The m's and b's of millibitcoin redenomination

We could change where the display shows the decimal point. Same amount of money, just different convention for where the [commas and periods] go…moving the decimal place 3 places would mean if you had 1.00000 before, now it shows it as 1,000.00.

—“Satoshi Nakamoto,” February 10, 2010

In the Kingdom of Geekdom, my €2.60 espresso this morning might have cost 0.0283 BTC (at the 90-day weighted moving average of €92/BTC), perhaps pronounced “point zero two eight three bitcoins.”

Such a string of sounds could only happily emerge from the mouths of card-carrying Geekdom denizens channeling Mr. Spock himself, but it would be most unlikely to pass the lips, or be long tolerated by the ears, of the average Katie, Hans, Taiwo, or Eijiro on the streets of this planet.

And thus a resurgence of interest in changing the standard Bitcoin denomination from a bitcoin (1 BTC) to a millibitcoin (0.001 BTC) has taken shape on the Bitcoin Forum with an informal survey. The top responses to “Should we start using mBTC as the standard denomination?” are 53% for “Yes,” and 20% for “After the price is at $1,000, dollar parity for the mBTC.”

Maybe, but what do we say at checkout?

Designed for convenience at much lower value levels, the initial standard “bitcoin” unit, which equals 100 million satoshis, the more fundamental unit within the Bitcoin system, has grown to become far too valuable for most people’s ordinary way of thinking and speaking about prices. A bitcoin has traded over the past several weeks mainly in the $110–$130 range with the 90-day weighted moving average now just shy of $120. Unlike bitcoin exchange values from earlier years—a few cents and later a few dollars—most ordinary items now have to be bit-priced entirely within the decimal point range, although the luxury houses and cars at Bitpremier could just stay priced in bitcoins. A hypothetical rise to $1,000/BTC would greatly amplify this situation.

A redenomination would only impact the way price numbers are displayed and discussed and would make no fundamental changes to values held. A person with 1 bitcoin could just as well be said instead to have 100 centibitcoins or 1,000 millibitcoins.

In contrast, when political money managers talk of devaluation, redenomination, and most recently “easing,” such machinations actually do signal an active manipulation of purchasing power (always to its detriment). This current discussion simply seeks consensus on practical and linguistic conveniences by, for, and among the wholly self-selected community of participating Bitcoin developers, service providers, merchants, consumers, traders, and even observers.

Yet the difficulties of finding spoken language for naming this new unit, language capable of seeing wide global adoption in everyday use, have proven a lingering challenge. To address this topic, I will draw on conventional pricing usages in several different countries and languages in search of common patterns to use as criteria. I will then apply these criteria to existing proposals for a spoken-language name for the too technical “millibitcoins,” and then offer two suggestions, the second of which I have not yet seen proposed elsewhere.

Before moving on, let us be sure to put this whole “problem” in perspective. This is a “sound-currency problem,” in the sense of the “first-world problems” meme. A rising currency and falling prices of goods and services denominated in it are the kinds of “problems” most people ought to be happy to face. The long, sad history of declining political currency values has systematically punished savers and planners and rewarded debtors and those with less effective foresight, leading to shortening time horizons and eroding senses of personal responsibility.

Falling currency values leave families struggling to meet ever-rising prices for goods and services. By several estimates, the United States dollar, for example, has lost some 97%–98% of its value since its “management” was assigned to the Federal Reserve System in 1913 (I refer those who fear falling prices, the deflation-phobic, to my 29 March 2013, A short Bitcoin commentary on “Deflation and Liberty” and the works linked from it).

Speaking of prices

Since the Bitcoin network spans this entire planet, such linguistic research ought to begin by at least attempting to reference practices in several countries and major languages. I will select examples below from the US, Germany, and Japan, based simply on my own degree of direct familiarity with each (please add other instructive usage examples in the comments). The three numerical examples below are of roughly similar purchasing power in each zone, probably enough to buy another espresso.

The first thing I notice is that it is common to use two decimal places, “cents” after a main unit. Second, in shopping language, the unit names are often omitted altogether. Thus, in the US, a spoken “two-sixty” means two dollars and sixty cents ($2.60). In Germany, “zweisechzig” likewise means two euros and sixty cents (€2.60), or more formally “zwei euro sechzig” (but still most often omitting “zent”). Omitting the unit is facilitated in both cases in the same way: two individual numbers are spoken in sequence, the first specifying the whole unit; the second, hundredths of it.

In Japanese, ¥260 is “nihyaku rokujuu-en”. Here, there is no decimal point, but in effect “hyakuen” (¥100) takes the place of the base unit in the dollar and euro examples. The “yen” (actually pronounced “en”) is not omitted in speech, but it only takes a quick syllable to say it and units are not optional in general. The “hyaku,” also lightning fast to say in Japanese, already works to create a division in ¥260 between the two hundreds and the sixty. This makes it less functionally different from the English and German examples than it might at first appear.

Generally speaking, when the names of currency units are not contextually omitted in speech altogether, they can almost always be pronounced in just two syllables: dollars, euros, pesos, kronas, rubles, rupees…bitcoins. In contrast, “millibitcoin” or “mBTC” (pronouncing each letter) each take up a hefty four syllables and are as such unlikely to survive in non-technical spoken usage.

The bit is dead; long live the bit?

So, what might that unit be called in ordinary speech? Some commentators have identified a problem with “coin.” It is by nature indivisible. On the other hand, “the coin of the realm” does give a more uncountable sense of a money in use in a particular place.

Either way, this provides an easy opportunity to cut out a syllable, and with “coin” duly exiled, proposals for spoken options for millibitcoin have included “millibits,” “embits,” “mills,” “mill,” “millies,” and “bits.” Those thinking way ahead have already termed a microbitcoin (0.000001) a “Mike,” presumably the thin, but loving partner of the much heftier Millie.

“Millibits” came out ahead in an informal naming poll for millibitcoin way back on May 14, 2011. Unfortunately, at three syllables, it is still a mouthful for everyday speech, exceeding the conventional two syllable mainstream for currency unit names.

You want change? Anybody got some tools?

“Bits,” at just one syllable, already have a long and storied history in coinage. For centuries, the Spanish silver dollar was a preferred unit of global trade due to its relative freedom from debasement of silver content and its wide international adoption. The peso de a ocho coin was worth eight reales and became known as “pieces of eight” in English, giving pirate parrots something to prattle on about. It has also been said that certain coins were physically cut into eight pieces or “bits” as a way to improvise around small-change shortages using the resulting sharp metallic pie pieces. I am not sure of the ratio of fiction to fact on that one.

The resulting related use of “two bits” to mean a quarter dollar has only recently been fading out of informal use in the US after a long run. Unfortunately, fiat inflation eventually left a quarter dollar unable to buy much of anything and the meaning of “two-bit” declined with it, coming to characterize something of poor quality. A “two-bit coffee” might thus sound rather dilute to modern ears.

Could “bit” be brought back in a decimal-based, high-tech reincarnation? A millibitcoin (0.001 BTC) is now trading at about US $0.13. Twenty of these might buy that espresso at $2.60 and “twenty millibitcoins” (20 mBTC; 0.020 BTC) might be shortened in speech to “twenty bits.”

The centibit challenge and foodie what-ifs

If such bits stood for centibitcoins (0.01 BTC) instead of millibitcoins (0.001 BTC), that espresso might cost about “two bits” after all (assuming $130/BTC). With centibitcoins, a family sushi dinner that might add up to $65.95 would come to “fifty (bits) seventy-three,” or the waiter could say, “in Bitcoin, that’s fifty seventy-three.” That’s 50.73 centibitcoins versus 507.3 millibitcoins and 0.5073 bitcoins.

A centibitcoin redenomination could thus bring things into a familiar range for dollar and euro users right away. At around $130/BTC, a centibitcoin would trade for $1.30, €1.00, and ¥100. That seems intuitively perfect, but only under approximately current rates.

Bitcoin exchange values could stay level or fall. Expecting a long, level trend or modest decline would speak in favor of centibitcoins as the standard unit. If Bitcoin does continue to climb impressively, though, how long before its dollar exchange value adds another digit?

Let us say that the bulls have it and the exchange value of a bitcoin moves to $500 and then $1,000 over the next several years. How would these two alternative redenominations then play out with some everyday examples?

At $500 per bitcoin, a $2.60 espresso would cost 0.0052 bitcoins, 0.52 centibitcoins, and 5.20 millibitcoins. Millibitcoins would win according to the balance of the above criteria (“in Bitcoin, that’ll be five twenty”). The big sushi dinner would be 0.1319 bitcoins, 13.19 centibitcoins, and 131.90 millibitcoins. In this case, either one might look okay.

At $1,000 per bitcoin, the espresso would cost 0.0026 bitcoins, 0.26 centibitcoins, and 2.60 millibitcoins. Millie would win. The sushi would then come to 0.06595 bitcoins, 6.595 centibitcoins, and 65.95 millibitcoins, and millie would win again.

While a centibitcoin transition would make sense for now, an assumption of further exchange value growth would point in favor of the proposed millibitcoin unit. Either way, a redenomination could well be positive. A key challenge for Bitcoin entrepreneurs is helping to broaden adoption into more frequent everyday payments and purchases. Making Bitcoin units easier for contemporary people to talk about in everyday language and think about closer to everyday price numbers could well be helpful.

So how about just putting “m” and “B” together?

“Embies” (mB) is another option I have proposed based on pronouncing “m” and “b”. The B can also be written with the proposed Bitcoin currency symbol when it makes its way into standard character sets. Embie matches the conventional two-syllable criteria. It strikes me as easy to pronounce on a multilingual basis. It also seems friendly and familiar; it could be a pet’s name. I find it easier to say than the two-syllable “embits” candidate. Not all sets of two syllables are equally easy to pronounce.

Still, some people seem to hate it, while others like it. It may be that the name for BTC 0.001 that will prevail in the end has not yet been coined.

 

For additional articles on this topic, visit my Bitcoin Theory page on this site.

 

Another bump on the road: Bitcoin and bubbles revisited

Japanese “bumpy road” sign for MtGox. 路面凹凸ありOverload, delays, and the temporary closure of the MtGox exchange seem to have been proximate triggers for a sharp Bitcoin correction on April 10–12 from dizzy highs.

As trading graphs fell freely, some Bitcoin critics appeared gleeful to believe that their prophecies of the Bitcoin phenomenon being nothing more than a delusional bubble might be coming true. Commenters promptly took to the internet to gloat at the short-term losses of naïve traders and bask in their own contrasting wisdom.

In this new context of short-term sentiment, it may be useful to revisit and refine my recent critique of the dismissal of Bitcoin as being nothing more than a bubble or even a sort of Ponzi scheme. In Hyper-monetization: Questioning the “Bitcoin bubble” bubble (6 April 2013), I offered an alternative to the popular interpretation of the long-term rise of Bitcoin’s exchange value relative to fiat money. This was especially intended to address the view that Bitcoin is nothing more than a bubble. The most insistent proponents of this view elaborate along these lines: “Bitcoin has no ‘intrinsic value’ and is therefore ultimately destined to fall to its ‘inherent’ value, which is zero, completely wiping out any true believers still left around for its inevitable and welcome extinction from the universe.” Or something like that.

“Is” versus “in”

A more subtle approach to calling a “Bitcoin bubble” is also available, and has long been advanced by several people with more nuanced understandings of the system. First, Gavin Andresen, lead developer of the open-source Bitcoin Project, wrote nearly three years ago in a short post Bubble and crashes (9 July 2010) that he expected multiple recurring bubbles over the course of several years.

Bitcoin will get mentioned someplace with lots of readers, a bunch of those readers will like the idea and try to buy Bitcoins, their price will rise, which will draw even more people to “invest”, which will drive the price up even more…until people decide that the price isn’t going to rise any more and everybody rushes to sell before the price drops. I predict there will be between one and five Bitcoin bubbles (price will double or more and then crash back down below the starting price) in the next four years…I think it will be impossible to tell if a bubble & crash is “natural” or “the men in black helicopters” manipulating the system.

Second, Rick Falkvinge, who had also called a short-term bubble and a correction to $60–$65, has long identified currency exchange services as a weak link in the wider Bitcoin “ecosystem.” See his 12 April post What we learn from this Bitcoin correction. A commenter on that post wrote, “I would not call an 80% move a correction…” to which Falkvinge replied, “It is not the downslope that is abnormal, it is the upslope. A value that reverts to where it was two weeks ago is normally a mild correction.”

Finally, Peter Šurda who steadily focuses on the importance of liquidity, infrastructure development, and scaling over price, re-summarized in a 12 April Facebook comment that:

My empirical research shows a correlation between media frenzy and price, and between liquidity and price volatility, while my theoretical research concludes that the price will fluctuate more rapidly than with more liquid media of exchange (i.e. what we are accustomed to as money, or even highly liquid goods such as stocks or commodities). The fluctuations will continue until Bitcoin’s liquidity increases significantly.

Such approaches have essentially been warning that, “Bitcoin may well be in a bubble phase,” adding, “one of several large ones, just as we expected to occur along the way.” As a commentary on the price trend in late March and early April, this appears to have been a valuable assessment. These observers recognized in advance that the price seemed to be rising at a pace unlikely to be sustainable, driven perhaps by events in Cyprus and then a flood of popular media attention.

In sum, saying that “Bitcoin is a bubble” (total dismissal of the system as such) and that “Bitcoin is (or was) in a bubble phase,” are quite different claims. Now that another correction has arrived, this distinction can come into better focus.

The Bitcoin system is not the same as the peripheral trading services

The core of the Bitcoin system itself, which few people seem to grasp is something entirely different from the more visible currency exchanges and their price charts, seem to have been relatively untroubled. This includes nodes, mining pools, the blockchain, wallets, and even informal and P2P markets. Besides MtGox, with its 12-hour mini-holiday, from what I noticed, only some of the exchanges and data chart services were heavily challenged and went offline intermittently. Bitcoincharts, for example, reported a 25x spike in concurrent online users from 2,000 to 50,000, requiring “tweaking the backend” systems in response.

The primary proximate cause of the crash, then, seems to have been the inability of a (currently) key exchange service provider to keep up with demand fed by sudden media attention and buy-in frenzy in the run-up, triggering a classic emotional wave of panic selling, most likely the corollary of the previous heat of emotional buying. The existing trading infrastructure (which is not the same as the Bitcoin system infrastructure) was not ready to scale to such a rapid demand spike. This sharp correction might be viewed in part as the rather ungentle method by which the market realigned itself with the current real-world state of scaling capabilities and business planning skills at exchanges that have been working to build themselves from the ground up.

Creation versus destruction

In the case of a classical terminal hyperinflationary event, the authorities orchestrating it are better equipped and prepared. Ink and paper are ready. Printing presses run and are up to their tasks. More importantly, printing plate engravers are standing ready to carve additional integers, a relatively simple task of creating higher and higher denominations of notes. The technical infrastructure is in place for state money monopolists to completely destroy the value of a paper currency, using “zeroes” to drive it all the way to “zero” and extinction.

Building a new kind of media of exchange for a community of all-volunteer users from scratch through peaceful cooperation, entrepreneurship, coordination, debate, and market ecosystem building would appear considerably more challenging than destroying a paper currency. After all, being constructive often seems more challenging than being destructive; it requires greater ingenuity and long-term persistence and perspective.

 

For additional articles on this topic, visit my Bitcoin Theory page on this site.

 

Short-term Bitcoin exchange trends as Rorschach tests of economic views

What might Hermann Rorscach (8 November 1884 – 1 April 1922) see in all this?Whatever the current excitement on any given day about short-term Bitcoin price charts, what stands out for me as a watcher of the theoretical underpinnings of discourse on these events is how they bring various economic-theory concepts out into view as the people who have them in mind use them to interpret current events. As Keynes famously put it: “even the most practical man of affairs is usually in the thrall of the ideas of some long-dead economist.”

I try to stay at least 98% positive in general; critique can be more tempting than contribution. That said, sometimes understanding can be advanced by considering contrasting examples. Here are three.

Realized/unrealized gains/losses

First, it appears that the distinction between realized and unrealized gains and losses could be kept more firmly in mind by most. The take-home point is that for all those Bitcoin market participants (whether bull or bear) who did not actually trade today or recently, nothing much actually happened during the rapid headline price changes on the exchanges (of course, the changes might lead some to adjust their future plans according to their various forward-looking judgments). What these exchange prices actually indicate is merely the current record of transactions that are occurring on those exchanges. It is only the collection of such discrete “real time” recorded exchange events that provide the data for the construction of the lines on the trend graphs.

At times of temporary disruption of access to websites, low visibility prevails. Pre-placed automated orders execute and panicking short-termers flee. The price graphs (as they become accessible after the disruption) show the actual trades and volumes at particular times during this course of events. The price graph on a given exchange indicates actual marginal activity, at given moments, on that exchange. These exchange services are specific businesses; not magical, instant oracles of “price” in general or “value” in general. In the event, the top two exchanges, it appears from preliminary reports, were most likely under active manipulation in a possibly partly orchestrated move (and do not forget that this may well have included both upward and downward elements).

What a difference a few days can make.

A spiral into absurdity

Second, the good old “deflationary spiral” fallacy (maybe market observers will get a couple days off from hearing that one now?) apparently misses the significance of the fact that BOTH a buyer and a seller are required to form any given data input for market price graphs. With no transactions occurring, which is what is posited in this imaginary world of “no one will sell when it is so valuable,” there is no “price” at all. Thus, the market “price” could not be too high, because it would be non-existent under the stated assumption that no transactions were occurring. Reductio ad absurdum. These exchange prices form an up-to-date historical record at a given time of actual recent buying and selling on a given exchange.

Look for the verb

Finally, it has been a little surprising just how many Bitcoin critics employ the concept of “intrinsic value” in making the claim that Bitcoin does not have any. It was members of the Austrian school of economics, with the so-called subjectivist marginal revolution, that had seemingly put the final nail in the coffin of this ancient economic fallacy. Beginning in the 1870s, Austrian school scholars began to re-emphasize the view that value is ultimately the result of valuation, in reference to the verb to value, which is an act that can only be performed by living people (We now understand that some of the Late Scholastics of Salamanca also had this point reasonably clear several centuries earlier). After Carl Menger, this view gained steam with Eugen Böhm-Bawerk and unmistakable clarity with Ludwig von Mises’s 1912 Theory of Money and Credit and later works. This further application of the subjective theory of value clarified that the concept of “intrinsic value” is ultimately incoherent, not only with regard to goods in general, but to media of exchange as well. Mises was rather strict on this point in TMC, pp. 61–62:

Our terminology should [help to overcome] the naive and confused popular conception of value that sees in the precious metals something “intrinsically” valuable and in paper credit money something necessarily anomalous. Scientifically, this terminology is perfectly useless and a source of endless misunderstanding and misrepresentation.

 

Note: I discuss value theory in simple terms with illustrative examples in Resolving the paradox of value. For a more detailed discussion, see IN-DEPTH | The sound of one bitcoin: Tangibility, scarcity, and a “hard-money” checklist.

 

For additional articles on this topic, visit my Bitcoin Theory page on this site.

 

Hyper-monetization: Questioning the "Bitcoin bubble" bubble

What is the opposite of this? Sweeping up in 1946 after the hyperinflation of the Hungarian pengő. Source: Wikimedia Commons, Magyar Nemzeti Múzeum Történeti Fényképtára, Budapest.

