• Storris

    The idea that money needs to be commodity-based is profoundly wrong-headed. There is no thing called ‘intrinsic value’. All value, as Mises knew, is in the eye of the beholder, it is always subjective.

    “Just as there is no standard and no measurement of sexual love, of friendship and sympathy, and of aesthetic enjoyment, so there is no measurement of the value of commodities. If a man exchanges two pounds of butter for a shirt, all that we can assert with regard to this transaction is that he – at the instant of the transaction and under the conditions which this instant offers to him – prefers one shirt to two pounds of butter.”

    - Mises, Human Action

    Money is only that which the seller will accept in exchange for his goods/services, whether it is Gold, BitCoin or a verbal Promise.

    • http://twitter.com/DanielPryorr Daniel Pryor

      Thanks for taking the time to read and comment!

      I don’t think that Mises’ Regression Theorem necessarily vitiates the (completely correct) subjective theory of value. He’s not abandoning cardinal utility theory, but simply saying that for something to be valid “money”, it must possess an original link with a commodity that is valued for any purpose other than simply exchange. As David Kramer puts it:

      “A medium of exchange arises from something that had a material use/value in the market prior to becoming a medium of exchange”.

      “Money” in the loose sense of the term is exactly what you state it to be: anything which the seller will accept in exchange for goods/services. But some would argue that Bitcoin violates the Misesian Regression Theorem of how a valid/true medium of exchange arises. For example, in a hypothetical free market economy, Bitcoin would not exist in its current form – that of being exchangable for “bogus” fiat money (e.g. USD).

      There have been some great articles asserting that Bitcoin is in fact backed by a scarce commodity (each unique cryptographic hash). Though they may be intangible, they are still scarce as they cannot be double-spent.

      • http://twitter.com/DanielPryorr Daniel Pryor

        That said, what use were the hashes before they were employed in Bitcoin? Another argument against Bitcoin satisfying MRT.

  • Robert

    You say: “A less common but more profound objection from fellow libertarians is
    based on theoretical grounds; since Hayek’s private currencies would
    hypothetically emerge independent of a commodity that could give them
    intrinsic value, nobody would accept them as legal tender and they would
    therefore be useless.”

    Cheques are not legal tender. Scottish bank-notes are not legal tender. They are not therefore useless. They are legal, but not “legal tender”. What matters is what people are willing to accept as payment without coercion.

    A currency is far less likely to be debased if it circulates on its merits and not as a result of being legal tender and therefore something a creditor must accept. The hyper-inflations in France and Germany were based on forced currencies that were, of course, legal tender.

    Hayek is very good, but better on money is an earlier and little-known author. Henry Meulen’s book, “Free Banking: a policy of individualism” (2nd edition, Macmillan, 1934) is brilliant, and he is slowly being rediscovered.

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