Austrian Economics and Bitcoin

[Agricola]

I was wondering if any scholars on here have attempted to apply Austrian economics (Mises, Rothbard, etc.) to bitcoin (for market analysis, fait viability, etc). I'm a law student myself, but I've been very intrigued with Austrian economics for sometime especially Rothbard's works.  thanks!

[Adrian-x]

I haven't seen many credentials advertised, it is evident if you read a few of these posts than some are students, and possibly some academics. (IMO most identifiable economic students seem to favor the Keynesian outlook) 

I recommend you read a few of the posts  (days of reading) - follow the inflation v deflation debates, or lending in a deflationary economy.

Mises regression thrum has also been debated my times, my takeaway: if you can't reconcile Bitcoin with Mises, (I believe there is an argument to be made you can) then Mises's thrum needs to be updated.

To me the Austrian perspective is by far the dominant in this forum and well represented, there is a Keynesian paradox at play that is not well discussed, and often is overlooked by the practicality of the Austrian school of thinking. 

I.e. When the value of Bitcoin goes up, it is equivalent to deflation in the Bitcoin economy.   Form the Austrian viewpoint, deflation typically is a time to save and refrain from investing, as the economy needs to cool down, as opposed to price inflation in the economy which encourages investing and speculating as the value of money is being inflated away, the market naturally stimulates economic growth by investing.

The argument suggests a paradox may exist as the price of Bitcoin, increases, people ether save it, or convert it to fiat, both of those action are typical of a inflation event not typically associated with a deflation event (Bitcoin value increasing) . 

I haven't seen any conclusive evidence, to negate the paradox altogether. To the contrary though I do think it is unanimous, that when you get over the historical view gold had in fixing the money supply as an Austrian, you see Bitcoin as Gold 2.0.

[Agricola]

Thanks for the info, friend. After searching for bitcoins in relation to mises regression theorem I found the following forum topic, with a great deal of info: http://mises.org/Community/forums/t/25411.aspx

Hopefully I can make some informed post on Austrian Economics and bitcoins in the future .

[lonelyminer (Peter Šurda)]

Agricola,

last year I wrote a master's thesis about Bitcoin from a mainly Austrian point of view and since then I switched to full time research of Bitcoin. I also help other researchers when I can, and I attempt to explain Bitcoin to other economists/researchers. Currently I'm expanding my thesis into a book. I have a blog, http://www.economicsofbitcoin.com and there is a list of my publications/interviews as well. Recently I made my bibliography and notes public.

I consider myself mostly an Austrian but I am also trying to read other schools so that I can approach other economists too. Two weeks ago I was at the 2nd International Conference on Complementary Currency Systems (CCS) where most attendees were neither Austrian nor mainstream. There I attempted to explain that Bitcoin is voluntary and that it takes control over money supply from the banks. Last week I was interviewed by Akio Fujii from Nihon Keizai Shimbun and he asked about the effects of Bitcoin on monetary policy, but luckily I have researched mainstream monetary policy economics so I was able to explain how Bitcoin fundamentally does not change the effect of OMO, as predicted by Michael Woodfor in Monetary Policy in a World Without Money, and that reserve requirements and interest rate already don't have much effect anyway.

If you have questions let me know, I'm always looking forward to new input.

[4mherewego]

A while back tons of Austrians were very vocal that Bitcoin would fail because it was not backed by any precious metal. I think some Austrians got a bit to attached to their theories, AE is supposed to be praxeological.

Unfortunatly very few national economists are Austrians, why bite the hands that feeds you. The AEs are usually found in the private sector, which wants to keep are their profits.

Bitcoin is a cool experiment and hopefully it can settle quite a few weird arguments many respected economists have put forward. I have a dream that they will have to answear for their errors, but we all know that will never happen

[Itcher]

I like austrian economics, they have a smart and wise perspective for many things. But they are an ideology. The Austrians can't see, what's outside their one and only theory of the market, her great knight of freedom. But Austrians should like the BTC, and they do. If you speak german or use googletranslater: the only real austrian-libertarian german magazine, "eigentümlich frei", published the last day two articles about "Marktgeld" and the "Bitcoin" one their blog.

http://ef-magazin.de/2013/07/01/4322-bitcoin-als-vertrauenswuerdiges-geld-geschaetzt
http://ef-magazin.de/2013/07/01/4324-essay-freies-marktgeld-bitte

Eigentümlich Freis favorite german politican, the "Euro-Rebell" Frank Schäffler, advertises Bitcoin.