What is the opposite of this? Sweeping up in 1946 after the hyperinflation of the Hungarian pengő. Source: Wikimedia Commons, Magyar Nemzeti Múzeum Történeti Fényképtára, Budapest.

Many observers have likened the rise of Bitcoin to an asset bubble. It is so customary today to use the “bubble” word in articles about Bitcoin that there may in fact be a sort of “bubble” bubble.

Another less common word introduced in this context is hyper-deflation. Some say such a thing is horrible, others that it is great. I suggest a quite different possible interpretation of these events and a word to label them: hyper-monetization.

I first heard the term “hyper-deflation” (used in a positive sense) when Bitcoin was rising rapidly from the low thirties to the high thirties over a few days in early March (Yes, this was only a month ago). While a few specialists of a certain persuasion understand “deflation” to be a great thing for ordinary people (see, for example, my 30 March 2013 post, “A short Bitcoin commentary on Deflation and Liberty”), the word still has a public-relations problem. Along with some technical issues from its several possible definitions (price level changes versus quantity of money changes, for example), and negative interpretations in conventional economics circles, it just sounds depressing, regardless of the stated technical sense in which one attempts to use it.

The word “hyper-monetization” first occurred to me around that time as a more positive term, and perhaps a more accurate antonym for the catastrophic hyperinflations that have repeatedly killed off fiat paper monies throughout their history. A related term, “de-monetization,” denotes the process of a widely used medium of exchange ceasing to function as such.

A total hyperinflationary collapse is one way de-monetization can happen. Another type of historical example of de-monetization is “bimetallist” legal tender price-fixing schemes driving one precious metal, say silver, out of circulation in favor of another metal, say gold. Yet another historical example is when a pure fiat paper standard is created after monetary authorities permanently “suspend redemption” of their legal tender notes into the precious metals they had promised to deliver.

The opposite process of “monetization” denotes something that was not a money beginning to function as one. When euros took over the respective jobs of various European national currencies, euros monetized and the previous national currencies de-monetized. Now they are historical paper relics, but no longer function as monies.

In contrast to such a legal tender conversion/transition, however, something that gains exchange value from scratch on the open market (rather than taking up exchange value through a conversion)—and does so at a logarithmic pace—might then reasonably be described as being in a process of “hyper-monetization.”

The trouble with the “bubble” bubble

Bitcoin’s high historical and current price volatility is unquestioned. However, one problem with the “bubble” analysis is that in an asset bubble, certain fundamental matters are quite different. In a business cycle mania phase, prices of the most popular asset classes for that particular cycle are bid up as people pile their freshly printed fiat money and freshly produced fiat bank account digits into booming fields. Each party in this rush competes with all the others to acquire some of the bubbling assets. These people are misled by artificially low interest rates to bid up certain asset prices unsustainably, and this all eventually collapses, as described in Austrian business cycle theory.

However high the prices of bubble assets go, they do remain the same goods. In the case of a monetization event, though, the practical use-value of the trading unit (not only its price in terms of other goods or monies) actually does rise with the number of people using it and the depth of the market. To imagine how different this is from a classic asset bubble, it would be as if not only the price of bubble-era houses were rising, but also that their actual sought-after qualities as houses were improving spontaneously at the same time. Such houses might sprout new rooms with no one building them, with new paint jobs appearing mysteriously overnight without any painters having visited.

In this way, quite unlike the case of an asset bubble, the more people “pile into” a medium of exchange, the more valuable it actually is in its function as a medium of exchange from the point of view of its users. This is a separate matter from its price, as a few astute observers out there have so far already been noting.

This type of value has been likened to the use-value of a language rising the more people there are who can speak it. Another analogy would be to the use-value, from the point of view of each user, of a given social networking site rising the more people join it and the more they use it.

These are called network effects. In this case, the exchange value of the unit for each holder is directly related to each holder’s expectations of being able to use the unit in future exchanges (much like the value of knowing a language relates to one’s expectation of being able to communicate with it). This is in turn related to how many people accept the unit, how readily, and for what. It is important here to note, due to long-standing and common economic misconceptions, that the “future” in this sense is any future time—from five seconds from now to however many vaguely numbered years into the future a particular acting person might happen to have in mind.

When it comes to network-effect growth, the more the merrier. An analogy can be made not only to the rising stock price of a growing social networking site, but also, and more importantly, to the number of users of that site and how much it is used.

Check this box for a perspective shift

Yesterday, I saw a tweet from the insightful Bitcoin watcher Jonathan Waller. He wrote (enthusiastically, I think) that, “The bitcoin all-time chart is not even slightly sensible,” and linked to a chart [showing logorithmic growth shown on a linear scale].

This tweet got me thinking (yes, this is also a possible function of tweets). How can we make sense of this trend? Might taking some other perspective help?

This chart struck me as looking quite similar to a hyperinflation. However, instead of the exchange value of a trading unit plummeting toward the abyss as in an archetypal fiat paper-money collapse, Bitcoin has been doing the opposite.

Checking the log-scale box on the bitcoin price chart reveals a different picture. It shows a (so far) intuitively ascertainable long-term historical course with a large bump or two and some curves in the road. In this longer-term view, the exchange rate has been growing, not so much from one to two to three to four, as on a linear scale, but from 0.1 to 1 to 10 to 100. It has grown by several orders of magnitude during these couple of years.

Of course, the usual caveats must be quickly noted. “If present trends continue” can and often is infamously followed by them not doing so. But what might nevertheless be observed about this trend?

If one were somehow witnessing a phase in the first “hyper-monetization” in history, is this not more or less what one would expect to see?

Mark my words

The value of a paper money at the tail end of a hyperinflationary event is mainly the direct value of the physical paper (burning, wall-paper, etc.), but there is a more gradual build-up before the final collapse. The following chart is the price of Goldmarks in terms of Papiermarks from 1918–1923 in the Weimar Republic. This includes a steady logarithmic trend from 1918 to mid-1922. The exchange rate also moves from roughly 1 to 100 during those few years.

After that, however, the 1923 portion looks incomprehensible even on a log scale. As monetary authorities run the presses full speed and add new zeroes to denominations, a point is reached toward the end when the primary objective of market participants is to rid themselves of paper as quickly as possible before the last shred of exchange value evaporates.

The USD/BTC trend shows the price of Bitcoin against (also steadily depreciating) US dollars. This bears a certain similarity to the pre-1923 phases of the Weimar Papiermark/Goldmark chart. One difference is that the trend for Bitcoin from autumn-2010 to spring 2013 is the inverse of the trend for the ill-fated Papiermark from 1918 to mid-1922. In other words, for the years in question, the rise of Bitcoin’s relative exchange value shows a statistical pattern with similarities to the decline of the exchange value of the paper mark. Of course, the specific factors behind these events are quite different. In one case, the destruction was driven by ever increasing, arbitrary production of more units. In the other, the growth appears to be driven by voluntary adoption (with all its various motivations) and network effects.

If we were now actually witnessing early stages of an unprecedented hyper-monetization event, what might the top of such an event look like eventually? This is a fantastic and entirely speculative question and certainly invites the ever risky “if present trends continue” types of thinking. Looking toward the future should never be confused with looking into the past.

That said, during such a singularity-like event, were such a thing to be occurring, one might at some fairly early stage expect to see an Epic Rap Battles of History installment called, “Bitcoin vs. Fiat Money.” The key question would then soon become:

“Who won? You decide.”

 

For additional articles on this topic, visit my Bitcoin Theory page on this site.

[UPDATE: Seven months later, a new article including revised highlights of this article along with new material appeared: Hyper-monetization reloaded: Another round of bubble talk (7 November 2013).]

A short Bitcoin commentary on "Deflation and Liberty"

I just finished reading the monograph Deflation and Liberty (published 2008, but originally produced more than five years earlier) by Jörg Guido Hülsmann. I am a big fan of Hülsmann’s 2008 work The Ethics of Money Production (not to mention just about everything else he has written). However, I had understood the shorter work to have been a mere precursor to The Ethics of Money Production. Now that I have finally read it, though, my impression is that it is quite different in content and certainly warrants its own reading. Besides, I had to catch up with the indefatigable Mises Circle at UT group, which read and discussed Deflation and Liberty a few weeks ago.

Deflation and Liberty was written years before Bitcoin appeared, and even more years before Bitcoin began to rise to superstar status in recent weeks. My collection of quotations below read in a different light now that Bitcoin has risen as a “third way” in the exchange space.

Bitcoin is not technically deflationary under one definition because its supply is set to grow gradually up to a terminal limit (inflation and deflation in this sense refer to quantity of units rather than relative exchange value). The important point is that the Bitcoin supply is set to grow at a specific, pre-defined, and gradually declining rate that no particular person or group can manipulate. Its growth rate is fundamentally knowable and predictable by all market participants, and presumably less variable than even the total market supply of a given precious metal in any given year.

After the Bitcoin supply growth trend ends in about 2140, I understand new production ceases and its supply is to remain stable and then decline ever so slightly based on incidental micro events such as individual password misplacements. I therefore believe it is even now “deflationary,” not in the letter, but in much of the spirit in which Hülsmann used the term in this monograph. At any rate, it provides a diametric contrast with the familiar inflationary policies that take the form of arbitrary fiat increases in the money supply conducted for special-interest political ends.

In another sense of the word deflation, however, Bitcoin does qualify, for the moment at least. The general exchange rates of Bitcoin against all other goods and services will of course tend to decline so long as Bitcoin is gaining in exchange value; Bitcoin-denominated prices will tend to fall so long as its exchange value grows.

With this context in mind, let us see how Bitcoin stacks up in light of the following quotations, keeping in mind that no such thing as Bitcoin existed at the time this monograph was written. I will add some minimal commentary in brackets with emphasis in bold.

Selected quotations from Deflation and Liberty with commentary

p. 16 fn 8: Speaking of “an economy” we mean the group of persons using the same money.

[Bitcoin, though not yet technically a “money” by many definitions, is not geographically defined, but rather defined by the community of its actual users and producers on a global basis. Use and production is entirely voluntary and entry open. To join this community, one need merely aquire a free “wallet.”]

p. 30: In a truly free society, the production of money is a matter of private initiative. Money is produced and sold just as any other commodity or service. And this means in particular that in a free society the production of money is competitive. It is a matter of mining precious metals and of minting coins [and of mining Bitcoins], and both mining and minting are subject to the competition emanating from all other market participants.

[Bitcoin “miners” cobble together or buy their “rigs,” connect to the network, and set work in motion, all of their own volition.]

p. 31: The production of money in a free society is a matter of free association. Everybody from the miners to the owners of the mines, to the minters, and up to the customers who buy the minted coins, all of them benefit from the production of money. None of them violates the property rights of anybody else, because everybody is free to enter the mining and minting business, and nobody is obliged to buy the product.

[Bitcoin mining, exchanges, wallet services, users, etc. would all appear to qualify under this criterion of free association. No one is obliged to buy Bitcoins. Indeed, in perfect contrast, many people are currently scrambling to figure out how to acquire them.]

No game.p. 32: The producer of fiat money (in our days typically: paper money) sells a product that cannot withstand the competition of free-market monies such as gold and silver coins, and which the market participants only use because the use of all other monies is severely restricted or even outlawed. The most eloquent illustration of this fact is that paper money in all countries has been protected through legal tender laws. Paper money is inherently fiat money; it cannot thrive but when it is imposed by the state.

[Bitcoin is by no means imposed by the state. In diametric contrast, all that can be said of it on this count is that a few state agents are slowly starting to ascertain (and only roughly) what it is several years after its launch]

p. 35: It would not be uncharitable to characterize inflation as a large-scale rip-off, in favor of the politically well-connected few, and to the detriment of the politically destitute masses. [Fiat inflation] always goes in hand with the concentration of political power in the hands of those who are privileged to own a banking license and of those who control the production of the monopoly paper money. It promotes endless debts, puts society at the mercy of “monetary authorities” such as central banks, and to that extent entails moral corruption of society.

p. 39: That leaves barter as the only legal alternative to using paper money, and barter is so much less beneficial than monetary exchange that market participants typically prefer using even very inflationary monies rather than turning to barter.

[Bitcoin has now landed out of the cyber ether as a sort of “third alternative” to this scenario]

The considerable social advantages of deflation

p. 40: Deflation…abolishes the advantage that inflation-based debt finance enjoys, at the margin, over savings-based equity finance. And it therefore decentralizes financial decision-making and makes banks, firms, and individuals more prudent and self-reliant than they would have been under inflation. Most importantly, deflation eradicates the re-channeling of incomes that result from the monopoly privileges of central banks. It thus destroys the economic basis of the false elites and obliges them to become true elites rather quickly, or abdicate and make way for new entrepreneurs and other social leaders.

p. 41: Deflation is at least potentially a great liberating force. It not only brings the inflated monetary system back to rock bottom, it brings the entire society back in touch with the real world, because it destroys the economic basis of the social engineers, spin doctors, and brain washers.

p. 43: The dangers of deflation are chimerical, but its charms are very real. There is absolutely no reason to be concerned about the economic effects of deflation—unless one equates the welfare of the nation with the welfare of its false elites.

[In conclusion], pp. 43–44: The purpose of these pages is not to appeal to the reason of our monetary authorities. There is absolutely no hope that the Federal Reserve or any other fiat money producer of the world will change their policies any time soon. But it is time that the friends of liberty change their minds on the crucial issue of deflation. False thinking on this point has given our governments undue leeway, of which they have made ample and bad use. Ultimately, we need to take control over the money supply out of the hands of our governments and make the production of money again subject to the principle of free association. The first step to endorsing and promoting this strategy is to realize that governments do not—indeed cannot—fulfill any positive role whatever through the control of our money.

 

For additional articles on this topic, visit my Bitcoin Theory page on this site.

 

IN-DEPTH | The sound of one bitcoin: Tangibility, scarcity, and a "hard-money" checklist

The first purpose of a scientific terminology is to facilitate the analysis of the problems involved.

—Ludwig von Mises on the role of monetary terminology

IMPORTANT UPDATE: What follows has been substantially updated, revised, and republished in other versions. The final version appeared in The Journal of Prices and Markets as, “Commodity, scarcity, and monetary value theory in light of bitcoin” (accepted 20 Oct 2014; published 24 Feb 2015; HTML, PDF). The arguments are substantively similar, but whereas the final version is more refined and academic in tone, the following was an initial overview treatment.

* * *

Tradable bitcoin units viewed as discrete objects of human action appear to be a new type of phenomenon, unprecedented. At times, they even appear to elude trusted monetary classification schemes. If such typologies were sound, however, they should not require correction so much as some careful revisiting within a new context of knowledge.

In this second installment on Bitcoin theory (following “Bitcoins, the regression theorem, and that curious but unthreatening empirical world” (27 February 2013), we seek to further clarify the economic nature of Bitcoin by closely reexamining the concepts of scarcity, goods, and tangibility. We distinguish what we will label economic-theory and property-theory senses of the word “scarcity” and attempt to more clearly differentiate scarcity from tangibility. This distinction helps overcome difficulties that have arisen in considering Bitcoin in relation to the monetary classification scheme pioneered in Ludwig von Mises’s The Theory of Money and Credit (TMC; original German 1912).

With these proposed building blocks in place, we examine bitcoin units viewed as scarce objects of human action using a typical set of criteria for explaining the historical-evolutionary strengths of metallic coins as media of exchange. How do tradable bitcoin units stack up directly on a list of “hard-money” criteria?

We also stress that the economic analysis of empirical cases must always be comparative. States of perfection, while useful in the advancement of pure theory, cannot legitimately be smuggled in to represent real empirical possibilities and serve as standards for comparison. How something compares to an imaginary state of perfection may help the theorist reason, but it is no cause to reject or prefer any real empirical option, which, whatever it may be, can never compete with any unrealizable, imaginary state.

The focus this time remains on the perspective of individual actors and discrete objects involved in action (which includes both tangible and intangible “objects”), with a central focus on economic theory. Planned future installments will then shift toward more system-level, market-level, and legal-theory perspectives. This step-by-step procedure reflects one aspect of an integral approach to the interplay of individual and system perspectives, as well as the parallel use of multiple, discrete fields, to enhance the totality of understanding.

Part I: Money Unveiled

“I can pay you in eggs or a bunch of these specially configured nested electron-shell wrapped neutron/proton bundles. Your choice, buddy.” Image source: Pumbaa (original work by Greg Robson), Wikimedia Commons.

The thing is…

In taking a strictly subjectivist position on the nature of goods, the fact that bitcoin units might be described as “merely” the current status of accounting entries in the ubiquitously duplicated block chain (and therefore not “really” goods at all in themselves), poses less of a difficulty than it might at first appear to. Of interest for action-based economic theory is the observation that large numbers of market actors on a global scale are nevertheless treating these units as a type of scarce economic good in general and as a medium of exchange in particular. By way of illustration, quipping that silver is “really” just one particular and generally pointless arrangement of sub-atomic particles is of no avail for praxeology, which is based on a strict dualist distinction between teleological concepts and the more objective, causal concepts of the natural sciences.

If no existing category or “box” on a given monetary classification proved sufficient to contain Bitcoin, a new category might have to be appended. In investigating a new case, terms and categories should facilitate understanding rather than hinder it. In developing his terminology in Chapter 3, “The Various Kinds of Money,” in TMC  (pp. 50–67), Mises sought to employ terms that would specifically facilitate economic analysis more effectively than the conventional and positive-law terms of the time (pp. 59–60). He notes on pp. 61–62 that:

Our terminology should prove more useful than that which is generally employed. It should express more clearly the peculiarities of the processes by which the different types of money are valued. [it should also help to overcome] the naive and confused popular conception of value that sees in the precious metals something “intrinsically” valuable and in paper credit money something necessarily anomalous. Scientifically, this terminology is perfectly useless and a source of endless misunderstanding and misrepresentation.

I do not believe that Mises’s classification scheme from TMC requires any fundamental revision to account for Bitcoin. We may only need to take a further step in the direction of a strictly dualistic action theory. This is the same direction of travel that gave rise to those classifications in the first place as Mises began to carry economic theory step by step further away from its objectivized past and toward its action-based future. Mises warned sternly in 1912 (p. 62) that:

The greatest mistake that can be made in economic investigation is to fix attention on mere appearances, and so to fail to perceive the fundamental difference between things whose externals alone are similar, or to discriminate between fundamentally similar things whose externals alone are different.

A fresh mystery from Vienna

Stephansdom in Vienna. Photo by Konrad S. Graf.

Among its many other contributions, Peter Šurda’s 2012 thesis, “Economics of Bitcoin: Is Bitcoin an alternative to fiat currencies and gold?” [90-page PDF; Vienna University of Economics and Business) carefully examined Bitcoin in terms of Mises’s monetary classification scheme from TMC. Up to a certain point, Šurda interpreted the situation in largely the same way as I have.

In a procedure reminiscent of the 1939 Agatha Christie novel And Then There Were None, he rejected, correctly I believe, one candidate after another as a place for Bitcoin within the TMC scheme (pp. 23–28). It is not any kind of money substitute (Bitcoin is not “redeemable” for any more fundamental unit). Even within Mises’s “money in the narrower sense” (senses other than money substitutes), Bitcoin is not credit money (no creditor/debtor relationship exists) and not fiat money (it lacks any legal-tender status or any other state-sponsored privileges, stamps, or certifications whatsoever to “prop it up”).

Somewhat disquietingly perhaps, Šurda and I had each arrived independently at just one final suspect. The only candidate that is even a remote possibility is: “commodity money.”

