One thing I love about Austrian economics is devotees cannot agree on a definition of money, interest, profit, the foundation of rights and so on. But I see that as a strength not a weakness. Keynesians and Marxists have their disputes, but neither side is ever right (Marxists do get their facts straight, something Keynesianism inherently cannot do, since Keynesianism is irrational, and must proceed from false premises to work). At least in Austrian school, one side has often got it right.
I got into a Colloquy with a devotee of Austrian economics over bitcoins as free market money, which we join in progress...
P: And since you are thoughtful on this subject, let me point out to you that cowry shells were not universally accepted either, but they still were money in a broad swath of earth.*** Internal contradiction - not universal/broad swath.... But I think you mean similar bagatelle items shells here, agates there, totems over there... but not universal.***
P: And why is universal acceptability a necessary criterion?
***Money is a medium of exchange. If I cannot use it as a medium of exchange, it is not money, it is something else.***
P: Who hands down these edicts anyway?
***The market, the same people who said Euripides was a great playwrite....***
P: And who says that money MUST emerge from a commodity? (von Mises I know, but what makes that pronouncement authoritative?)
*** Von Mises is always just restating the obvious... when time and again "money" (medium of exchange) emerges, it is from a commodity.
This leads to "the store of value controversy" as part of the definition of money. All commodities are a store of value, and when one emerges as money, it does not lose its inherent quality as a store of value. Some austrians get worked up over money defined as medium of exchange AND a store of value since it offends against the principle of subjective valuation. But it is one item acting in two faculties, so the confusion is understandable.***
P: And is it really barter when you use another object (like bitcoins) to mediate an exchange?
***It is barter because bitcoins explains itself as barter, without saying the word. You and I can agree that I'll send you my book for 2 bitcoins (which you either mined or earned) and now I have 2 bitcoins to use to buy that 8 meg flash drive from Fast Eddie. Bitcoins role is to make an accounting entry on who owes who what, in this barter arrangement. Alternatively, this could be called fiat money, but fiat and money together is an oxymoron.
An accounting entry is rather tenuous item to describe as an object.***
P: If so, then all money transactions are actually barter.
***I disagree, since in barter, like bitcoins, there is no medium of exchange. In bitcoins, the exchange is in-direct, whereas in barter the exchange is direct (My pig for your goat). Bitcoins may solve the problem of double coincidence, but it meets none of the other criteria the market has set for money.
With money, all of the criteria set by the market are in place (plus one only recently observed: money is antibiotic... newly discovered metals that are antibiotic end up being made into coins (platinum, rhodium, palladium), metals not antibiotic do not end up thus... it is a curious phenomena.
Goat for pig, barter; goat for 1/4 ounce of gold, medium of exchange transaction; goat for bitcoin... i'd say barter with accounting system, but if someone wants to argue it is a fiat currency transaction, ok...whatever, but it ain't a money action, there is no medium of exchange, no object.
If one argues bitcoins is just a private mockery of our fiat system, I have no problem with that. But it is not money.***
P: Barter has to be disparate goods exchanged for other disparate goods, or else it loses all meaning.
***d'Accord. Since bitcoins are usuable only within the tiny milieu of the bitcoin nation, the universe of goods and services are rather limited.***
P: And even if we accept the notion of emerging from a "commodity", how you demonstrate that the emergence of bitcoins in the process being used is not a commodity?
*** a commodity is universally accepted: rice is a commodity, sushi is not. Bitcoins are far too rare, intangible, and are near universally unacceptable for barter, (nothwithstanding that I think their miniscule use is as barter).***
P: It's easier to say that it IS a commodity.
***I disagree, walk into a market with 100 pounds of rice, and 10 bitcoins, see which gets you a deal...***
P: And so, I deeply appreciate what you've suggested, because it has elicited from me all of these counter-thoughts, which I hope you find stimulating and perhaps persuasive.
***I've read you for years and I would not have challenged you if I did not think you were more than my match... I come from a family of academics, and I am the black sheep who went into commerce. You've forgotten more on these topics than I've ever learned... but as to money, I've been fixated on the topic for 40 years, and as an importer have been able to discuss it worldwide (have you read spooner on how the precise correct amount of coin is kept in circulation? http://lysanderspooner.org/node/49).***
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