But they write also against the poor, agaist the foreigners, against any kind of Wealthfare-State, against the Euro, against the European Union, and so on. They are fundamentals, they just see the: Market=freedom, Government=tyranny. Their market is alway best, even if it does harm to millions, and collectivity is always the devil, even if it cure the millions.

[weisoq]

I'm pretty sure that whatever rothbard or mises or hayek would have thought about Bitcoin, they would also have concluded that the natural consequence of Bitcoin is competition to Bitcoin, as with everything.

[shawshankinmate37927]

I was wondering if any scholars on here have attempted to apply Austrian economics (Mises, Rothbard, etc.) to bitcoin (for market analysis, fait viability, etc). I'm a law student myself, but I've been very intrigued with Austrian economics for sometime especially Rothbard's works.  thanks!

This thread discusses an excellent article about Bitcoin written by a rather well-known Austrian economist:

https://bitcointalk.org/index.php?topic=184603.0

[acne]

Austrian economics are no different then any other countries economics..

[Agricola]

Austrian economics are no different then any other countries economics..

haha bud: http://en.wikipedia.org/wiki/Austrian_School

---
Wow guys, thanks for all the feedback! I will be reading through this info in the coming days. Also @lonelyminer (Peter Šurda) , and @Itcher: I hope to get in contact with you via PM, once things slow down for me.  Again, I really appreciate all the info/help guys!

[oleganza]

I've read a lot of Rothbard before I noticed Bitcoin. And I realized Bitcoin potential very quickly. Rothbard would totally LOVE it.

Also, the principle of "allow currencies or metals compete with each other like any other product" does not invalidate the tendency of people to come down to very limited amount of currencies if not a single one. History shows a lot of examples when we had multiple currencies only because of some restrictions (physical or legal).

I wrote in detail here:
http://oleganza.tumblr.com/post/54121516413/the-universe-wants-one-money

TLDR: People use money to trade for as many goods as possible (because everyone wants to have a choice and there is always uncertainty about the future). Therefore, ideal money which is cheap to store/transmit/verify will tend to become the dominant. It does mean we don't need competition in money, but this will be a competition to choose the limited set of the most perfect currencies. In old times we came down to gold and silver (because gold is impractical for small payments). In modern times we may have Bitcoin taking up 90% of transactions (big and small) with some hedge against hacks in gold. Silver probably will be less relevant in this situation.

[Itcher]

Austrian economics are no different then any other countries economics..

haha bud: http://en.wikipedia.org/wiki/Austrian_School

---
Wow guys, thanks for all the feedback! I will be reading through this info in the coming days. Also @lonelyminer (Peter Šurda) , and @Itcher: I hope to get in contact with you via PM, once things slow down for me.  Again, I really appreciate all the info/help guys!

you're welcome

[bitfromit]

There is a tide change with the Austrians, though they were initially very skeptical - to put it mildly :

https://www.google.com/search?q=mises.org+bitcoin&ie=utf-8&oe=utf-8

Some old fuddy-duddies don't (and probably can't) get it. Poor guys. I guess they would also be non-emailers.

Bitcoin certainly is putting their "no such thing as intrinsic value" to the debate however!

Modern physics is pointing more and more to a universe that is just pure information. So, perhaps a bar of gold has no more "intrinsic value" than bitcoin hey?

[Phinnaeus Gage]

I've secretly been working on a book--über-stealthy Bitcoin related--of which will now include a page on  https://en.wikipedia.org/wiki/Eugen_von_B%C3%B6hm-Bawerk.

The goal is to have it published ready for the 2013 Christmas gift-giving season. I'm heavily leaning toward using Phinnaeus Gage as the pen name.

[Albert Speer]

Austrian Economics Are Different