Yet surely this could not be quite right either. At this point, one might think it would have been easier to start by rejecting commodity money, and then try to make an analogy to some of the other categories. Commentators have tried to do this variously with fiat money and token money, for example. However, I do not think such claims hold up to scrutiny.

It is certainly quite odd in this context to begin trying to imagine Bitcoin as a “commodity.” True, in certain other contexts, “commodities” can have a quite broad meaning. In its broadest theoretical usage in purchasing-power theory, “commodities” are sometimes the euphemistic label for everything that is not money—all that against which money prices are paid. Nevertheless, for the most part, and certainly in this context, “commodity” takes its narrower and much more common meaning. It is a fungible physical material or product, such as metal, oil, grain, or these days interchangeable “commodity” memory chips or other general-purpose electronic components.

The opposite perspective: Vienna from high above in Stephansdom. Photo by Konrad S. Graf. 

In the face of this apparent impasse, Šurda’s thesis next proposed several considerations. First, since he had already argued that Bitcoin is not a “money” (yet), but a secondary medium of exchange (p. 22), it need not necessarily fit on a chart of “money” in any case. Yet he also recognized that to some degree this just kicks the can down the road a few more yards. What if Bitcoin did somehow grow to eventually qualify as “money,” even by his own chosen definition? To this he proposed some alternative terminology from several existing sources (p. 26), such as “quasi-commodity money.”

He offers additional detail on this issue is in his recent post, “The classification and future of Bitcoin” (12 March 2013), where he notes perhaps the most important point of all:

The issue…is not some abstract classification for its own sake. The purpose of the classification system provided by Mises is to assist in the economic analysis of trade, money supply, price building, liquidity and so on. From this perspective, if we insist that we must keep the number of categories the same that Mises used, the economically closest category of Bitcoin would be commodity money.

I think further clarification may still be possible from some different directions. I suggested in the previous installment of this series that substituting the more subjectivist word “good” for “commodity” may already be a useful step, at least from a meaning-content point of view. This time, we venture further into language and context.

As always, meaning must come first; words have to follow along as best they can. Concepts are one thing; the words used to signify them another. To me these are not just theoretical claims, but my lived experience working as a professional translator for many years (Japanese to English as it so happens). A good translator is constantly at play with the concepts and meanings that the various words are employed, at times somewhat imperfectly, to get across from mind to mind in given times and contexts. One of the first things it occurs to my translator self to do is to check into the source text and consider what, if anything, might be noticed there that may not occur to a reader of the resulting translation. It is also often helpful to consider the background context of debates in which words were employed.

TMC is a translation of Mises’ 1912 Theorie des Geldes und der Umlaufsmittel. “Commodity money” was the term used to translate Sachgeld. Although some issues have been found with the TMC translation, including most notably the title itself (see the recent centennial symposium volume,The Theory of Money and Fiduciary Media(2013), “commodity money” seems a perfectly reasonable translation in this case. To be clear, I am aware of no reason to think that Mises would have objected, or did object, to this choice. In Nationalökonomie, the 1940 German precursor to Human Action, many instances of Sachgeld are accompanied by the usual examples of gold and silver, which also serve as the stock examples of “commodity money” in Human Action in 1949.

Nevertheless, our purpose is not to toy with words, but to better understand their theoretical content and meaning, and specifically to look for some assistance on the challenge of reconciling Bitcoin with Mises’s original categories. Bitcoin is a novel enough development that it forces us to revisit in a new context of knowledge fundamental concepts that were arranged and labeled as they were in a previous context of knowledge.

In this process, one language might provide hints that another withholds. A word that was unobjectionable in the past might begin to suffer now for the first time from outmoded or non-essential connotations. Moreover, this is likely to occur somewhat more strongly with regard to the particular words and senses of words used in one language than with the corresponding words and senses of words used in another. It is in this spirit that some multilingual brainstorming might lead to a missing clue.

Lt. Cdr. Data sleuthing in Star Trek: The Next Generation.And indeed, the two-part compound construction of the German word Sachgeld suggests some related connotations that “commodity money” in English does not. Die Sache is a “thing,” in either a concrete or abstract sense. Alternative senses from this word and associated compounds readily include such abstract senses as “the matter at hand,” “the facts of the situation,” and “the main or most important point or issue.” A Sachbuch is a non-fiction book (not a “commodity book,” but a book about any non-fictional topic, a “factual book” as opposed to a fictional one). Sachgeld itself in modern dictionaries comes across as any “thing” (or even animal or person) that was historically used as a medium of exchange, or simply the earliest forms that money took historically (note that historically here also implies prior to the evolution of money substitutes).

It appears that Sachgeld, in its first, most literal possible sense, looks like “thing-money” or “fact-money.”

This may already be enough of a clue to begin threading a path through the “commodity” puzzle that Bitcoin, perhaps now for the first time ever, presents. One of our central underlying themes this time will be continuing to seek ways to disentangle the concept of tangibility from various other concepts relevant to monetary theory, especially scarcity. A “thing” is usually considered tangible, but unlike “commodity” in its relevant monetary meaning (a fungible physical material), “thing” more easily also covers abstract senses such as “matters at hand,” “conditions,” and so forth, as in, “The thing is…” or “How are things going?” or “It is a curious thing, this Bitcoin.”

At this stage, rather than creating an alternative category, or turning to a sub-category such as “quasi-commodity money,” it may only be necessary to revisit the original concept of Sachgeld such that it takes on a more abstract and subjective, and less concrete and objective, sense than it has ever been asked to. This would also seem to be in keeping with the overall long-term direction of development of the Austrian school of economics in distinguishing ever more carefully between action-based teleological concepts and objective characteristics of various means employed in acting.

It appears, then, that we might interpret the central economic meaning of Mises’s monetary category of Sachgeld as something like “thing-in-itself money,” or “money in itself,” or “money in fact,” and my re-reading of Chapter 3 of TMC does not appear to exclude this possibility. Much as a silver coin in the old days functioned directly as “money in itself,” and was not “backed by anything,” a bitcoin unit is likewise not “backed by anything.” Nor is it even a perfect or imperfect substitute for anything else. From the point of view of economic actors using it, a bitcoin unit is the tradable good itself. No intermediating substitutes stand between it and its user. And the mere existence of various service providers does not automatically imply that money substitutes are in play.

Paper fiat money is “backed” by such factors as user experience from the past, legal tender laws and user expectations of their continuation, and other powers suppressing certain forms of competition. But Bitcoin enjoys no such force of either habit or law. Moreover, a study of the Bitcoin system suggests no obvious need or function for such money substitutes as have historically grown up around metallic currencies. Not that they are impossible, just that they would not appear to add value. They could even subtract value by adding superfluous risk layers. Many of the advantages that typical money substitutes had in the past, such as freedom from the weight burdens and creeping heterogeneity of precious-metal coins from gradual wear, are already provided in Bitcoin from the point of view of users of “the thing itself” (a topic also addressed in more detail below).

Some knightly context

For an initial check on how well this proposed interpretation might mesh with the greater context in which TMC appeared and its major contributions, we rely on Professor Hülsmann’s definitive intellectual biography, Mises: The Last Knight of Liberalism (2007).

First, we find that Hülsmann noted on p. 215 (emphasis mine) that:

In dealing with the nature of money, Mises relied heavily on the work of Carl Menger. The founder of the Austrian School had shown that money is not to be defined by the physical characteristics of whatever good is used as money; rather, money is characterized by the fact that the good under consideration is (1) a commodity that is (2) used in indirect exchanges, and (3) bought and sold primarily for the purpose of such indirect exchanges.

The words “good” and “commodity” as we read this passage would normally seem to point to physical characteristics, and this was most likely also the intended meaning. But what if we try reading again with abstract senses for these words in mind? The substantive points in this paragraph are all about functional characteristics of money for actors. Look for the verbs: used as, bought, and sold. Moreover, “physical characteristics” are specifically singled out as factors on which money is “not to be defined.”

In quickly reviewing Mises’s typology of monetary objects (pp. 216–217), Hülsmann notes that:

[Mises] distinguished several types of “money in the narrower sense” from several types of “money surrogates” or substitutes. Money in the narrower sense is a good in its own right. In contrast, money substitutes were legal titles to money in the narrower sense. They were typically issued by banks and were redeemable in real money at the counters of the issuing bank.

Here we have the word “good” again. We also have “a good in its own right.” This seems reminiscent of our hyper-literal attempt at rendering Sachgeld as “thing-in-itself money,” or more simply “money in itself.” So far as I am aware, Bitcoin currently has no significant substitutes and virtually no issuers of any such substitutes. Perhaps with a few arcane or experimental exceptions, Bitcoin is so far traded directlyas itself at freely fluctuating rates against all other goods, services, and monies. While the construction of Bitcoin-denominated financial instruments is possible, most all of the actually traded forms of Bitcoin are direct instantiations of bitcoin units.

As Šurda explained (pp. 9–18), Bitcoin is already inherently “form-invariant,” much as language can come in spoken and written forms, but remains language. “Transfer of Balances (ToB)” methods convey Bitcoin units from one wallet to another, while “Transfer of Keys (ToK)” methods, suited for offline use, transfer physically instantiated wallets that contain specified Bitcoin balances (effectively denominations). The private key is physically contained inside a ToK object in the shape of a coin, smart card, etc. with structural and one-time-change physical security features such as holographic coverings and color-change chemistry. Critically, the current wallet balances on ToK objects can be verified if necessary using only the public key without the need to expose the physically concealed private key to any party. None of these ToK objects are Bitcoin substitutes; they are each native forms of Bitcoin itself.

The question of whether actual Bitcoin substitutes and associated practices entailed in the kind of “banking” we are accustomed to could evolve on top of Bitcoin is a separate and open one. Šurda has also just recently offered some further observations on this in an interview with Jon Matonis in American Banker, “How cryptocurrencies could upend Banks’ monetary role” (15 March 2013).

The key issue seems to me that Bitcoin both functions as a money in itself and delivers many of the benefits of historically evolved money substitutes, leaving little demand for them to grow up in relation to Bitcoin, at least in the same old ways. In a provocative take on the question of Bitcoin money substitutes, Pierre Rochard has suggested that this type of development might simply render the ongoing debate about banking reserve practices not so much resolved as obsolete (22 February 2013). People will of course attempt to construct all such familiar instruments, but whether they can add any value relative to native Bitcoin and attract any sustained and significant use remains to be seen.

Mises, in developing his own monetary theory in TMC, was also arguing against the assignment theory of money, which holds that money has no real value of its own to actors, but merely functions as a sort of neutral receipt that facilitates deposits and withdrawals on the “social warehouse” of goods. Money, in this view, is simply a “veil,” functioning as a sort of mere claim ticket exchangeable for other goods, but not a good in itself.

On p. 237, Hülsmann explains that:

Mises’s great achievement in his Theory of Money and Credit was in liberating us from the veil-of-money myth…Mises could even rely on Menger’s theory of cash holdings, which already contained, in nuce, the insight that money is itself an economic good and not just representative of other goods.

Böhm-Bawerk had put it this way in an early-1880s lecture (p. 235):

Money is by its nature a good like any other good; it is merely in greater demand and can circulate more widely than all other commodities. Money is no symbol or pledge; it is not the sign of a good, but bears its value in itself. It is itself really a good.

Hülsmann explains the role of Mises’s strict terminology in countering the prevailing assignment theory of money (p. 237):

To combine these elements into one coherent theory required a radical break with time-honored pillars of monetary economics, in particular, with the classical tradition of presenting money as a mere veil. Mises was fully conscious that this was the key to his theory, which is why, in an introductory chapter of his book [Chapter 3], he engaged in the somewhat tedious exercise of distinguishing various types of money proper (money in the narrower sense) from money substitutes. It was these substitutes in fact that were the sort of tokens or place holders that Wieser and the other champions of the assignment theory tacitly had in mind when they spoke of money…While it is true that the value of a money substitute corresponds exactly to the value of the underlying real good (for example, one ounce of gold), the value of the gold money itself does not correspond to anything; rather it is determined by the same general law of diminishing marginal value that determines the values of all goods.

This greater context clarifies that “money in the narrower sense” is a form of money valued directly without any intermediation of substitutes and without mere veiled representational reference to other goods. Money was not just a placeholder or accounting entry, a claim ticket for other goods. It was one good trading for other goods on the market. Moreover, Sachgeld, “money in itself,” was further differentiated from Mises’s other two monies “in the narrower sense” by not being a debt instrument (credit money) and also not depending on any official legal certification or special legal status (fiat money). The primary distinction of money in the narrower sense among all other goods was its wider relative marketability, as Böhm-Bawerk had explained.

This higher degree of marketability then gives rise to an increased value of money as a hedge against uncertainty. If no uncertainty existed, there would be no need to hold cash balances. As Hoppe explains in “‘The Yield from Money Held’ Reconsidered” (2009), in the real and always uncertain world, we do not know in advance exactly what we will want to buy and when, but we do know with much higher certainty that we will want to buy something sometime. The holding of cash balances can be understood as a forward-looking measure we take in relation to this degree of perceived uncertainty.

No coinbug likes inflation

Whatever the future brings, for today, at least, Bitcoin seems to behave very much like a “money in itself,” but one unlike any the world has ever seen. It is digital and it is apparently impossible for any party to manipulate its total supply. This is critical, because one of the central political-economic monetary issues is inflation, by which I mean specifically, the ability of money producers to manipulate the money supply for whatever reasons they might happen to have in mind or cite at a given time.

As Mises wrote in TMC (p. 428):

It is not just an accident that in our age inflation has become the accepted method of monetary management. Inflation is the fiscal complement of statism and arbitrary government.

He also explained the social-protective advantages of having precious-metal coins circulate physically (p. 450):

Gold must be in the cash holdings of everybody. Everybody must see gold coins changing hands, must be used to having gold coins in his pockets, to receiving gold coins when he cashes his pay check, and to spending gold coins when he buys in a store.

This might seem at first to be the definitive Misesian endorsement of circulating metallic coins. Yet as Hülsmann notes in this context, “Mises had not become a gold bug. He had no fetish about the yellow metal or any other metal” (Last Knight, p. 922). Hülsmann then points us to the reasons behind Mises’s proposal—to help counteract the advance of inflationary policies (TMC, pp. 451–52):

What is needed is to alarm the masses in time. The working man in cashing his pay check should learn that some foul trick has been played upon him. The President, Congress, and the Supreme Court have clearly proved their inability or unwillingness to protect the common man, the voter, from being victimized by inflationary machinations.

The function of securing a sound currency must pass into new hands, into those of the whole nation [world?]…Perpetual vigilance on the part of the citizens can achieve what a thousand laws and dozens of alphabetical bureaus with hordes of employees never have and never will achieve: the preservation of a sound currency.

At this point, much appears to hinge on the definitions of “good” and “commodity.” Must they necessarily maintain their historical associations with tangibility? It is therefore to tangibility, and in particular its relationship with scarcity, that we now turn. Against all the temptations to try to drop Bitcoin into one old basket or another, can Bitcoin nevertheless stubbornly hold out and demand recognition as something new in the world?

[Intermission]

Part II: The Sound of One Bitcoin

That intangible sense of scarcity

In further considering Bitcoin and monetary theory, the concepts of goods, scarcity, and tangibility must be carefully differentiated. Scarcity and tangibility were long inseparable in the form of monetary metals. They remain fused in most familiar goods.

But what if factors other than tangibility, per se, such as relative stability of total supply, durability, and divisibility, were the essential factors even in evolutions of metallic media of exchange? What if tangibility was something of a monetary “inactive ingredient,” a “material carrier” for those other qualities, which had actually always been the essential ones?

Digital goods have brought the separability of goods from tangibility front and center in the modern world. To apply these concepts now to the case of Bitcoin, we revisit their various senses and definitions, including some recent refinements.

Copying is not theft

Most digital goods, such as song or text files can, in principle, be copied ad infinitum even as any earlier copy from which other copies are made remains entirely unchanged.

This was the essence of the digital-information revolution. Unlimited numbers of people could use copies at the same time without direct mutual interference or degradation of the integrity of any earlier copies. A copy could be made without the original disappearing, as would be the case with theft or any other kind of transfer. Moreover, any copy could then become a new, equally serviceable “original” from which new copies were made from there. “Originals” would not even degrade with time or use, as is the case with analog reproduction methods, with their analog “master” copies.

The difference between copying and theft has been humorously and quickly illustrated in the “Copying is not theft” one-minute meme. Since a video may be worth 10,000 words, it might repay the time to view this now to see the essence of this distinction (literally one minute) before proceeding.

The advent of mass digital replication dealt a crushing blow, at least within the abstract realm of knowledge and patterns, to an age-old enemy—inherent or natural scarcity. In response, we have been witnessing a legal and technical scramble to create artificial scarcity to replace it. The major methods have been expanding and tightening legislation and enforcement and the application of digital rights management (DRM) technologies. This combination of developments brought the dusty old issue of “intellectual property” front and center. To make any sense of this odd scene in a principled way required a fresh look at basic social-theory definitions and concepts.

As one important step in this effort, Jeffrey Tucker and Stephan Kinsella in “Goods, scarce and non-scarce” (25 August 2010), focused on distinguishing perfectly copiable goods, such as ideas, methods, and most digital goods, labeling them as “non-scarce goods.” They quoted from Kinsella’s landmark “Against Intellectual Property” (2001), which addresses the relationship between tangibility, scarcity, and the core social function of property rights. Kinsella (p. 19) asked:

What is it about tangible goods that makes them sub­jects for property rights? Why are tangible goods property? A little reflection will show that it is these goods’ scarcity—the fact that there can be conflict over these goods by multiple human actors. The very possibility of conflict over a resource renders it scarce…the fundamental social and ethical function of property rights is to prevent interpersonal conflict over scarce resources.

This sense of “scarce” is a social-relational one. It refers to the physical impossibility of a rivalrous good being used for different purposes simultaneously by more than one party. For example, one person cannot, under any imaginable scenario, drive from Rome to Vienna while another drives from Sydney to Brisbane in the same car. This specific sense of scarcity derives from the property theory reasoning of Hans-Hermann Hoppe, who wrote in A Theory of Socialism and Capitalism (p. 235) that:

insofar as goods are superabundant (‘free’ goods), no conflict over the use of goods is possible and no action-coordination is needed…To develop the concept of property, it is necessary for goods to be scarce, so that conflicts over the use of these goods can possibly arise.

Care must be taken, as we shall see, because scarcity is sometimes used with a different meaning in economic theory. In that usage, “scarcity” is a necessary attribute of any economic good, by definition. Moreover, in popular colloquial usage, “scarce” has yet a third meaning of “in short supply” or “not enough to go around” relative to an assumed “normal” or ideal baseline situation, which is completely distinct again from either of the two foregoing technical meanings.

Tucker and Kinsella mentioned that tangibility is not inherently necessary for scarcity, citing airspace and radio waves as examples (one transmitter can interfere with another). Yet the practical conclusion seemed to be that tangibility and scarcity do coincide in almost all cases. All of the examples in an informal and illustrative chart of “scarce” goods (and non-goods) happened to also share the attribute of tangibility, while the non-scarce examples were all intangible. And indeed, this is almost always the case. Yet they left no doubt about the key point:

The term scarcity here…means that a condition of contestable control exists for anything that cannot be simultaneously owned: my ownership and control excludes your control.

