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Bitcoin and Georgist economics




Stirred by the latest controversy over who might have gotten it all started, stirred too by some of the tweets in my feed in recent days, I've been wondering what Henry George might think about bitcoins. I'm not a Georgist, but I have long regarded his point of view with fascination, and  I discussed his theory of credit in particular in one passage of my book on the economic crisis of 2007-08.

The theory of interest can give us some basis for extrapolating to what HG might think and say about cryptocurrencies were he around today to learn of them.

In his classic work, PROGRESS AND POVERTY (1879), George proposed a thought experiment thus, "[I]f wealth consisted but of the inert matter of the universe, and production of working up this inert matter into different shapes [then] interest would be but the robbery of industry, and could not long exist."

So: did he in fact see interest as theft? No, because the premise of that thought experiment is invalid. Some wealth is inherently fruitful, like a growing tree that will someday be harvested as timber, or a vat of a yet unfermented grape juice. Inert matter, such as planks of wood and the planes that carpenters employ upon it, becomes part of production because they are parts of the same "circle of exchange" with fruitful forms of wealth.

In the end, then, it is the fecundity of nature that secures the legitimacy of interest.

Applying these ideas, it is natural to infer that there is a natural interest rate, the rate that corresponds to this fecundity, and that central bank or governmental action that secures either a higher or a lower rate than fecundity warrants is either dysfunction or blatant theft.

So ... perhaps George might have been persuaded that Bitcoin is a valuable experiment in allowing people to discover and re-attach themselves to that natural rate of interest, independent of those banks and bankers.

Just a thought, in the spirit of some "geolibertarian" friends of days gone by.


Comments

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