to the poor next time."

After that, we're to the classical "But who will build the roads?" stage. Much more so in law than in economics is there work to be done in showing how problems are solved. Libertarian theory is in some ways quite new and still developing, though in some others time-tested, age-old wisdom. So, I agree that not only is not "directing" my actions toward (at least paying for) the protection of private property irresponsible, but knowingly directing my actions toward an inferior means (i.e. a state) of accomplishing the goals in mind is irresponsible. States only do "good" things by doing "bad" things first, so if we can figure out how to do more good with less bad, I'm for it, and bitcoin is an example of a way.

This is not to disparage solely you Babylon, the anti-capitalistic mentality is a common affliction, but I am really not interested in the type of faulty arguments you are putting forth. I'm not here to debate someone who isn't going to learn about what they wish to argue against. Please try to read some of the books people have suggested because there is a wealth of information out there. Bitcoin is a real life experiment regarding Gresham's law, viz. bad money driving away the good. See here for instance, What Has Government Done to Our Money? -- Fiat Money and Gresham's Law.

Even this is really an advanced concept. I suggest again Murphy's book or the first couple hundred pages of Mises' Human Action in order to understand the fundamentals.

Assuming that I have not read these books does no credit to your arguement.  I'm not a statist, I am an anti-capitalist only in that I am opposed to state power and do not see capitalism being possible without state protection of capital.

I won't deny that a state does bad things as a prerequisite for any other action and I am far more of a Marxist than a Keynesian as far as economics are concerned (his political theories meanwhile are garbage IMO) Using an Austrian economic approach coupled with a plutocratic government system however leads to concentration of wealth with he rich, who will alternate their monetary policies between Austrian and Keynesian in whichever combination keeps the real assets flowing to them.  By properly alternating deflation and inflation they are able to manipulate the currency and acquire a greater and greater share of the assets.

[kiba]

How do we know when to inflate and when to deflate?  

We don't. Let the market which kind of money/currency/etc is the best in the world.

Ya know why I like bitcoin? I can save and not have to worry about it losing value due to someone printing it. Why would I want to store my saving in inflatecoin?