While the meaning and purpose of their argument is clear in its context, in strictly economic theory terms, one must still act to obtain even a “free” or “non-scarce” copy of a good. One must still click on one free file icon rather than another, for example, displaying choice and preference through this action, and making the clicked-on file a means in action and the runner-up file an opportunity cost. As a result, great care must be taken with the overlapping and sometimes reversed senses of these two meanings of the word scarcity. For example, in the property theory sense, even a “non-good” can be scarce, which is impossible in the economic theory sense. Yet once again, Tucker and Kinsella took care to make their meaning clear:

Something can have zero price and still be scarce: a mud pie, soup with a fly in it, a computer that won’t boot. So long as no one wants these things, they are not economic goods. And yet, in their physical nature, they are scarce because if someone did want them, and they thus became goods, there could be contests over their possession and use. They would have to be allocated by either violence or market exchange based on property rights.

This subtle difference in the meaning of scarcity in economic theory and property theory reflects the respective clarification tasks at hand. Economic theory is in the first instance concerned with the nature of economizing action as such, which can only be taken by individual actors (“Crusoe”). Property theory is first of all concerned with individual action in its capacity as occurring in a social context of other similar actors (Crusoe plus Friday on up). This latter context gives rise to the binary descriptive possibilities of either cooperative (consenting) or conflicting (violent) relationships. One sense of scarcity is used for the purpose of considering Crusoe only, while the other sense of scarcity is used for the purpose of considering the possible classes of interactions between Crusoe and Friday.

Property rights are a fundamentally social phenomenon; they are irrelevant to the consideration of Crusoe alone. And this goes for the narrower sense of the word scarcity used in property-theory reasoning. With Crusoe and Friday situations onward, however, social action theory posits binary action possibilities of either cooperation or violent conflict. These encompass a descriptively possible totality of all possible human interactions (on this, see Murray Rothbard, Man, Economy, and State [MES, 1962] pp. 79–94, and Guido Hülsmann, “The a priori foundation of property economics(2004)). This particular set of binary classifications has been selected (either more or less consciously) by investigators as being valuable for helping to explain differential social phenomena.

Confusion in discussions of scarcity could also arise from the use of the term “free goods,” which Kinsella and Tucker also associated with non-scarce goods. In the strictly economic theory sense, “free” goods are not really “goods” at all, but the background conditions under which actions take place. They are not means in themselves within an (intentional) structure of action. Rothbard put in this way in MES (p. 8):

The means to satisfy man’s wants are called goods. These goods are all the objects of economizing action…The common distinction between “economic goods” and “free goods” (such as air) is erroneous…air is not a means, but a general condition of human welfare, and is not the object of action.

Air would not be a means for a jogger unless this particular jogger were an obsessive economist who had in mind “using” air as a “means” to go jogging. The air outside under normal circumstances is a background environmental condition, but not itself an object of action, and therefore not a good, unless its supply or quality is threatened. In strict dualist fashion, Mises emphasized how the concept of a means only arises in relation to the study of action (Human Action, pp. 92–93; my emphasis):

Means are not in the given universe; in this universe there exist only things…Parts of the external world become means only through the operation of the human mind and its offshoot, human action…It is human meaning and action which transform them into means.

Means are necessarily always limited, i.e., scarce with regard to the services for which man wants to use them. If this were not the case, there would not be any action with regard to them. Where man is not restrained by the insufficient quantity of things available, there is no need for any action.

Eugen Böhm von Bawerk’s image on 1984 “Austrian” fiat paper. Andrew Jackson sympathizes. Source: Berlin-George, Wikimedia Commons. Good for what?

A “good” is thus something that serves as a means within the structure of human action. Gael J. Campan argues that this was already explained in Eugen Böhm-Bawerk’s 1881 paper, “Whether Legal Rights and Relationships Are Economic Goods.” The first part of Campan’s article “Does Justice Qualify as an Economic Good?” (1999) explains the subjectivist conception of a “good” that Böhm-Bawerk advanced (my emphasis):

While scarcity is commonly referred to as an essential feature of an economic good, this must not be understood purely in a physical sense, i.e., a fewer number of items compared to the quantity of others. Indeed, if all means are scarce by definition, it is specifically because they are limited with respect to the actual ends that they are capable of satisfying…The characteristics of a good are not inherent in things and not a property of things, but merely a relationship between certain things and men.

The thing named a good must have useful properties, which is not to be understood in a strictly physical sense.

As quoted by Campan, p. 24, Böhm-Bawerk wrote (my emphasis; and try it once omitting “corporeal”):

Whatever importance we accord to the corporeal objects of the world of economic goods derives from the importance we attach to the satisfaction of our wants and the attainment of our purposes…It is the renditions of service rather than the goods themselves which, as a matter of principle, constitute the primary basic units of our economic transactions. And it is only from the renditions of service that the goods, secondarily, derive their own significance.

Define “scarce”

We have seen that scarcity in the property-theory sense pertains not to whether something is a good or not in this broader economic-theory sense, but rather to the native potential for rivalrousness of consumption and, specifically, to the presence or absence of the attributes of copiability and simultaneous shareability. Since the broader economic concept of scarcity is already contained within the definition of a “good,” the narrower property-theory sense appears more useful for the current explanatory tasks.

Building on this property-theory sense of scarcity from Hoppe, Kinsella, and Tucker, I propose defining a “non-scarce good” as: a good that is copiable with perfect remainder of the original and useable by multiple actors simultaneously without mutual interference.

Here the two travellers from our previous example,  each now with a car of his own, can simultaneously drive to Vienna and Brisbane, respectively, while each listens to identical digital copies of the same album by the same band (each driver incurring his own respective speeding citations). The variable cost of producing each additional playing of this same album is effectively zero (at any rate, quite unlike producing an additional “copy” of a car).

The point for right now is not to enter into the pros and cons of copyright legislation and entertainment business models (on which I recommend work done at C4SIF.org and Techdirt.com), but rather only to show the relevant descriptivedistinctions involved. A copy of a non-scarce good can be freely produced with no objective effect on previous copies, while a “copy” of a scarce good such as a car cannot be made in this way. Either control of the given instance of a car must be transferred (through sale, gift, or theft), or an entirely new instance of a car must be constructed from new and different scarce instances of the requisite materials and energy.

The point of Tucker and Kinsella’s article was to create a relevant binary classification along these lines (my emphasis):

One helpful way to understand this is to classify all goods as either finite and therefore normally scarce or nonfinite and therefore naturally nonscarce…It is scarce goods that serve as means for action, while nonscarce goods that can be copied without displacing the original are not means but guides for action.

…[A] recipe can be shared unto infinity. Once the information in the recipe and the techniques of making it are released, they are free goods, nonscarce goods, or nonfinite goods.

By contrast, according to my suggested definition of a non-scarce good above, the definition of a scarce good (in the property theory sense) would be the negation: a good that is not copiable with perfect remainder of the original and is not useable by multiple actors simultaneously without mutual interference. This proposed definition encompasses what most people think of colloquially as “goods” in general: groceries, clothes, and so forth.

In the modern age, such “non-scarce goods” have proliferated. As Tucker and Kinsella put it, “The range and importance of non-scarce goods has been vastly expanded by the existence of digital goods.” For the most part, non-scarce goods include all sorts of abstract goods such as ideas, text and music files, patterns, plans, recipes, methods, and so on. Specifically, it includes the meaning and content of all types of media and text, and other abstract and digital “things.”

Except…

In the case of Bitcoin, matters are different. Each bitcoin unit can exist in only one wallet at one time due to the Bitcoin protocol’s methods of ubiquitously recording transactions and preventing double-spending. It is critical to understand that these qualities of Bitcoin scarcity are not merely due to add-on “security measures.” They are not appended legal or technical “protections.” Rather they are integraland inseparable attributes of a system protocol of which a given bitcoin unit is one element.

As should be clear by now, it is not necessary to fuss over objectivistic considerations such as whether an abstract collection of digits in certain configurations can “really” be a “good” or not. Böhm-Bawerk’s insertion of the word “corporeality” into his 1881 sentence is not a separate criterion for something to serve as a means, a point we can much more easily see today than over 130 years ago. Böhm-Bawerk nevertheless clearly explained that one must observe what people are doing to understand what economic goods are, an insight that Mises would later take up and run with in his action-based reconstruction of economic theory.

Bitcoin has now brought authenticscarcity into the world of digital goods.

This is not the artificially imposed, legally constructed “scarcity” of “intellectual property” legislation, which was the target of Tucker and Kinsella’s important work. It is not even a type of tacked-on DRM system that attempts to use technical measures to create artificial scarcity out of informational objects that are in their nature not otherwise scarce. The Bitcoin system has set up a type of scarcity that is inherent to the nature of the good itself. This possibly unique achievement of an inherent scarcity within the digital realm is an essential part of the innovation that has made Bitcoin a new type of good.

A bitcoin unit viewed as an object of action also meets another essential criterion from Böhm-Bawerk—it can be controlled. As Campan explained (p. 24):

It is necessary that the thing in question be disposable or available to us. We must possess the full power of disposal over it if we are really to command its power to satisfy our wants…the possession of a good cannot simply be decreed: either you possess effective control over it or not.

The Bitcoin system achieves this through private key/public key encryption, which allows effective control of bitcoin units in a user’s wallet, provided said user maintains control of their private key and/or related passwords. Once a bitcoin unit is transferred from one wallet to another, it is no longer “in” the originating wallet, but only “in” the destination wallet.

Thus, in the property-theory sense of scarcity, a bitcoin unit qualifies, not as non-scarce like most other abstract or digital objects, but as scarce, since according to our proposed definition, it is “a good that is not copiable with perfect remainder of the original and is not useable by multiple actors simultaneously without mutual interference.”

Once a private key to a Bitcoin wallet is copied, more than one party can have the key at the same time, as with any other non-scarce good. However, even so, only one party can succeed in using this private key to make use of any given bitcoin unit associated with that wallet. Only one transaction with a given bitcoin unit can be confirmed in the block chain. Even though a private key or password can easily be copied if obtained, even in this case, only one person can end up succeeding in making use of a given bitcoin unit because of the system’s prevention of double-spending. A known compromised key pair (wallet) can be abandoned. Additional key pairs are free and plentiful.

What is the sound of one bitcoin?

Two hands clapping make a sound. What is the sound of one hand?

—Koan attributed to Zen Master Hakuin Ekaku 白隠 慧鶴 (1686–1768)

We have seen that the concept of scarcity in both economic-theory and property-theory senses is useful to understanding bitcoin units as objects of human action and that scarcity and tangibility are separable. But can the quality of tangibility, so essential to the familiar story of the evolution of precious metals as monies, just be unceremoniously dropped? It is said that an experienced examiner can distinguish the authenticity of a precious metal coin by dropping it and listening to its ring. But what is the sound of a bitcoin dropping?

It was tangibility in the monetary-evolution story that had seemingly held together all the numerous traditional monetary-commodity characteristics in the form of a nice solid coin of silver, gold, or copper. It appears that some observers steeped in that story, upon seeing that Bitcoin lacks tangibility, concluded that it must also lack the other associated monetary characteristics such as durability and relative stability of supply.

In this context, we find it insightful that Jon Matonis, a long-time observer of and writer on cryptocurrenices, recently said in a Reddit interview (19 March 2013) that one way to quickly understand Bitcoin better is that it is distinguished from gold in that “it depends on mathematical properties rather than chemical properties.”

A “hard-money” checklist check

With these considerations in mind, this paragraph from Professor Hülsmann from “How to Use Methodological Individualism” (27 July 2009) will be helpful. The essay was on a different theme, but the following paragraph from it contains a great deal of interest for our current topic all in one convenient place (my emphasis):

Media of exchange become ever more generally accepted to the extent that they are objectively more suitable than their competitors in arranging indirect exchanges. Silver is more suitable as a medium of exchange than cherry cakes because it is durable, divisible, malleable, homogeneous, and carries a great purchasing power per weight unit. Market participants are likely to recognize this relative superiority in a process of learning and imitation, and eventually most of them will use silver to carry out their transactions. Hence, one can explain why the technique of indirect exchange is adopted on an individual level; and one can explain why specific media of exchange become generally accepted and thus gradually turn into money.

There is much of relevance in that paragraph, but for now, I will only consider how bitcoins seem to fare against silver coins on those very characteristics (plus stock stability) on which silver coins beat cherry cakes:

Divisible, malleable, and scarce. Source: Mikela, Wikimedia Commons. Are bitcoin units

  1. Durable?Perfectly. Abstract digital objects do not change. However, this is subject to recording and replication, substrate non-destruction, private keys and passwords not being lost, etc.
  2. Divisible?Current theoretical maximum of 2.1 x 1015 units to be reached around 2140, with future extensions apparently also possible (finally enough tradable units for the “needs of trade”?).
  3. Malleable? Irrelevant; not tangible. However, analogs of this quality may be found in the variety of “transfer of keys” code-recording methods such as hologram- and color-change-protected code-bearing physical coins and cards.
  4. Homogeneous? Perfectly. More homogeneous than possible with any conceivable physical material because the homogeneity is mathematical (by definition) rather than physical (by empirical measurement relative to a definition).
  5. Purchasing power per weight? Infinite. Intangible code patterns lack the characteristic of weight altogether, rendering the slightest purchasing power infinite in per-weight terms.
  6. Now add: Relative stability of supply? Quantitative growth and terminal maximum quantity and timing are determined computationally; macro supply of bitcoin units (theoretically) not subject to human manipulation.

On this initial reading, it appears that Bitcoin obliterates metallic coins on factors 2–5, whereas factors 1 and 6 are open to contingencies and informed technical debates. Just as silver coins beat cherry cakes on these criteria (except malleability!), Bitcoin beats silver coins outright on four of six criteria. The other two criteria require further investigation, but Bitcoin also appears potentially competitive and possibly superior on these characteristics as well. These are questions for empirical observation, debate, prediction, and speculation about the specific course of the future, not for abstract theory as such.

This analysis of Bitcoin suggests several other points with regard to several of these characteristics.

First, purchasing power per weight was a major impetus in the evolution of paper and account entry substitutes for precious metal coin monies. Bitcoin’s purchasing power per weight is already infinite, and is therefore, quite literally, unbeatable on this factor. Another problem with metallic coins was gradual wear from circulation, which would eventually give rise to weight variations—a loss of homogeneity resulting from imperfect durability. Bitcoin does not share these particular defects with metallic coins that helped lead to market demand for substitutes.

Second, people tend to interpret the traditional hard-money characteristic of durability as a mainly material one. Tires, for example, are described as being more or less durable. On reflection, however, a temporal aspect is central to the concept of durability in that it refers to measurement of change over time in relation to use. To ask about durability is to ask the extent to which an object tends to change over time in certain of its properties under certain conditions. In the case of an abstract code relationship, the code need not change at all. Although its recording substrates might change, the code itself can be perfectly copied and copied again, and it is in this specific sense that its durability as a code sequence is theoretically infinite for any relevant purpose.

Third, regarding divisibility, whereas fiat money issuers stand ready to add as many integers (“zeroes”) to paper fiat notes as they like to facilitate the steady loss of value of fiat monetary units; the Bitcoin system is capable of supporting divisibility to as many decimal places as are demanded to facilitate a steady gain of value over time. This is a diametric contrast the further implications of which would be difficult to overstate.

Competing ways to approximate a golden spiral. Source: Silverhammermba, Wikimedia Commons. Comparative versus imaginary-perfection methods

The ultimate potential for manipulation of the total Bitcoin stock (factor 6 above) is a key question that is certainly a very technical one, possibly with philosophical aspects. Can it be established that future quantitative supply manipulation at the macro level cannot occur? Would that require “proving” a technical and empirical negative?

Whatever the factors and answers, it is important to apply the realistic comparative perspective of the true economist rather than the “imaginary-perfections” perspective of the false one. For example, with fiat monies, we know above all that large-scale, distortive, quantitative manipulation of the money supply can occur—andin all known cases actually does.

Even with metallic currencies, comparisons on hypotheticals would still have to be even-handed. The stock of precious metals adjusts slightly over time with mine output and other factors (though always with much less volatility than the stock of a fiat money). Nevertheless, at the extreme, can it be shown that cheap synthetic gold could not ever be produced (as the alchemists had forever dreamed), thereby collapsing the price of gold by inflating its supply? (as the alchemists may or may not have thought through far enough).

Gold can apparently already be synthesized in particle accelerators and nuclear reactors, just not cheaply. If one of the criteria required of a candidate for becoming a sound money is proof of a fantastically complex technical and empirical negative, then such must be required equally of all potential candidates. If, for example, it must be “proven” that no mass quantitative manipulation of Bitcoin could ever possibly take place under any imaginable conditions, then it must likewise be “proven” that no future cheap gold synthesis could ever possibly take place.

Empirical perfection never comes to pass. In all such matters, the comparative method must be recalled and put to use. Pros and cons of possible alternatives must be assessed. Critical comparisons against made-up and wholly unrealizable hypothetical states of empirical perfection must be identified and rejected.

Unfortunately, just such clouded thinking has been ingrained and normalized through the practice of assuming that state actors can successfully and perfectly accomplish whatever they like by enacting legislation and setting up a bureaucracy. This patently absurd dream is then compared (at best) to the forever imperfect efforts of the living human beings who by contrast inhabit the so-called “market” (which euphemistically seems to mean “reality”).

Human action is by nature always a choice among perceived possibilities. The Misesian tradition of economics is positioned as one part of the study of human action. The study of society is the study of acting persons joined in a grand, interacting process of trial and error writ large.

It is not the role of economic or legal theory to predict the future. However, they can and do have useful and unique contributions to make to basic understanding. These can in turn prove useful in such other fields as investing, forecasting, and business-model development that do attempt the always-speculative and risk-bearing task of peering ahead into the soon-to-become empirical future.

For additional articles on this topic, visit my Bitcoin Theory page on this site.

Individualism, collectivism, "mere" birds, and how to understand ice hockey

What is happening here? Source: 08-usa-rus-faceoff, Uncleweed, Wikimedia Commons. Conventional thinking has overemphasized and over-stretched the collective perspective. Meanwhile, I think certain approaches to libertarianism have over-emphasized an individual or individualist perspective—or at least have a bad reputation for seeming to. Calling this "atomized" individualism is certainly a rhetorical move on the part of collectivism, but it might also contain some useful lesson.

Over-emphasizing the individual perspective probably came as an understandable reaction to the absurd overreaching of collectivist thinking, in which the "mere" individual is to vanish in the great tide of the collective. Moreover, the undertone is usually not far away that if the "mere" individual does not cooperate, force will be applied. The great blind spot of collectivism is that such force can only ever actually be applied by other acting individuals wielding such force (whether they work for the state or such does not alter this fact).

In contrast to all of this, what is needed is the ability to use both individual and system perspectives as appropriate to understand reality. This seems to also be what the great economist, journalist, and moral philosopher Henry Hazlitt was on to when he wrote:

Society is not merely a collection of individuals. Their interrelations in society make them quite different from what they would be in isolation. Brass is not merely copper and zinc; it is a third thing. Water is not merely hydrogen and oxygen, but something quite different from either. What an individual would be like if he had lived completely isolated from birth (assuming he could have survived at all) we can hardly even imagine…We can hope to solve many social problems not by looking at them exclusively from either an "individualist" or a "collective" aspect, but by looking at each aspect alternately.

          — Henry Hazlitt, The Foundations of Morality (1964) p.167

Some images might help clarify what I am getting at by the need for access to both "aspects" or perspectives. Imagine a team sport match. Any sport will do. Maybe ice hockey. What is needed to watch and understand the game?

