In this article, we’ll outline some of the best resources for finding out why failed economic practices led to the invention of bitcoin, exploring the first principles of economics, from the perspective of the Austrian economy.
- “Economics in a Lesson” – Henry Hazlitt
- “The Ethics of Money Production” – Jörg Guido Hülsmann
- “The origins of money” – Carl Menger
- “Anatomy of the State” – Murray N. Rothbard
- “Human action” – Ludwig von Mises
The economy in a lesson
In “Economics In One Leson”, Hazlitt argues that we must consider the unintended, often invisible, consequences of government policy and economic action. Illustrating this point with “the broken window error,” he points out that the economy is damaged when the baker has to spend money to replace a broken window. Instead of using that money to invest in a new oven or a paint job for his bakery, which helps him and other businesses, his funds are diverted to replace the window, which only helps the local glazier. Because we see that broken glass helps the glazier and cannot see the harm it does to the economy in general, many of us assume that broken glass is good for economic growth. But, this is obviously not true. In short, every time the government or dishonest window breakers misappropriate funds from the individual, the economy suffers.
The ethics of money production
“The ethics of monetary production” argues that money production should be privatized, in the same way that most goods are produced. In this book, author Hülsmann refutes popular misconceptions that the government manages money. Government control does not lead to stability but to inflation, fakes and instability. And, a decentralized market is better suited for determining the value of currency, not the government. Hülsmann also points out that paper money was not voluntarily accepted when it was first introduced into society. The government had to force people to use it, sometimes even with the death penalty. People should be able to use whatever medium of exchange they want as long as it is voluntary. Coercion to join a currency monopoly is unethical, goes against freedom and property rights, and opens the door to corrupt and monopoly practices.
The origins of money
In this essay, Menger argues that money does not need to be created and applied from top to bottom, because it will naturally come from human action. Individuals in early economies slowly evolved from direct bartering for products and services to using different intermediaries to more easily obtain the desired product and service. The market testing different intermediaries will eventually resolve to one or two popular media, which will turn into money. For most civilizations, it was gold and other precious metals. Menger’s central thesis is that money does not need to be human in design, but will occur as a by-product of individuals trying to trade as efficiently as possible.
“Anatomy Of The State” follows the government’s libertarian view that government is a parasite that needs to be checked regularly. It steals value from productive members of society and defines those who accumulate “too much” money, or who want to keep their money, as greedy. According to the libertarian point of view, the government needs propaganda on its behalf to justify its existence and actions, and its main objective is to maintain and develop its power, not to protect or help its citizens.
In his aptly named treatise “Human Action”, Ludwig von Mises summarizes the economic growth and decline as a result of human actions. People create, destroy, trade and compete in an economy, and profits are inexplicably linked to progress and economic success. If people make a profit, they deliver a product that the market wants and are rewarded. If people lose money, they are punished for using resources and making a product that the market does not want. According to von Mises, at the center of all economic activity and progress / regression is the entrepreneur who creates something, and economic activity and entrepreneurship will not stop until the market reaches contentment. This will probably never happen because market contentment implies that people are satiated with the products and services available to them, and that humans are insatiable creatures.
If you can manage to read all of these books, including even the 881-page giant, “Human Action ”, we have even more great books on Bitcoin related topics listed in our bookstore.
This is a guest article by Siby Suriyan. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.