Austrian School of Rock

Understanding Mises Institute position on Bitcoin

I have to be honest, the initial position of the Mises Institute on Bitcoins was really disappointing, being a Hayek guy myself, I was expecting a take-that-central-banks approach, but what I got was a Frank Shostak “You have a pipe dream” speech, not even a kudos to Satoshi Nakamoto for trying to achieve what the Austrian School is been trying to do -in terms of monetary policy- for more than 100 years. Never mind, I thought. Mises Institute has a reputation to take care, and Dr. Shostak couldn’t be seen singing the praises of something that -from his point of view- may or may not be just a fad.

But life goes on, even if you feel like you were stabbed in the back by Keynes’ Wikipedia entry. Later that year Peter G. Klein (@petergklein), Executive director and Carl Menger Research Fellow in the institute posted an answer to the question of government regulation of Bitcoin. This time decentralized hope grew again, Dr. Klein (besides from confessing himself as a crypto-currency owner) accurately predicted that as Bitcoin gains more acceptance the government would push for greater regulation, not only because it’s in its nature, but -even more important- because people will ask for it as most of the population tend to accept a “paternalistic, interventionist, government ” and believe that “government intervention is for their own benefit”, so government regulation will not primarily come as an imposition but as a request from the bottom up. This approach, pessimistic as it was, presented a whole now stance on Bitcoin, it places Mises in its more traditional position of the Austrian School vs. Regulations, even more, it recognizes crypto-currencies as a financial tool that should be kept away from regulatory forces, a position not so different from the one Austrians have for traditional centralized currencies.

But why does it matter? Why should we care about what Mises Institute has to say on this respect? Bitcoin started as a technologic novelty product of an idealistic purpose: decentralized money, currency beyond the control of a central power, monetary instruments that can’t be devaluated, twisted, tweaked or influenced. As we have discussed, this idea of a financial system free of government intervention is not new, and there is plenty of theoretical work on that respect, but so far for non-economists it remained mostly in the realm of utopic good advice, now all of a sudden this knowledge instantly provides a complete theoretical basis for a real alternative to the status quo, it represents a bridge between technologists and economists, an uncanny phenomena that resembles the Standard Model where the theoretical ground for explaining the existing dynamics between sub-atomic particles was laid out before some of those particles were even discovered. Now, the Mises Institute is a libertarian stronghold for decentralized knowledge and an active force in the spreading of the ideals of the Austrian School economics, one only can wonder what will come out when crypto-currencies are allowed entry into the stream of ideas flowing through it.

For long I have read critics of the Austrian School of Economics arguing about over-theorizing and excessive methodology, a triumph of decentralized currencies will -for once- put practice to the theory. It will have been a long way to the top.