Seeing the whole field and the players, we are able to understand what is happening. Now if advanced video editing were used so that we could only see one of the players in the game but not any of the others, it would suddenly appear incomprehensible. What is that player doing? Why going this way and not that? Why crashing into the wall? This is an example of missing the collective or system perspective.

Alternatively, say we were watching unedited video of the game, but this time had no idea what the rules and objectives were. Here we would be missing the individual perspective. What is each player trying to do, why, and how? Again, the whole game would be incomprehensible in that case too, but for different reasons. Now there are just a bunch of armored people skating around with sticks! But why?

In order to understand the game, we require both an individual perspective and a system or collective perspective at the same time. The same goes for the real world in general.

One of a list of benefits of referencing an integral approach (see, for example, Ken Wilber's The Marriage of Sense and Soul (1999)), is that it reminds us that both individual and system perspectives are always available to be consulted, and ought to be. Both perspectives can be misinterpreted and misused, sure, but neither simply goes away.

The very idea of one of these aspects being valid to the exclusion of the other is absurd; they are sides of a coin. There exist no systems that are not made up of components. At the same time, components do not become something other than what they are by virtue of being part of a system. Birds flock—and remain birds all the while. We observe no flocks of "mere" birds, only flocks of regular birds. Likewise, components do not exist in isolation. One can ignore their context and interrelations (which Ayn Rand called "context dropping"), but this does not make such context and interrelations vanish from reality.

It seems that Hazlitt already hit the perfect note on this in 1964. We must "look at each aspect alternately." Upon running into an explanatory brick wall by focusing mainly on one perspective, one can try checking in with its partner perspective and see what dawns.

Bitcoin and social-theory research highlights: Digging for kryptonite

As I work here to organize and refine my own theoretical interpretations of Bitcoin, I try to keep searching and scanning for solid material that is already available, so as to minimize wheel-reinventing. Here are a couple of promising sources and intellectual resources I have identified so far as part of this process. Given the volume-to-quality ratio of talk out there right now, this can be a little more like digging for kryptonite than mining for mere gold or bitcoins.

Matonis, Šurda

First, wondering last weekend if Guido Hülsmann had written anything on Bitcoin thus far, I came across Jon Matonis citing Hülsmann’s “Deflation and Liberty” in an article on deflation and Bitcoin in Forbes, “Fear Not Deflation” (23 December 2012). “Deflation and Liberty” was a precursor to Hülsmann’s concise treatise, The Ethics of Money Production (2008).

Matonis’s Twitter feed soon led me to a discussion thread that contained a link to a late-2012 Diploma Thesis from the University of Vienna by Peter Šurda entitled Economics of Bitcoin: Is Bitcoin an alternative to fiat currencies and gold? [download 90-page PDF]. My first impression is that this contains significant solid information and analysis and I am looking forward to examining it. It looks like an in-depth work by somebody who combines a good grounding in economic theory with a solid understanding of what Bitcoin is, a rare blend.

I already recognized his name from various comment threads, but this discovery helps me understand one probable factor behind his comments standing out from the crowd in my eyes. One such comment thread is ongoing under the post Is Bitcoin Money? and Šurda is making what I think are some stellar observations in that conversation.

Tucker, Boyapati

Just today, I watched the new half-hour interview between Jeffrey Tucker and Vijay Boyapati on Bitcoin and monetary theory (embedded below). I think it offers an informed discussion with a refreshing frequency of solid and balanced ideas and interpretations. It was interesting for me to note matches between some ideas in this interview and similar points in my recent initial foray into this topic, “Bitcoins, the regression theorem, and that curious but unthreatening empirical world” (27 February 2013).

First, I also came up with “used for economic calculation” as one of the interpretive indicators to look for on the question of whether bitcoins are “money” or not. The empirical question this implies is: To what extent are actors doing their planning, decision-making and profit/loss calculations using the unit directly, and to what extent are they referring back to local fiat currency exchange rates?

At the same time, this “Is it ‘money’?” issue seems to be of mixed explanatory importance. While “medium of exchange” is a precise concept, the word “money” tends to suffer from being more colloquial and susceptible to shifting and varied definitions of what is or is not to be included. Debates built on shifting or non-matching definitions do not end. The value of using the “money” word therefore varies greatly with the degree to which a specific definition is out and on the table, and its use should always be tested against whether or not it is actually advancing understanding.

Second, similar to Boyapati’s take here on the first emergence of bitcoin value, my article also traced back to “coolness factors,” etc., which I characterized as psychological, motivational, and sociological elements in initial valuations. Once again, dismissing such factors as “merely” imaginary or subjectively felt factors, and comparing everything back to gold, which is “inherently valuable” (!) may risk falling back toward or into an objective-value approach in the struggle to stuff the bitcoin genie into one old bottle or another.

 

 

For additional articles on this topic, visit my Bitcoin Theory page on this site.

 

IN-DEPTH | Bitcoins, the regression theorem, and that curious but unthreatening empirical world

I attempt to account for the emergence of bitcoins in terms of the monetary regression theorem. In doing so, I argue that 1) the existence of bitcoins does not and could not challenge the regression theorem and 2) the regression theorem does not constitute any particular problem for bitcoins in terms of economic theory. That said, 3) the investment analysis of bitcoins is a separate matter from the economic-theory analysis and is a good (but separate) topic for vigorous debate.
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Misesian action theory is an approach to social theory, not just economics

What if praxeology (deductive action theory in the tradition of Ludwig von Mises) is conceived as something much larger than merely the backstop for Austrian economics or a sort of pre-Austrian-economics warm-up act? In that case, economics ought to be better defined as one branch of praxeology among others. Since Mises kept mentioning economics as the “thus-far best-elaborated part” of praxeology, shouldn’t more thinkers be taking this up and working on advancing other such parts?

This is one of the questions addressed in my 2011 paper Action-Based Jurisprudence, which, among other things, sought to more explicitly define another branch that I am now calling the theory of legal concepts. I am now working on taking this approach further and in new directions, but meanwhile here is an update on the question of defining economic theory and other fields, as parts of praxeology. One element in what originally helped me get moving further in this direction of an enlarged vision for praxeology a couple years ago was Stephan Kinsella's compilation of references, “Mises: Keep it interesting,” (Mises Economics Blog [RIP], October 16, 2010).

Since writing the original paper two years ago, I have taken note of the discussion in Guido Hülsmann's 2003 introduction to the third edition of Epistemological Problems of Economics, entitled, “From Value Theory to Praxeology.” This describes Mises's process of working backward from subjective value theory to arriving at his formal concept of action. It contains a descriptor at one point of economics as that part of praxeology that deals with action that uses economic calculation. On this basis, I might suggest for economics: the study of aspects of action as they arise uniquely only within the context of an exchange economy in that the latter enables economic calculation.

We can briefly test out this “exchange economy” proposal (or some other proposal) for the case of defining economics by playing a game of takeaway: “No exchange economy? No prices.” Check. “No exchange economy? No interest rates.” Check. And then on down the list of what we think ought to be considered part of “economics” proper. "No exchange economy? No time preference." Well, no. Not so fast. There is time preference regardless of the presence/absence of an exchange economy, so this one doesn't pass. It looks like it must belong more to a "core" area of praxeology rather than to any particular specialized branch of praxeological investigation.

We might also then see Mises’s classic statement on the impossibility of economic calculation under socialism, “Economic calculation in the socialist commonwealth,” (original German 1920) in a new light. It becomes a particular instance of playing the takeaway game: “No private factor-of-production ownership? No (real) factor prices and thus no profit/loss calculation.” Check.

My most recent thinking on the general issue is that praxeology is a tool that we can use as one element in the study of just about anything involving human action. The parts or branches should then simply be defined by the sets of subject matter that we are using praxeology to investigate. I was pleased to see some work in this direction in criminology as presented in Renaud Fillieule’s 2012 Mises Memorial Lecture, “Misesian praxeology: An illustration from the field of sociology of delinquency,” delivered at the Austrian Scholar's Conference in Auburn, 10 March 2012, which I also recently mentioned here.

So we’re out here investigating what praxeology/thymology can show us if we apply it to issues x, y, and z, extending to all the things in the social sciences that we are interested in understanding better. This could become useful in the entirety of the social sciences—as opposed to the natural sciences—which I think is more what Mises had in mind with praxeology/thymology vis-à-vis natural science methods.

In other words, there ought to be plenty of work to do to carry forward the actual “program” that Mises launched, which was much larger than economics. It was a call for a revolution out of historicism (see especially Theory and History) and positivism (see especially The Ultimate Foundation of Economic Science) in the social sciences as such and was by no means limited to economics. Economics was Mises’s own primary specialization within praxeology; it doesn’t have to be everybody else’s.

Reeva Steencamp's final message, academic hubris, and a legal philosophy view of the case

A final message versus academic hubris

USA Today reported that, “The South African Broadcasting Corp. [SABC] aired the Tropika Island of Treasure program, showing the late Steenkamp — the victim of a Valentine's Day shooting at Pistorius' home — laughing and smiling in Jamaica when it was filmed last year."

And the Guardian noted that, “The SABC was also attacked by Rachel Jewkes, the director of the gender and health research unit at the South African Medical Research Council. "It sounds incredibly tasteless," she said. "I struggle to think what it would be like for her family to see her swanning around and being normal on TV."

Hmmm. Maybe try asking them?

USA Today: “Steenkamp's family said earlier Saturday that they had not been contacted by either the SABC — South Africa's national broadcaster — or the show's producers for permission to air it, but were not opposed to it because Reeva [Steenkamp] wanted everyone to see it.

"'Her last words to us personally was that she wants us to watch it,' Sharon Steenkamp said, hours before the program was shown."

Or ask the victim:

The Guardian quoting Steenkamp from the show: "'I think that the way you go out, not just your journey in life, but the way that you go out and you make your exit is so important. You've either made an impact in a positive way or a negative way, but just maintain integrity and maintain class and just always be true to yourself.'

"Before blowing kisses to the camera, she added: 'And I'm going to miss you all so much. I love you very, very much.'"

A legal philosophy take

There does not seem at this stage to be any controversy about whether Oscar Pistorius was the one who pulled the trigger and set in motion the objective cause of death of Reeva Steenkamp. This means the entire case will revolve around the question of whether the shooting was intentional or negligent.

Accidental already seems like quite a stretch, if the following is to be believed. The Guardian: "Media reports in South Africa continue to claim that Pistorius, 26, told police the shooting was a 'horrible accident' after he mistakenly believed 29-year-old Steenkamp to be an intruder. One newspaper suggested that he fired four shots through a bathroom door."

Shooting through a door at an unidentified target might be negligent at best (for shooting without successfully identifying the target), but "accidental" doesn't quite seem to fit even this account.

Without taking any position on the facts of the case, which remain sketchy, in my view, based on action-based legal theory (disclaimer: not necessarily equal to positive law in this or any other jurisdiction, but rather a philosophical position), the shooter took an action. This means there was a human means/ends structure. Firing the gun in a particular direction was the means. The end or objective of the action, what the person had in mind in taking the action, is what is contested, and the two stories contrast sharply: 1) to neutralize a threatening intruder or 2) to murder a woman in cold blood.

In both cases, however, the action objectively caused the death of the victim. This "objective causality stemming from an (intentional) action” element means the shooter ought to be liable for damages to the family, to insurers, etc., and this would be true in either case, whether the act was negligent or intentional. He took an action. That action created the harm. He carries the liability and responsibility for the results.

The main differential questions that stem from the negligence versus intent issue would seem to be: What kind of person is this? Can he be trusted? Is he dangerous? How should one treat him and deal with him (or not) now and in the future? And so on. What remains then, is the potentially tough task of establishing the actual facts of the case in such a way as to make the judgment of which it was—intent or negligence? Yet the key issue of personal liability and responsibility appears, in either case, to already be clear.

Bank robber chatting with Bill Murray illustrates self-control theory

Fresh from robbing a bank in Tokyo, a robber saw film star Bill Murray and stopped to chat with him! Soon, Tokyo police tackled him (the robber) in mid-conversation.

This is a perfect image to illustrate the essence of the low self-control theory of criminality in Gottfredson & Hirschi's 1990 A General Theory of Crime, an important book that I become aware of through the work of French scholar of the sociology of crime and contributor to the Austrian school of economics (a rare combination!), Renaud Fillieule (see his presentation on praxeology and criminology embedded below). They write on p. 89 that:

A major characteristic of people with low self-control [characteristic of most actual criminality] is a tendency to respond to tangible stimuli in the immediate environment, to have a concrete “here and now” orientation.

Moreover, police caught the man with "a knife and a bag filled with 455,000 Japanese Yen, or about 5,000 USD." Once again, this is a perfect image for Gottfredson & Hirschi's contention on p. 21 that:

Although it may be more glamorous and profitable for law enforcement [and news and entertainment media] to portray an image of crime as a highly profitable alternative to legal work, a valid theory of crime must see it as it is: largely petty, typically not completed, and usually of little lasting or substantial benefit to the offender.

The vast majority of actual crimes are just like this, "petty, not completed, and of little benefit to the offender." This event, too, would have gone mostly unnoticed and unreported, were it not for Bill Murray walking by.

Self-control theory in criminology maps fairly closely to the concept of time-preference in economics (specifically, low self-control would be associated with high time preference). However, the latter is more precisely formulated as a praxeological law; the former more of a specific interpretive framework for understanding behavior patterns.

Here is a fascinating 2012 lecture examining the field of the sociology of crime from a Misesian action-theory perspective.

Action-Based Jurisprudence II: Down under (and back again)

I gave a presentation at the wonderfully principle-centered 2nd annual Mises Seminar Australia in Sydney's central business district (CBD) on 2 December 2012. Here is a document version of my presentation, a close transcript arranged with selected content from the slides and rounded out with a list of readings.

Key themes included clarifying the difference between the ethical and the legal and differentiating "law" into five sub-disciplines, each with its own distinct domains and methods, conflating which (as is usually done) leads to serious problems (which we see all around us). It discusses who wins and who loses from contemporary complexity in legal definitions, and argues that the emerging action-based jurisprudence approach offers a better way of addressing the many contingent complexities of real life and culture without undermining fundamental principles of civilization in the process.

With Mises Seminar co-organizer and Liberty Australia co-founder and director Michael ConaghanDeveloping this for me started out as an attempt at a simpler restatement of the arguments in my August 2011 paper, Action-Based Jurisprudence: Praxeological Legal Theory in Relation to Economic Theory, Ethics, and Legal Practice," one that would be more accessible to people less versed in the background literature. As it developed, new territory and reformulations emerged. This included the three theory modules designed to help people grasp some difficult but crucial concepts without having to delve into stacks of academic books and articles to glimpse a solid initial understanding (after which, those stacks of books and articles can more profitably follow, and a strictly select list of them does, on the last two pages).

A substantially expanded and elaborated academic journal version, with more detailed references and footnotes and some additional new angles, especially on the relationship with action-grounded criminology (our understanding of what crime and criminality actually are), is also in the works.

With Professor Walter Block at 2nd Mises Seminar Australia (visiting Yanks!)There and back again

This was my first trip south of the equator. I had a wonderful time in Sydney and got to meet a number of people I had previously encountered only online, including among many others, organizing team members Michael Conaghan, Benjamin Marks, Washington Sanchez, Samuel Marks, and Anthony Coralluzzo. Before this weekend, I had only briefly met the legendary libertarian teacher/promoter and enthusiastic intellectual trouble-maker Professor Walter Block, but this time had the opportunity to speak with him at greater length. My presentation also came just after one of his (now in his 70s, he did five segments in two days and looked ready to do 12 more). I was stepping up right after someone who has been presenting at conferences since I was learning to walk, and I was touched afterwards that he referred back to content from my talk several times in his later segments.

I also got to talk at length with Michael Conaghan, co-founder and director of Liberty Australia, who is quickly becoming legendary himself in online discussion circles for regularly coming up with spot-on quotations from the relevant literature (even with occasional video clips of old Q&A sessions with Rothbard personally addressing the question at hand) and dropping them out of thin air into active discussion threads.

My last day was a solo trip by city bus to Bondi Beach and MacKenzies Bay. I told the waiter at the amazing Hurricane's Grill Bondi Beach that I didn't feel like leaving Sydney to return to the frozen German winter, but would rather send for my family to come down and join me. He just smiled and said this is the kind of feeling a great many people who visit Sydney seem to report. I could believe it. Maybe Hurricane's delivers to Germany?

Download the free PDF of the document version of the presentation.

BOOK COMMENT | The Constitution was already perfectly clear to begin with

"I do solemnly swear (or affirm) that I will... protect and defend the Constitution of the United States."

No, not the piece of paper; what it SAYS. Regarding what it says, my paper "Action-Based Jurisprudence" (2011) included the following one-footnote book review (p. 35, fn 31):

"[Randy E. Barnett, in Restoring the Lost Constitution: The Presumption of Liberty (Princeton: Princeton University Press, 2004)] argues that the US constitution’s actual conception of rights is essentially a libertarian one. He forwards an “original meaning” standard, which uses documentary evidence to establish what the language of the final enacted text meant in view of linguistic usage at the time. He contrasts this with “original intent” attempts to speculate as to what “the Framers” may have wanted to accomplish with the text. He argues that the restrictions and limitations in the document are placed on the powers of the federal government and not on the rights of the people and states it was designated to serve. The entire structure creates a “presumption of liberty” for the people in any area of dispute with the federal government.

"While he makes a compelling case for respecting what the Constitution says so long as it remains notionally in force, I find this line of argument weak if it is be viewed as a reform pathway. This is because, precisely as Barnett shows, the original document already made its own meaning perfectly clear. Yet despite this clarity, post-enactment history has still been a story of powers expanding and rights being limited in direct contravention of the unmistakable meaning of the enacted text. We should not expect the underlying factors behind this process to change based on another, even clearer presentation of the plain meaning of the enacted text, such as Barnett’s. The problem is that any state placed in charge of judging the extent of its own powers will surely manage to wear down, redirect and overcome such efforts at limiting itself, as the American experiment in substantive constitutional limitation so dramatically attests."

Barnett's own previous book, The Structure of Liberty: Justice and the Rule of Law (Oxford: Oxford University Press, 1998), makes substantial contributions toward understanding why a written constitution should in all cases fail to actually limit the activities of a monopolistic government indefinitely. Both books are insightful and worth reading, and the latter effort makes the original-meaning case well. However, the earlier book seems to be the more realistic one—by being the more radical one.

Another mummer's farce gone by (and more rumors of wogs and dragons)

I overheard an old guy ranting something in what sounded a lot like the common tongue of Westeros (Song of Ice and Fire/Game of Thrones). Readers of the books, at least, if not possibly watchers of the show, ought to be able to follow his curious ravings as well as I recall them. Maybe he was just telling tall tales. Who knows? I'm pretty sure this is what he said:

Source: Konrad S. Graf (on our Earth, called Vaduz Castle)Now that they've done with their mummer's farce, they'll be expecting the rest of us to bend the knee. Stags, lions, it makes no matter in the end. We've heard much and more of kings of late, but the wolves and crows have the right of it: winter is coming. Most like, this time, we'll be walking hip-deep in royal pieces of paper! You can't feed a babe with paper, whatever they're like to tell you in King's Landing.

I also heard tell that the new king doesn't even use a headsman anymore. Now he's turned to sorcery! His wogs enter the spirits of dragons, swoop down and burn the king's enemies, anyone, anywhere. Just give a nod to a wog is all he has to do. Aye, a fearsome thing if true!

