The Revolutionary Intersection of Bitcoin and Austrian Economics
In the world of economics and currency theory, few topics have sparked as much debate and discourse as Bitcoin. Since its inception in 2009, this pioneering cryptocurrency has challenged conventional notions about money, banking, and the role of government in monetary policy. Its innovative attributes like a capped supply, decentralized verification, and resistance to inflation have made Bitcoin a fascinating case study.
However, one particular school of economic thought seems to have an uncanny philosophical alignment with Bitcoin’s foundational principles – the Austrian school of economics. While Bitcoin was developed outside the realm of academic theory, many of its core properties adhere to the teachings of influential Austrian economists like Ludwig von Mises, Friedrich Hayek, Murray Rothbard and more.
This website is dedicated to comprehensively exploring the multitude of ways in which Bitcoin intersects with Austrian economic philosophy. Through scholarly analysis and insightful perspectives, we will unpack how this revolutionary digital currency arguably manifests some of the most essential theorems championed by the Austrian giants.
The Austrian Rejoinder to Central Banking
To understand Bitcoin’s natural kinship with Austrian economics, we must first examine the Austrian view on central banking and nationalized monetary policy. A core tenet of the Austrian school is the rejection of artificial government intervention and price fixing when it comes to money.
Figures like von Mises and Rothbard were fervent critics of central banks’ ability to manipulate money supplies and interest rates. They viewed such actions as inevitably distorting price signals, subsidizing inefficient business behaviors, and creating inaccurate indicators that would lead to recession and economic crisis down the line.
The Austrian Business Cycle Theory postulates that excessive credit creation by a central bank fans the flames of an unsustainable boom which must be paid for by a painful economic contraction and recession. Austrians argued for money supplies to be governed organically by market forces rather than a centralized authority’s decision making.
This criticality of separating money from state control finds its ideal manifestation in Bitcoin’s decentralized, politically-impartial network. Bitcoin was created precisely to operate separately from central banks, nation-state policies, or any instituted money monopoly.
Bitcoin’s Deflationary Economic Modeling
Perhaps the most foundational link between Bitcoin and Austrian economics is their shared embrace of a deflationary, inelastic monetary supply. For decades, Austrian thinkers advocated adamantly for money supplies to be strictly limited rather than constantly inflated.
The rationale was that increasing money supplies cause rising prices and diminishing purchasing power – a proverbial “inflation tax” that erodes the value of savings and perpetuates a disconnection between consumption and actual production. Only a money supply permanently capped and independent of artificial expansion could provide a stable economic foundation.
In the theories of Mises and Rothbard, a progressive transition towards a 100% reserved money supply anchored by a non-inflatable commodity was the ideal path. Enter Bitcoin – which features a strictly limited maximum supply of 21 million coins mimicking a scarce precious metal.
New bitcoins are released into circulation on a precisely scheduled, diminishing issuance model adhering to stern, unbreakable rules. This disinflationary “hardened” money supply aligns perfectly with the Austrian belief that money sources must be inelastic and free from manipulation to retain value.
The Misesian Applicability of Bitcoin
Beyond its deflationary monetary properties, Bitcoin bears numerous philosophical parallels to the teachings of the master theorist Ludwig von Mises. Mises developed the concept of praxeology – the deductive study of purposeful human action founded on basic axioms like pursuing means to achieve desired ends.
Bitcoin can arguably be viewed as the physical manifestation of praxeology in the monetary realm. The decision by economic actors to