Nothing good can come of it though. I remember Ned Stark always swore that if a lord were going to execute a man, it ought to be by his own hand and only after hearing the man's last words with his own ears. Nowadays, just a nod.

The problem with shouting “Tyranny!” in a crowded theater

This is a brief excerpt from my “Action-Based Jurisprudence: Praxeological Legal Theory in Relation to Economic Theory, Ethics, and Legal Practice.” Libertarian Papers 3, 19 (2011), pp. 36–37.

It is popularly repeated in “civics” type discussions of fundamental rights and responsibilities that one may not shout “Fire!” in a crowded theater. Merely intoning the name of this famous example is thought to be enough to remind or instruct those present that “rights” are not “absolute” and must be “limited.”

Before delving into the problems with this reasoning, it may be instructive to understand the shady history of the example. The original statement was: “The most stringent protection of free speech would not protect a man falsely shouting fire in a theater and causing a panic” (Schenk vs. United States 1919).

Oliver Wendell Holmes, Jr. was penning an opinion of the Supreme Court of the United States. Even though specific speech acts were under discussion, the (constitutional) “right” of free speech was considered. However, what is less widely known is that the actual speech in the case involved neither fires nor theaters. At issue were statements opposing involuntary military servitude (the “draft”) in World War I. Among the examples were leaflets that included such statements as, “Do not submit to intimidation” and “Assert your rights.”

It turns out, then, that a supreme agent of the state introduced this example to rationalize an opinion that obfuscated an otherwise clear issue in favor of that same state. The court, in effect, upheld the punishment of legitimate acts of opposition to an exercise of tyranny that was both unjust on general principles and explicitly illegal under the constitution that established the court’s own existence (“Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.” US Const, Amend XIII, § 1). It is no wonder that confused thinking might follow from such an example.

The rights/actions distinction shows how some of the general notions usually assumed to derive from the theater example are confused (see Murray Rothbard, The Ethics of Liberty, 113–18). First, a person has a right to be the one—as opposed to someone else—who controls his own voice. Yet shouting “Fire!” in the theater is an action. What is the means/ends structure? The means is to shout the word. It may be fair to assume, prima facie, that the end is to needlessly panic the crowd and disrupt the theater experience. This vocal act endangers and inconveniences other patrons and violates the explicit or implied rules set by the theater owner.

However, this need imply no “limitation” on the right of the shouter to be the one in charge of his voice. All that is needed is to say that he, as the absolute and undisputed user of that voice, is responsible for the actions that he takes with it, just as an “absolute and undisputed” motorcycle owner is responsible for the results that follow from how he rides his—or any other—motorcycle.

A simpler example more directly linked to the ownership model of rights further illustrates the importance and usefulness of the rights/actions distinction. The reason attacking another with a baseball bat is a non-aggression principle infringement has nothing to do with who owns the bat (maybe the attacker stole it) or whether ownership of bats can be “absolute” or not, or whether rights to own bats are “limited” by coming up against the rights of others not to be hit by them. Nor would it clarify matters if an archivist were to present a tattered parchment bearing a long lost, secretly ratified amendment establishing a “Constitutional Right to Own a Baseball Bat” (…which, especially for Americans, must not be denied or disparaged!).

What is relevant to praxeological legal analysis is the action of using a baseball bat to hit someone, regardless of who owns it or to which degree of alleged “absoluteness” it is owned. The bat is the means. The end is the result sought from the action of attacking—hurting the person and perhaps also stealing their property. The question of who owns the means—the bat—is not directly relevant to the injustice of the action—the hitting. It does not matter, unless there is some specific reason to argue otherwise (for example, ownership might function as one line of evidence showing what was done and by whom), whose bat is used.

Resolving the paradox of value

Philosophers struggled for centuries to understand the paradox of value, the mystery of why certain luxuries such as diamonds and gold are considered more valuable than certain essentials such as water and food.

Everyone must have water, yet it is usually not that hard to get. We can buy a bottle or it comes out of the tap. Diamonds are rare and expensive, but optional. Men, at least, seem to be able to get along well enough without them. It seems counterintuitive that something essential to everyone’s life could be less valuable than something that seems so much more optional.

Many thinkers tried to understand value as a property of things. They thought that a table, for example, has the property of being flat, having legs, being made of wood, and having a certain value or usefulness. Such approaches are called objective theories of value, because value is seen as a property of the object.

This idea is found in our everyday language when we say that “diamonds are valuable.” But this is also the kind of thinking that produced the paradox of value so it is unlikely to resolve it.

The breakthrough came with two of the greatest ideas in the history of economic thought: the subjective theory of value and the concept of marginal utility. Carl Menger, a professor at the University of Vienna, played a key role in formulating and spreading these two ideas in his 1871 book, Grundsätze der Volkswirtschaftslehre, translated as The Principles of Economics.

Menger is considered the founder of what came to be known as the Austrian School of economics. The name started as a way to distinguish this approach from that of the German Historical School, and the name stuck. Ludwig von Mises, in his 1949 treatise, Human Action, further clarified and extended subjectivism and marginalism, and even insisted that these are among the foundations of any sound economic reasoning.

The subjective revolution clarified that the key to value is valuation. Valuing is an action; it is something that people do. The concept of value makes sense as a relationship between an acting person and the means they select in pursuit of the ends they seek. The object of valuation can be tangible or intangible, base or sublime. It can be anything whatsoever that a person chooses as an end or means as demonstrated in what they actually do. In this view, the value of a thing derives from people valuing it.

Different people have different priorities. The same person has different priorities at different times. A person might buy a bottle of water, but after reading an article on possible risk from plastic bottles, that same person the next day might disvalue and avoid an identical bottle of water. When this same person a year later flies to an anti-plastics conference and crashes in the desert, a plastic bottle of water might suddenly become one of the most valuable things in the universe—to that person, at that time, and in that place.

The marginal revolution built on this insight into the subjectivity of value. No one is actually ever in a position to make a choice between “water in general” and “diamonds in general,” or between all water and all diamonds.

Let’s say I want a drink of water. I go to the kitchen, pour a glass, and drink it. What I chose was not “water in general” but “a glass of water right now.” I didn’t choose two liters of water and I didn’t choose a glass of water tomorrow instead.

This leads to another important concept. If I have one apple, I might just eat it. If I have a second apple, I might give that one to someone else. If I have a third apple, I might keep it for later. In this example, there are three different uses to which I have put each of the three apples.

This has a key implication hiding just below the surface. I showed my priorities with these three uses of each apple. We know this because this is the actual order of uses to which I assigned each additional apple. We know in this example, that I valued eating an apple over giving an apple away because I ate the first apple and gave away the second one. Saving an apple for later was only my third priority for using apples. I only met that priority when I had the third apple and not before. If I had no third apple, my third use for apples would just be left unmet.

So each additional apple I obtained I put to a lower priority use than the apple that came before it. This means that each additional unit of the same good has a lower value to me than that of the unit I used before it. This is the Austrian, or subjectivist, version of what economists call the law of diminishing marginal utility.

All of this has important implications for the idea that value could be measured. To measure distance, we need a unit that is always the same, such as an inch. But with value, things are quite different. In our apple example, each additional apple had a different value than each of the others. Imagine trying to measure a distance if each inch you used was different from every other inch!

The Austrian theory of money and prices builds on this insight. Units of money can be analyzed just like units of apples. Money also has important additional properties and uses, but the theory of money and pricing in the Austrian approach is built on this theory of value and cannot contradict it. It can only elaborate on money as a special case. In other words, money too cannot correctly be described as a measure of value in the same way an inch is a measure of length.

This means that value cannot be measured as we measure things in the natural sciences using length, time, or volume. That kind of measurement uses cardinal numbers such as one, two, and three. What we can use with value is the concept of ranking using ordinal numbers such a first, second, and third. An acting person shows a preference for one thing over another, demonstrates a ranking and ordering of values with every choice and every action.

The dual insights that value is the result of people valuing and that people do not value things in general, but things in particular, resolves the ancient paradox of value. While there were some precursors of these ideas in the history of economic thought, their clear modern formulations originated at the University of Vienna starting in the 1870s and they remain central concepts in the foundations of what is still called the Austrian School of economics today around the world.

IN-DEPTH | Logic takes on the physics paradoxes: Review essay on The Spacetime Model: A Theory of Everything by Jacky Jerôme

 The history of science is the record of the achievements of individuals who…met with indifference or even open hostility on the part of their contemporaries…A new idea is precisely an idea that did not occur to those who designed the organizational frame, that defies their plans, and may thwart their intentions.


—Ludwig von Mises, The Ultimate Foundation of Economic Science[1]

A few days after watching CERN’s Higgs boson press conference, it occurred to me that if the hypothesized Higgs field is supposed to be responsible for mass, and gravity is directly related to mass, it should be fairly obvious that mass, gravity, and the Higgs field might all turn out to be aspects of the same deeper phenomenon, rather than separate, interacting layers.

A search soon revealed some theorizing out there to this effect. Given the list of seemingly impossible paradoxes that have been generated in the name of quantum physics over the past century, and which have spun off an entire quantum mysticism genre, I became curious as to whether there might be alternative models that attempt to bridge the usual list of physics paradoxes in a way that made more sense.

In a free 222-page PDF (Version 6.00, 2 July 2012 [Originally 2005]) replete with illustrations, Jacky Jerôme of France claims to have elaborated a single model capable of suggesting rational accounts of most of the headline physics enigmas. He characterizes it as a substantial build off of the basics of Einstein’s four-dimensional spacetime, that does not resort to any fantastic additional dimensions, yet is still consistent with experimental evidence and the accepted descriptive mathematics of both quantum mechanics and general relativity.

That is a big claim, yet he still tries to avoid overhyping it: “Despite the fact that this theory is logical, coherent, and makes sense, the reader must be careful, bearing in mind that the Spacetime Model has not yet been validated by experimentation.” That said, he offers reasoned degrees of confidence as he applies his underlying concepts to particular issues, and at several points suggests further experiments to test claims.

His work appears to be both compatible with the laws of logic and a provocative contender for the holy grail of physics, a “Theory of Everything,” that is, a physics model that accounts for the behavior of both the very large and the very small using the same principles.[2]

Students of economics in the tradition of Ludwig von Mises might quickly recognize the potentially large gains to be had if formerly separate “micro” and “macro” specialties can really be integrated into a unified model.[3] They will also recognize the possibility that in certain situations, thinkers outside of the current establishment can be offering superior ideas that are built on fundamentally different perspectives than the conventionally accepted ones. The dual themes of logic and physics here might also capture the attention of fans of the epic rationalist-fantasy storyworld of Ayn Rand’s Atlas Shrugged, in which philosophy and physics are portrayed as the dual-pinnacle disciplines of the “rational mind.” Finally, serious students of contemplative traditions curious about the popular claims of quantum mysticism will have a fresh opportunity to consider whether and how the contrasting Spacetime Model may or may not relate to various traditional contemplative claims about the fundamental nature of reality.

Two ways to look at banging a drum

Jerôme’s writing caught my attention early when he made a critical distinction between the mathematical description of physical phenomena and their causal-rational explanation:


We could think that the basic laws of physics are extremely complex since the mathematics of general relativity and quantum mechanics are. Such is not the case…It is thus advisable to distinguish the basic phenomena, generally very simple, from the laws governing them, generally using mathematics, which may be extremely complex.[4]


He gives the example of a child knowing how to produce noise by banging a drum. We can readily understand in causal-rational terms that noise results from impacts on the drum, whereas describing the surface waves in physical-mathematical terms requires complex know-how and calculations including Bessel functions. Thus, causal-rational explanation and mathematical description are revealed as two different modes or aspects of knowledge about the same phenomena.

The claim I have sometimes heard that “one can only understand quantum physics through mathematics” always struck me as a little suspicious. It speaks of a mystery that is inherently unapproachable to the non-math-genius. Yet the above distinction enables an alternative interpretation. What if this claim only signals that while the speaker understands this rarefied mathematics, he also simply lacks a rationally acceptable causal explanation of what it describes? After all, even if the subject is the same, these are two different approaches to knowledge of that subject. Each employs different languages, skills, and methods. If these approaches form a team, isn’t it possible that one of those partners (causality) could go astray even as the other (math) remained on track?

Bridging these two approaches, Jerôme tackles paradoxes such as the wave-particle duality, the nature of photons, the constancy of the speed of light amid the relative motion of matter, the behavior of black holes, the location of the mysteriously missing antimatter in the universe, how such high energy is produced by nuclear reactions, and how fantastic numbers of electrons and positrons everywhere could have the same volume and charge (just either positive or negative) to unimaginably high degrees of precision.

By the end, he even offers a fascinating alternative to the “Big Bang” theory of the start of the universe. He claims the Spacetime Model makes much more sense of the relevant issues and observations, while accounting for a long list of otherwise “mysterious” phenomena in the process.

Any attempt at an account of the origin of the universe must ultimately be speculative to some degree, but here we must also note that any knowledge claim in the natural sciences can never be validated 100%, as those in the more abstract disciplines such as logic, praxeology, and geometry can be. Natural science hypotheses must compete with rivals on the relative question of which available contender better accounts for the observations. Yet this is not a matter of “empirical” experimentation alone. Logic (internal consistency, etc.) must also play a role in evaluating competing hypotheses. Jerôme notes that:


Wrong reasoning can lead to wrong results. For example, we know three different theories of mass and gravity, which are mathematically verified: the Higgs boson, Superstrings, and the Spacetime Model. At least two of these three theories are wrong, despite the fact that they are all three mathematically verified.


Here is a typical example of the way Jerôme attempts to make sense out of the numerous established mathematical principles that have been left to appear mysterious in causal-rational terms: “E = mc2. This formula is fully verified using mathematics and experimentation, but no one is able to explain it using logic and good sense. However, the solution is quite simple within the Spacetime Model.”

 

Positivism still roosting at home?

Such an advance of mathematical description over causal-rational explanation in fundamental physics should not be surprising in view of the relevant history of controversies regarding the respective roles of reason and empirical observation. Radical empiricism and logical positivism viewed axiomatic logical principles as unscientific, metaphysical anachronisms, not “really real” because they could not be empirically “observed” (meaning measured). As Ludwig von Mises noted:


…the category of regularity is rejected by the champions of logical positivism. They pretend that modern physics has led to results incompatible with the doctrine of a universally prevailing regularity...In the microscopic sphere, they say…The categories of regularity and causality must be abandoned and replaced by the laws of probability.[5]


It was just this mindset that accompanied the emergence of enigmas allegedly implied in a series of experiments and models in fundamental physics. The slit experiments, Schrödinger's cat, Heisenberg’s uncertainty principle, and so on, were trotted out as evidence that logic and causality had met their match, that the universe is at bottom governed by chance and uncertainty and that some entities (not really being entities as old-school philosophers might have understood them) can exist in one place and another at the same time. Maybe quarks are telepathic!

Proponents of such claims did not seem to notice the possibility that it was their previous rejection of logic that enabled an environment in which stop-gap speculations could gain sober recognition. Instead of these enigmas being viewed as no more than bemusing placeholders awaiting more coherent replacements, they were instead embraced and cited as evidence against old-fashioned reason and its “metaphysical,” a priori conceits.

However, such thinking not only missed its own circularity, it also missed that an experimental result and the quality of a hypothesis forwarded to explain it are entirely different matters. The quality of a hypothesis depends in part on applying the very axiomatic logic that had been abandoned. Paradoxes that appeal to the minds of those who have rejected the strictures of logic show no mystical insight, but only the failure to apply to their thinking the inescapable, ancient rules for forming and validity-checking explanations of anything whatsoever.

In this light, Jerôme’s comment is telling: “As a physicist, it is necessary to leave this philosophical aspect to the philosophers and try to solve this enigma in a scientific way, with a logical and rational explanation.”

This could be from the pages of Atlas Shrugged, since his let’s-get-practical use of the word “philosophers” in this sentence seems to imply that these are by definition anti-rationalist philosophers. Yet rationalist philosophers, part of whose message is precisely to uphold the requirements of logic and consistency for any valid knowledge claim, demand exactly the kind of “logical and rational explanation” that Jerôme sets as his goal.

A breath of relatively reasonable quantum air

Against this backdrop, I found refreshing Jerôme’s unabashed resort to “deduction,” “possibility,” and “logical consistency.” The results are consistently fascinating and provocative. He appears to make fairly short work of one physics paradox after another within a unified framework.

In a key early move, he specifies a more consistent definition for volume as “closed volume.” In doing so, he notes conventional inconsistences in volume definitions across scales, highlighting the importance of what is and is not “counted” as closed volume. In his model, it is closed volume alone, and not any of the other varieties of volume he details, that creates the central phenomenon of spacetime displacement. Particles and nuclei form closed volumes, but the distributed charges of the outer electrons of atoms are so diffuse that they do not. And whereas waves do not form closed volumes and therefore have no mass; particles do and therefore have. One might also take the converse perspective and define closed volume as “that which displaces spacetime.”

“Particles,” in this model, result from “pieces of wave” that form closed volumes in spacetime. As these move and reopen, they can subsequently turn back into waves. Only closed volumes cause displacement in the elastic four-dimensional spacetime fabric that Einstein described, which produces what we have come to see from two different sets of observations as “gravity” and “mass” (“mass effect”).

Even the hypothesized Higgs field entails an additional dimension. The Spacetime Model claims to be able to dispense with this while still accounting for the observations associated with the entire Standard Model of particle physics, Higgs boson included. As Jerôme puts it:


The 4D expression of the mass effect means that the universe can be described with only 4D expressions, as Einstein thought his whole life. We don’t need extra dimensions such as 5D, 6D, 7D...nD (string theory), or extra fields such as the Higgs field. In reality, the proposed theory is close to the Higgs boson theory. The major difference is that the famous Higgs field is nothing but spacetime....mass and gravitation are nothing but the consequence of the pressure of spacetime on closed volumes.


His conclusion that “Everything is made out of spacetime” can certainly still leave us with a sense of the mysterious, but somehow manages to clean up the mystery compared to the more typical litany of enigmas. As Mises often emphasized, any given state of theory in a field must run up against some “ultimate given,” that is, it can never be expected to explain every possible thing:


Scientific research sooner or later, but inevitably, encounters something ultimately given that it cannot trace back to something else of which it would appear as the regular or necessary derivative. Scientific progress consists in pushing further back this ultimately given. But there will always remain something that—for the human mind thirsting after full knowledge—is, at the given stage of the history of science, the provisional stopping point. It was only the rejection of all philosophical and epistemological thinking by some brilliant but one-sided physicists of the last decades that interpreted as a refutation of determinism the fact that they were at a loss to trace back certain phenomena—that for them were an ultimately given—to some other phenomena (UFES, p. 48).


Jerôme’s ultimate given is quite ultimate indeed: an elastic 4D spacetime with a substructure of Spacetime Cells (sCells). Everything else is built from that.

It may be easiest to start by conceiving of an sCell as a “neutral electron.” However, Jerôme’s real point is the converse: that an “electron” is a “negatively charged sCell.” Its positively charged partner in existence is called a “positron,” which explains the positive charges of protons in this model.

Positrons and electrons always do have the same mass (closed volume) of 510.998918 KeV (electron masses confirmed with “precision of <0.0000086%”) and protons and electrons the same charge (with the opposite pole) of 1.602176565(35) x 10−19 Coulombs. Jerôme writes, “The relative difference between the absolute values is less than 10-21! So, the question is, ‘How can we explain the incredible equality of these electric charges?’”

He hypothesizes a joint origin of both characteristics in the splitting and reproduction of identical sCells that constitutes the ongoing creation of spacetime (more on this below), which would account for this uncanny precision of commonalities. Starting with a fabric of sCells, when the neutral charge of one transfers to another, the result is one below-neutral cell and another nearby and equally above-neutral cell. These two always appear as a precisely opposite pair because the above-average charge of one and the below-average charge of the other are nothing more than two symmetrical results of a single transfer. They always have the same mass because their shared sCell substructure already predefines this in the same way in both cases.

In this view, electrons and positrons are visible to us because of their charges, whereas sCells in their background average neutral state are undetectable (cannot be “observed” directly), precisely because of their neutrality, and are therefore hidden in plain sight. Positrons and electrons are just two types of lit-up sCell.

Electromagnetic waves, massless because they do not form closed volumes, propagate through this sCell fabric at a consistent speed in vacuum, but never any faster (light travelling through transparent matter has been measured at slower speeds and quite slow speeds have been measured under extraordinary experimental conditions within matter cooled to near absolute zero). Jerôme attributes this to a maximum cell-to-cell transfer rate that is a natural limiting characteristic of the medium of sCells themselves. That we have come to call this maximum transfer speed of 299,792,458m/s “the speed of light” reflects the way in which we observed it and can measure it.

Jerôme identifies neutral, positive, and negative states of sCells as the basic building blocks of all other particles. He proceeds to suggest how these components alone can account for the formation, disappearance, properties, masses, and charges of up and down quarks, protons, neutrons, hydrogen atoms, and onward. Neutral sCells can contribute to mass effects themselves, but only when they become enclosed within a subatomic particle or nucleus and thereby come to “count” as part of a closed volume.

This pair model simultaneously accounts for the location of antimatter in the universe. Rather than being hidden many light years away, it is hidden right under our noses, concealed quite near its partner in existence within other particles. Jerôme also claims to dispose of the hypothesized Strong force as a separate force; those effects result from the enveloping rubber-band-like effect of “distributed charge fields.” In fact, according to this model, there are only two fundamental forces from which the other apparently separate forces derive: Hooke’s Force (constraint and pressure), which applies to all particles, and Coulomb’s Force (attraction and repulsion), which applies only to charged particles (Figure 5-1).

He argues that the concept of a photon as a particle makes no sense. He explains why a photon must be a “quantified wave” and never a particle, and how a quantified wave travelling through an sCell substructure is both consistent with experimental evidence and in principle logically comprehensible. As for black holes, he writes: “Inside a closed volume, as inside a black hole, nothing happens. The light doesn’t exist and therefore can’t escape…”

He also claims to have solved the wave-particle duality. His method of doing so is largely logical and deductive, working from a simple set of widely accepted observations. And in another illustration of differentiating mathematical description and causal-rational explanation, whereas “Schrödinger’s probability concept must be replaced by a more realistic concept called the Distributed Charge Model,” the Schrödinger equation can still be used just as before!

For the finale, he offers a simple, elegant, and unified account of the beginning and ongoing growth (“expansion”) of the universe through sCell expansion and division reminiscent of the way that living cells divide and reproduce in vast quantities with nearly unimaginable precision and a few extremely rare minor variations. This approach simultaneously supplies accounts of a long list of observations for which the Big Bang offers only question marks.

A single internally consistent model is thus able to suggest accounts of the major observations at both the micro and macro levels of physics, including most of the usual list of enigmas. The real nature of spin and some other points remain relatively elusive, he admits, but ventures some tentative parameters and possibilities in each case.

Simplifications are used to get the basics across to general readers, while the math-heavy sections and recalculations of fundamentals using closed volume definitions are set off as supplemental information, which can be skimmed or skipped by the non-specialist. Most of the book should be within reach of those with a reasonable general science education (though more would make things easier) and might be read in a motivated afternoon or two. The prose is brief and clear and the illustrations helpful in bringing home the arguments. The English is “off” just enough to reveal that it is not the author’s first language, but the meaning remains clear and easy to follow. Although the book is clear, a quick copyediting by a native speaker would still lift the quality level.

Any bones left for quantum mysticism?

If this model does pass the tests of internal logical consistency, it is still left to face tests of experimentation. In contrast, some of the competing paradox-ridden and n-dimensional theories it targets do not appear to pass the tests of logic, Ockham’s Razor included. Some may be rejected on logical grounds alone. Others might be rejected if there exists a competing theory that both explains the observations and better passes the tests of logic.

Ideological opponents of “metaphysical” a priori logic would have been loath to reject a hypothesis based on logic alone. Yet not doing so has probably contributed to allowing dead-end speculations to run, permeating scientific culture, and poisoning tendencies in pop philosophy for a century.

The Spacetime Model could put a damper on many of the popular claims of the “new physics supports mysticism” genre, particularly claims that logic, predictability, and consistent causality are mere illusions, or that subject-object differentiation is not to be relied upon. That said, there are still some extraordinary and mind-bending claims to be found in the Spacetime Model itself that might easily be viewable as resonant with certain claims found in some traditional contemplative traditions.

In the Spacetime Model, it is not only that “all is spacetime”, but more specifically that particles (matter), waves (energy), and space (medium) all consist of the same stuff, which is, in this view, “elastic four-dimensional spacetime substructure.” From there, consider some traditional formulations such as the Tibetan “non-duality of form and formlessness” and the typically pithy Zen “not one; not two.” Matter, energy, and space are presented as being both different from each other (not one) and also consisting only of the same spacetime stuff as one another (not two).[6]

However strange images from our attempts to understand the deep structures of physics may appear, and even though atoms are quite clearly “99.999% vacuum with 0.001% waves or matter-energy,” as Jerôme puts it, none of this has any bearing on the reality in which we as persons do and must live and act. Matter, however strange its ultimate substructure, still behaves according to the laws of causality, and so does its substructure.

Probability is ultimately a measurement of our own degree of ignorance about the precise operations of physical causality.[7] Moreover, what is visible at one level of magnification (atomic level: mostly empty) does not necessarily also apply to the view at another level of magnification (the scale at which we live and act, where stuff does bounce off walls).

As Hans-Hermann Hoppe has pointed out,[8] Paul Lorenzen, in Normative Logic and Ethics,[9] argues that all of our knowledge of natural sciences, even physics itself, presupposes certain a priori true assumptions and norms that are not derivable from “empirical” experimentation, a set of knowledge types he labels protophysics, which are “definitions and the ideal norms that make measurements possible” (p. 60). Nothing we discover by measurement can validly contradict the presuppositions of measuring or we will have taken the rug from under the basis of our own claims, rendering them nothing more than sounds, chirps or barks!

And the winner is…?

So where is the grand reaction to Jerôme’s rather comprehensive challenge to conventional physics models and hypotheses? I have not been able to find much of one online, either by specialists or anyone else.

Is it because our Mr. Jerôme is just dead wrong and hopelessly naïve in his imaginings? Is it because there are so many competing “theories of everything” out there, a dime a dozen? Or might there be something special about this one?

What if this Spacetime Model really is a simpler, more elegant explanation of all the observations than the mixed and matched crop of better-known theories it challenges, and is compatible with experimental results and QM/GR mathematics, as claimed? What if it does explain much of what is in need of explaining in a better way – not perfect, just better – than the competition?

A conventional mindset would have to quickly reject such possibilities: Let’s get real. He has no official position in the physics community. His speculations and diagrams are self-published on his own website! Certainly it must just be an amateur effort compared to the real experts in the establishment with their mysterious, peer-reviewed ways!

Maybe. But in light of our earlier discussions of the philosophical background radiation and our distinction between mathematical description and causal-rational explanation, such a conclusion may now look less reasonable than it might have. There certainly are mathematical geniuses at work and checking on each other in a language very few people can speak well enough to even listen in. That is all to the good as far as it goes (gains from specialization), but is it also a good excuse for not making sense in causal-rational terms? Maybe these are two separate matters that deserve more robust differentiation.

So I retain doubts about just writing this all off based on institutional factors such as academic pedigree and position. Yet speaking of institutional factors, we do know that establishments in many fields tend to want to remain…established. We also know that one of the ways guilds and priesthoods have always tried to preserve advantages and privileges is through the construction and preservation of a public image that highlights the great mystery and impenetrability of their subject, which is obviously accessible only to the anointed!

The very first line of the copyright notice page of Jerôme’s book reminds us that: “Scientific peer journals do not accept papers from independent researchers whatever their content.”

Whatever their content?

Including author bio as one factor among others in accepting papers would surely make sense, but it is hard to imagine something less “scientific” and more pre-modern and guild-like than excluding intellectual work based on the author’s institutional status alone.

Fortunately, in this day and age, Mr. Jerôme’s carefully developed, clearly presented set of arguments are just a click away at no cost but time and mental effort for anyone to review, consider, and attempt to refute or improve upon (or maybe print out and tape to the doors of CERN?).

However this comes out, though, we ought to keep up the hard work of applying the laws of logic even when it is not easy, and not start mumbling in resigned despair: “It doesn’t really matter. Who is Jacky Jerôme anyway?”

Postscript: What about Beckmann?

After initially writing a draft of this review of Jerôme's book, an early reader led me to Questioning Einstein: Is Relativity Necessary by Tom Bethel, which is largely a presentation and update for general readers of the ideas of Petr Beckmann, as presented in the more technical Einstein Plus Two. This is certainly also worthy of a careful reading and also touches many issues of the relationship between empirical knowledge, the role of logic, and problems with “official” knowledge institutions that I address in the review of Jerôme’s book. However, the Beckmann/Bethel line of thinking operates only at the "macro" relativity level. In quick summary, it argues that contrary to conventional wisdom, Einstein’s special theory of relativity is on weaker, not stronger, empirical grounds, than general relativity, whereas general relativity is stronger empirically, but was made unnecessarily complex in order not to contradict the earlier special relativity claims. The observed evidence for general relativity, claim these authors, can be explained using classical physics, whereas special relativity is essentially “unfalsifiable” (its assumptions inevitably "don’t apply" to any case of evidence that actually threatens to contradict it).

I do not discuss the Beckmann/Bethel line here in detail so as to focus on Jerôme’s theories, but my general impression is that the Jerôme and Beckmann/Bethel perspectives do not appear necessarily contradictory. Meanwhile, Jerôme’s model appears to make even stronger claims, which go beyond the behavior of gravity and mass to explaining what both gravity and mass are in causal-rational terms that are built up right from the micro level. One Beckmann/Bethel addition to that might presumably be to modify Jerôme’s language for describing the macro level to further remove specifically Einsteinian terminology, even “four-dimensional spacetime,” which Jerôme is still fond of maintaining in his book (and which I will also keep in my review below for simplicity). I found no evidence that either of these parties is aware of the work of the other, and yet I do not see any obvious reason why both alternative theories could not be bounced off of one another and probably cross-improved for the trouble. The Beckmann/Bethel line of thinking is also summarized elsewhere.

 



[1] Indianapolis: Liberty Fund (2006) 117.

 

[2] While context does or should limit the meaning of “everything” here, the “Theory of Everything” formulation still ought to be qualified to head off reductionist interpretations. As the American philosopher Ken Wilber has often pointed out, any physics “theory of everything” cannot cover “everything,” as it excludes phenomena of consciousness viewed from the interior, that is, as Mises might phrase it, from the subjective perspective of an acting person. We cannot deny that such a perspective exists without self-contradiction and it is not reducible to material description. Subjective phenomena of consciousness are emergent from, but not reducible to, physical phenomena. Thus, “everything” should at least be used with this reservation to avoid what Wilber calls “flatland,” as described, for example, in Integral Psychology. Boston: Shambala (2000), pp. 70–71.

[3] Ludwig von Mises, Human Action: A Treatise on Economics. The Scholar’s Edition. Auburn, Alabama: Mises Institute (1998 [1949]). Murray N. Rothbard, Man, Economy, and State, with Power and Market. The Scholar’s Edition. Auburn, Alabama: Mises Institute (2004 [1962, 1970]).

[4] While the original text is quite clear and easy to read, the author is not a native speaker of English, and in citing quotations, I have made occasional typographical alterations to language and punctuation only to head off unnecessary distraction for readers of the present article.

[5] The Ultimate Foundation of Economic Science (pp. 19–20).

[6] The Spacetime Model also suggests an uncanny depth to the basic elements of Ken Wilber’s integral four-quadrant model of all phenomena, one element of another “theory of everything,” but one not limited to the field of physics. Various accounts may be found in: The Marriage of Sense and Soul. New York: Random House (1998), esp. Chap. 5; Integral Psychology. esp. Chap. 14; and Integral Spirituality Boston: Integral Books (2006), esp. Introduction and Chaps. 1, 7, and 8. The second stage of the start of spacetime within the Spacetime Model is an expansion of a single sCell until it splits into two identical sCells (and then four, eight, 16, etc.). Here, 14.1 billion years ago, we already have the singular/plural distinction that forms the vertical axis of Wilber’s model. Then, at the very first sign of matter from the rare appearance of density variation in a few sCells, we find a positron and electron pair and with each of those, we already have closed volumes defining an interior and an exterior. That polarity forms the horizontal axis of Wilber’s model. The Spacetime Model thus offers possible root foundations for the construction of the integral four-quadrant model from among the very first things to ever happen in the history of spacetime.

[7] As Mark R. Crovelli recently summarized this view: “If every event and phenomenon which occurs in the world has an antecedent cause of some sort, then we are forced to say that probability is a measure of human ignorance or uncertainty about the causal factors at work in the world…Man’s uncertainty in such a world could only stem from his inability to comprehend or account for all of the relevant causal factors at work in any given situation” (p. 166). in “All Probabilistic Methods Assume A Subjective Definition For Probability,” Libertarian Papers. 4 (1): 163–174.

[8] “On praxeology and the praxeological foundation of epistemology,” The Economics and Ethics of Private Property, 2nd Edition. Auburn: Mises Institute (2006), pp. 265–294.

[9] Mannheim: Bibliographisches Institut (1969).

IN-DEPTH | Ron Paul, Flatland, and the left–right long con: Beyond the Nolan Chart

Note: The first half of what follows is a revised version of, Is the left–right spectrum in flatland? A better way to graph Ron Paul (13 January 2012). It is followed by a new critique of the personal/economic dichotomy and the Nolan Chart, which is built on it. Minor copy revisions were made on 24 January 2014.

The Ron Paul campaigns badly strained the interpretive power of the conventional left–right political spectrum. The San Francisco Chronicle took a stab at placing Paul somewhere along it (Is Ron Paul left of Obama, or a throwback to Ike?). Even the Paul campaign itself at times engaged in nomination-trail rhetoric to establish which candidate was “more conservative,” which is generally understood to mean more to “the right.” This tactic may help win some votes, but is it accurate?

What if we could graph the core positions of the Paul campaign without trying to squeeze them into the usual left–right spectrum? What if that spectrum itself is analogous to the imagined world in the 1884 novel Flatland? In Flatland, two-dimensional beings live as flat geometric shapes within a plane. One day, residents are shocked by a three-dimensional being who, while passing through their plane, seems to appear out of thin air, change shape, and then vanish again without a trace.

Back in our world, how might we locate an entire additional dimension of political spectrum? It is made to seem as though the whole range of possible opinion must exist somewhere along one line. Such a line is only one-dimensional; it does not even allow us the Flatlanders’ relatively generous two.

What if we add a second dimension? Imagine looking down at two lines that form a cross on the ground. The usual political scale stretches out to your left and your right, but a second scale crosses over that one. The “front” is closer to you (a living human person, as it so happens) and the “back” is farthest away from you (in the realm of abstractions that are supposed to trump the value of real human persons, as it so happens).

Now what if the whole left–right scale could have some thickness, making it more of a band rather than a line. This whole band could then be seen to move along the front–back scale over time. This could be used to represent a gradual movement of a whole political culture, even as the relative positions of left and right to each other remained. I will label this new scale with subjective percentages to illustrate relative positions and directions of movement over time. The precise numbers will not be as important as the relative positions they indicate, yet it may be clearest to begin from the farthest extremes as ideal types.

Far-out definitions

Let us say that all the way at 100% in the back of this new scale is totalitarianism. This is the idea that the state can and should do to and with individual people and variously defined groups whatever it pleases. The historical “far right” fascists and “far left” communists had different flavors of totalitarianism in common. Adherents to such views thought that their own favorite party should rule over any individual or traditional civic or community interest. In this sense, the familiar litany of 20th-century dictatorial leaders such as Stalin, Hitler, and Mao, stood side-by-side on the front–back scale. This is not to ignore their many differences; it is only to say that when viewed along this scale, their differences were incidental and their commonalities overwhelming.

Now let us say that all the way in the front of this new scale at 0% is philosophical anarchism. This is the idea that the state has no justifiable place within human societies at all. This body of thought also comes in a range of distinctive “left” and “right” versions with regard to the ideal rules and institutions for a statefree society, such as mutualist and private-law models. Fewer people are familiar with such distinctions, but here is a breif hint at the range of viewpoints possible here. Toward the left, mutualists emphasize such institutions as cooperatives, labor-unit trading associations, and an occupancy theory of land ownership (the illegitimacy of absentee ownership). At the other end, “private law” philosophies refer not to each person having a law unto themselves, but to the quite opposite idea of upholding legal principles that are equally applicable to all people in their capacity as “private” persons, allowing no special exceptions to general rules for “public” agents, such as those special exceptions to general rules that are made under “public law.”

This raises a puzzle for the usual left–right spectrum. It is able to combine left totalitarians and left anarchists at one end and right totalitarians and right anarchists at the other, a major case of lumping together quite opposite views. Imagine Stalin and a peasant freely trading units of labor time. Sounds dodgy. Imagine national socialists promoting a set of universal social norms that apply equally to all human beings everywhere regardless of grouping and classification. Sounds even more unlikely. Something about this scale, taken alone, therefore seems far too simplistic. A naive observer of the left–right scale alone might be forgiven for assuming that the two sets of “opposite” anarchists and “opposite” totalitarians, while they might disagree on many issues, might be at least as likely to find common ground with one another as with their alleged neighbors.

Some readers may by now have thought of the well-known “Nolan Chart,” which may at first seem similar to the model proposed here. However, the Nolan Chart is actually different in important ways, the implications of which we will explore below.

An example: Applying the front–back scale to American history

Where might 1770s American revolutionaries appear on the front–back scale? Some were probably around 0–10%, depending on which ones. They were rebelling against perceived overreaches of monarchy and mercantilism and wanted to replace them with somewhere between nothing and as little as possible, that is, with a novel “limited” state that was supposed to differ substantially from monarchism.

As usual, there was a division between the “left” and the “right,” in this case between the revolutionaries and the loyalists. This difference was largely over the question of what the proper natural order of society was. What represented the true natural order of society? Was it familiar monarchy or some novel form of self-government? It can be hard for us to imagine today that at that time, it was monarchy that appeared to be the self-evident natural order and self-government the seemed to be a reckless new social experiment.

Both revolutionaries and loyalists generally viewed society as a kind of natural order, a few that is closer to the front of our proposed new scale. This contrasts with central planners deciding how society should be, and then using the police powers of a state to engineer it that way, closer to the totalitarian end of this scale.

After the revolution, some, particularly the Hamiltonian Federalists, were still in favor of a powerful state, just one that they would run instead of some distant monarch. Few today, even in the Ron Paul camp, seem to recall that many Jeffersonians already viewed the Constitution of 1787 as a dangerous step toward perpetually growing government, one that clashed with the revolutionary ideals of 1776 and had already most likely been a net victory for big-government Hamiltonians. As it has turned out, the entire American political culture has been moving toward greater state power since soon after the revolution, and judging from the impressive scale of the current US Federal government, which that constitution set up, the anti-Federalist Jeffersonians were correct.

US history using the left/right scale can be viewed as having progressed in a zig-zagging pattern between “left” and “right,” represented by various parties in different epochs. However, this simple, one-dimensional story tends to obscure a pervasive undercurrent in which left, right, and center all move “back” together along a second dimension—in the direction of a more powerful central state in all areas.

It has often been observed that the modern US Federal government’s effective powers vastly exceed those that most monarchs would have dared even imagine. Modern powers to tax, borrow, and inflate are immense and business and life are hyper-regulated. In other words, the entire left–right scale, as a band, has been moving along the front–back scale toward the back for a long time.

Where is this band now? Centered around 65%? More? Each observer might suggest a different subjective number, but it has moved far from its former positions and the “consensus” direction of movement remains toward more central state power.

Where on this front–back scale should one place “legalized” extralegal military detention or assassination? What about raids on small-scale farmers selling to eager customers in search of more healthful products? What about detention without charge based on the failure of snoops to understand modern English idiom in the tweets they scan?

The original French “left–right” model was focused on the question of change. Should the familiar old ways be preserved or should something new be done? Included in the “left” were the great French economists Bastiat and de Molinari, who wanted to largely or completely eliminate the powers of the state to let civil society and economy function properly. They did not want to transfer those same or greater powers to some other form of coercive organization. Their main goal was to eliminate those powers, not reassign them. Left-wing “change” originally meant reducing the powers of the state and the cronyocracy.

A preference for change versus a preference for the status quo is a highly contextual distinction. Change what? How? In what direction? The original left–right concept itself is relational; it emerged in a particular historical context. In today’s context, however, the model applies quite differently. In fact, the presumed direction of desirable “change” now seems to mean exactly the opposite of what it once did.

Things are not better at the “right” end. The idea that the modern right wants smaller government is a faint ghost from the “Old Right,” whose ideas survive in mainstream politics as mere words devoid of effective content. The modern right generally wants the central government to be bigger and stronger in somewhat different places than the modern left does. However, both major parties have long been united in the big picture on ratcheting up government; they just differ at times on exactly how, where, and for the benefit of which blend of special interests.

From the perspective of any quite different position along the front–back scale, the major parties have become increasingly indistinguishable in practice on the most important issues, issues such as war versus peace, police-state versus republic, and technocratic central planning and cronyocracy versus authentic economic liberty.

How to graph Ron Paul

Whatever one’s opinion of Ron Paul, it is widely agreed that he is focused on making serious changes to status quo policies. Relative to him, then, all of the other candidates, the sitting president included, are broadly in favor of the status quo. Moreover, the “status quo” itself is not static; it is a moving pattern of massive state growth. Most of the talk of “cuts” in Washington refers to reductions in the rate of growth. Thus, Paul, who is from the “right” according to conventional wisdom, is far “left” on a “change versus status quo” scale applied to today’s context. The change he wants, however, is in the opposite direction from the one usually presumed – away from centralized state interference in people’s lives. Graphing that requires another dimension.

By stepping back from the permutations of the left–right scale, we can more clearly view Ron Paul’s 2008 and 2012 presidential campaigns as appealing to issues better defined along the front–back scale. Paul himself opened his 2008 The Revolution: A Manifesto by deconstructing the false alternatives the modern left–right scale sets up. In contrast, his unique location among modern politicians on our proposed front–back scale better explains his broad crossover appeal on certain key issues.

Imagine the whole left–right scale nowadays as a band crossing over the front–back scale at somewhere around 65% central state power. The real Ron Paul would be effectively invisible to anyone looking only along the usual scale from left to right. Conversely, he might stand out in the eyes of others for exactly the same reason. He is the only candidate who is substantially off of the left–right band as it is currently positioned along the front–back scale. He therefore appears either 1) completely unfathomable, as the three-dimensional character was to the two-dimensional Flatlanders, or 2) as the only intriguing alternative to the various flat shapes within our usual political flatland.

Mainstream candidates of both parties argue about how and where to grow state power. Meanwhile, Ron Paul is saying that we should be moving that whole state power meter, left, right, and center, in the other direction along the front–back axis.

There are always left and right camps on each major issue and in each historical context. One side might lean more or less toward the front or back, tilting the angle of the whole crossing band one way or the other. Nevertheless, a monocular focus on the left–right scale obscures the long-term movement of the entire political culture toward greater central state power and away from individual liberty and civil society institutions.

We are supposed to be enchanted by the theater of differences between the heads of a two-headed beast. We are not supposed to notice that the whole two-headed beast has been lumbering in the direction of ever-expanding powers for itself and special privileges for its camp followers of all parties. That makes it encouraging that more and more people, especially among the young, are beginning to notice. Could this be a sign that the illusion-holding power of the one-dimensional left–right scale is weakening?

The three-dimensional visitor to two-dimensional Flatland was not a beast, but the two-headed bipartisan leviathan is. Ron Paul is the only candidate who is working to turn that whole beast around and walk it back toward its cage.

The personal/political dichotomy and the Nolan Chart

We have examined the implications of adding a new dimension to the political spectrum, one that crosses the left–right spectrum and runs from front to back between the political ideal types of philosophical anarchism and totalitarianism.

The Nolan Chart was also an effort to add dimensionality to political interpretation to help people question and see beyond the left–right spectrum. David Nolan developed it in the early 1970s and it forms the basis of the well-known “World’s Smallest Political Quiz.”[i] The Nolan Chart divides the world into “personal” and “economic” realms to illustrate a seemingly paradoxical preference of the left for more freedom in “personal” areas and less in “economic” ones, with the inverse set of preferences on the right, which allegedly prefers economic freedom and enforced social control. Libertarians are depicted in another corner preferring freedom in both personal and economic areas, while totalitarians (or communitarians in one variation) are placed in the opposite corner, insisting that some other set of political considerations should take precedence over liberties.

The Nolan Chart was a substantial improvement over left–right reductionism. It allowed space for possibilities that are invisible along the left–right spectrum, namely libertarianism. Simply conflating libertarianism with “the right” is deeply confused and tends to lend an undeserved laissez-faire credibility to the fundamentally authoritarian right. This perspective also suggests that the main risk of the Ron Paul movement attempting to work within the Republican Party is that, as is often the case, vote-catching words can be assimilated into the conventional party while their meanings are ignored.

The concept of a scale that runs from total state control to no state control at first appears the same as in our proposed model. The important difference is that the Nolan Chart uses two distinct scales of freedom, each one qualified. This turns out to be an important difference that reveals some of the Nolan Chart’s weaknesses and shows how a still deeper layer of illusion is embedded in the conventional left–right spectrum.

Source: Wikipedia CommonUses and possible origins of the personal/economic dichotomy

The Nolan Chart’s most important weakness is that it accepts the conventional division of the world into personal and economic realms. This may seem uncontroversial at first, but as we examine this division step by step, and from various angles, the separation between personal and economic realms, used as a political assessment tool, may begin to look more and more flimsy, to the point that it may seem to fall apart altogether.

First of all, it may be that separating personal and economic categories is in part a legacy of certain economists’ attempts to create an artificial, reductionist model of “economic man.” Such a creature fit into mathematical and deterministic models much better than pesky living people. An “economic” calculating machine devoid of “personal” idiosyncrasies was just what advocates of such models needed if they were to make them seem relevant.

In contrast, Ludwig von Mises argued that real economics:

…deals with the real actions of real men. Its theorems refer neither to ideal nor to perfect men, neither to the phantom of a fabulous economic man (homo oeconomicus) nor to the statistical notion of an average man (homme moyen). Man with all his weaknesses and limitations, every man as he lives and acts, is the subject matter of catallactics. Every human action is a theme of praxeology (Mises [1949] 646–47).

A second perspective is that the personal/economic dichotomy may have arisen out of differing streams of rhetoric used by advocates of political control over people. Different threads of coercion-justifying rhetoric have different historical and philosophical origins, some of which are more “economic” and some more “personal.”

Listing up the various elements of life into categories is itself an artifact of a bureaucratic view of life. It results from habits of “seeing like a state,” in the memorable phrase of Yale Professor of Agrarian Studies James C. Scott. State administrators are eager to divide out and prioritize attention on those parts of the real world that are “legible and hence appropriable by the state” (Scott 2009, 39). Thus, what the state and statists view as “economic” will tend to involve those aspects of social life that are easiest for the state to regiment, monitor, and measure from the outside and, most importantly, tax. The production of grain was historically a worldwide favorite of states in this regard. From field to storage, it is visible, trackable, measureable, divisible, and therefore most readily taxable.

On the other hand, interest in using the state for social control of the “personal” realm may be associated more with the mashing up of law and religion. For example, in considering the impact of the 16th century German Reformation on the Western legal tradition, the late Harvard legal scholar Harold J. Berman argued that, “What has traditionally been called a process of secularization of the spiritual law of the church must thus also be viewed as a process of spiritualization of the secular law of the state” (2003, 64). Secular law was increasingly infused with the quasi-religious objective of attempting to make people “better” by using police powers to force them to perform certain lists of duties that religious bureaucrats defined as “moral.” This basic approach of attempting to use the state’s coercive powers to press-gang others into joining in a pursuit of moralized objectives may be traced right up to the assumptions underpinning a host of forcible modern wealth-transfer bureaucracies.

This latter, more “personal,” coercive dynamic today coexists with the more general interest of states in categorizing and directing “economic” activity into those channels that can most easily be recognized, measured, and exploited. Nevertheless, control and freedom are not so easily separated, not in theory or in practice, especially when viewed over the longer term.

Is that personal or economic?

But surely, you might say, we can set aside such theoretical considerations and try to list some categories for “personal” versus “economic” areas of life that everyone can agree on.

Very well. We might start with some typical subjects of political discourse: employment, education, housing, religion, marriage, and food. Consider each one in turn.

Is it clear which area is personal and which economic? Perhaps this should be examined more closely.

With greater “economic” independence of decision-making, a given person may enjoy greater freedom of “personal” action. So is such freedom definable as economic or as personal?

One might imagine a guaranteed “personal freedom” under some constitution or another. Does one still have such freedom when it no longer extends to whatever that particular state has most recently decided to reclassify as an “economic” area of life? Surely your “freedom of expression” on the Internet is subject to certain “economic” regulations of the medium or the “economic” products and services you use to access it, is it not?

Or it may be that your “personal” freedom from yesterday is actually covered by “interstate commerce” today. Or maybe it has some bearing on “national security.” Either way, the practical message may well be, “Sorry folks, that was yesterday’s freedom. This is today.”

What about one’s ability to open, relocate, expand, or contract one’s own business? What about one’s choice of place of work and of co-workers, one’s place or type of residence, what foods one can or cannot eat or sell, or where, how, and when oneself or one’s children are educated?

Those are all “economic” matters in some ways. But are they not also each very personal? Clearly, they impact large portions of the days and hours of one’s life and the quality and content of one’s experiences. They can also all impact issues of employment, saving, retirement, income, and expense, which of course makes them all…What? impersonal?

But surely we can all agree that marriage is completely personal! Well, marriage within modern states is in effect a bureaucratically defined legal status that has a direct bearing on tax rates, exemptions, and insurance coverage. It surely has major impacts on the financial affairs of all those involved, impacting bank accounts, housing, transportation, inheritance, the distributions of child-rearing expenses, etc. So then marriage is actually “economic” rather than “personal”?

Will the seemingly solid personal/economic division really go down that easily? Maybe we should give it one more chance. Surely we can define it objectively for all people this way: the “economic” has something to do with the use of money. The economic is the monetary.

All right, then, let us try this one out. What are some quintessentially “personal” areas within conventional political discourse? How about vice? This is one of those personal areas that the right is famous for wanting to use the police state to control, including areas such as prostitution and substance use.

People acting within such realms almost invariably employ, well…money, for transactions. One might suppose that actors in these sectors also use money for at least some degree of budgeting and cost accounting. So the money = “economic” attempt at a definition soon begins to break down once again.

Out of the paradox

One secret to unraveling this puzzle is that both the personal and economic categories themselves are subjectively defined. They make the most sense when viewed from the perspective of a person considering his own decisions in a given context. They depend for their meaning and application on how each issue is being viewed, who is looking, and why the viewer is asking. The question of whether an issue is personal or economic is itself an individual matter. Who wants to know?

For example, if Anna decides to take a particular job, she might think to herself that she is mainly doing it to advance her career in an interesting work environment, which would make her decision lean more toward the “personal” side of things. However, she might also decide to take the same job mainly for its income potential, which might make her think of her decision as more of an “economic” one. From a rigorous economic-theory perspective, observers cannot determine this distinction from the outside one way or another, as it has to do with how the acting person is conceptualizing what they are doing in terms of ends and means.

It would also not suffice to ask the regional economics czar or the head of the Bureau of Personal Satisfaction assigned to the territory in which Anna lives. In any case, those two bureaucracies would not be likely to agree even with one another. After all, the classification of her action might impact their respective budget appeals next year in different directions. As for Anna’s decision, only she can really know what her decision was mainly about. She might never even tell us the truth about why she took the job, depriving us of any chance to effectively use our neat little bureaucratic categorization scheme into “personal” and “economic” statistics.

The personal/economic distinction referenced in the Nolan Chart and other political charting models, while at first seeming intuitive and clear, thus turns out to look increasingly arbitrary and malleable the more closely we examine it. Moreover, the distinction depends on categories that help define the same conventional left–right spectrum that we have been attempting to build a pathway for transcending.

Indivisible

To the extent that the personal/economic distinction might be meaningful at all, it is also important to recognize that when the state controls either alleged “half” of freedom, it already has the leverage to control the other half. Those who use or threaten state-orchestrated violence to control others in the “economic” realm also gain discretion over them in the “personal” realm, and vice versa. This is not to say that authorities with discretion to direct violence to control the lives of others will actually do so in any particular way at any given time. Each state, for example, remains somewhat different from the others in its current style and practices. The key is that they can.

The personal/economic distinction functions within statist discourse to help sell state control, but different packages are available to appeal to different sets of preferences. The “left” version says that you can have your freedom in the personal realm so long as the state has the discretion to tell you (mainly tell other people, of course) what to do in the economic realm. The “right” version is the mirror image. You can have your freedom in the economic realm so long as the state has the discretion to tell you (mainly tell other people, of course) what to do in the personal realm.

Each seductive package appears to make sense right up until the moment it is too late. That is the moment when the creature you have been supporting tells you what to do in an area over which you had preferred to retain personal control. The secret power of this distinction is its “confuse and exploit” effectiveness against entire populations of individuals, each of whom is willing to buy into some attractive, customized variant of this deceptive pact with the devil, and pay for it—with other people’s liberty.

All of these packages, however, are long-term scams, or “long cons.” Neither variant of half-freedom is meaningful if you cannot act in disagreement with the authorities who control “the other half.” Whichever half of liberty has been ceded is held in reserve and can always be used to undermine the half that supposedly remains. The key is that with any such scheme of divided liberty, you are left with no reliable foundation from which to disagree—and act on such disagreement—without facing the threat of officially meted-out fines, confiscation, imprisonment, or death.

Citizen A, for example, might be arrested and imprisoned for a “personal offense” such as sampling some forbidden substance. While in prison, she will not be able to exercise her “economic” freedom by continuing to work at the company she started. Meanwhile, Citizen B’s “economic offense” of creating a popular website that offends powerful incumbent economic interests with strong lobbying operations might likewise land him in the lock-up, from which his “personal” life will be out of reach.

Say you want to start a food co-op with your neighboring farmers and friends. This is an exercise of “economic” action in support of “personal” food freedom. However, this risks running afoul of the government’s bipartisan system of food regulation and its lobbyist-driven support for certain kinds of politically favored industrial products that are marketed for human consumption. Having been duly raided and warned, you would probably be arrested if you persisted too far. Before long, both your “personal” and “economic” freedoms might be narrowed down to the choice of eating the agro-congressional complex’s mystery-grain GMO prison chow or going on hunger strike.

Differently labeled frogs in the same pot

The overall preference for state control over civil and individual freedom in all areas has been rising – left, right, and center. Meanwhile, all the little frogs divided into their left, right, and center teams, are focused on their differences along the left–right spectrum. What none of them seems to notice as they croak back and forth is that the water temperature in the pot they are all floating in together is rising.

The image of the entire left–right spectrum as a band shifting along the front–back axis over time makes even more sense if the division of the world into “personal” and “economic” realms is illusory. All freedoms, or their absence, are ultimately interdependent and, in the big picture, tend to rise and fall together.

The fake division of the world into personal and economic realms has proven an effective mechanism for helping to divide and control every one of those hapless simmering frogs. Even the venerable Nolan Chart, while it went a long way toward expanding political perspectives, did not manage to fully transcend that division. Taking a fresh look at the Ron Paul movement in these terms may help us all enhance the dimensionality of individual acts of political interpretation.

References

Berman, Harold J. 2003. Law and Revolution II: The Impact of the Protestant Reformations on the Western Legal Tradition. Cambridge: Harvard University Press.

Mises, Ludwig von. 1998 [1949]. Human Action: A Treatise on Economics. The Scholar’s Edition. Auburn, Alabama: Mises Institute.

Scott, James C. 2009. The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia. New Haven: Yale University Press.

 


[i] There have been many alternative charting attempts over the years since the Nolan Chart. I recently discovered that the Political Compass Organization had already proposed a two-axis model with even more visual similarity to the one discussed here. Looking further, however, it seems that that chart’s labeling and the underlying assumptions suggested in its diagnostic test still end up differing considerably from the model I suggest. I base this quick assessment on the chart’s labeling, the actual questions on the accompanying test, and the somewhat surprising result I obtained from taking it (hardly where I would have placed my views on it by looking at the definitions).

Two types of A Game of Apples

IP is evil in a Game of Thrones kind of way and is wasting a tremendous amount of all of these companies' time and resources. It is an inherently non-market game, a win/lose game. And IP has to some degree forced all companies to play that game one way or another (defensively is less morally offensive than aggressively).

That said, it still must be noted in the context of comments such as the above that execution and "invention" are utterly different things. The definition of "product" in the video is technological, but not subjective. The "product" is the entire thing that the consumer is buying, including the surrounding experience. That is precisely the "technological recipe" discussed, which is just the right idea, except that the speakers seem to continue to imply the technical elitist view that this is an inherently lesser function than supposedly pure "invention."

However, without execution, invention serves no one. Creating an end-product that people actually buy is at least as much an art, and Jobs' vision was explicitly to work at the intersection of technology and humanities, including aesthetics. It is the result of making the recipe (the dish on the plate) that _always_ constitutes the consumer product that is bought, not the underlying technologies that are of interest mainly to engineers and technical elitists. A consumer does not go to a restaurant and ask for a portion of one of the ingredients from a bin in the kitchen.

Apple legal is being evil and Jobs had, among his weaknesses, an IP and overstretched credit-claiming mentality. But this is a different matter from the company's habit of reinventing entire industries for the benefit of ordinary people, which they did precisely by realizing that not only the ingredients, and not only the recipe, but the dish on the plate _is_ the important thing in business; not the "technology" taken in isolation from what matters to the end users. I think all this can still be appreciated separately from judgements about the company's horrific IP antics, which amount to trying to prevent competing chefs from using certain types of ingredients in their cooking!