Aug 27, 2013
The Benefit of Specialization – Bitcoin as an Invented Currency
Posted by Daniel Shafrir in categories: bitcoin, economics, engineering, finance
Originally posted as Part II of a four-part introductory series on Bitcoin on May 7, 2013 in the American Daily Herald. See the Bitcoin blog for all four articles.
The emergence of money and its importance in enabling trade between people has been well researched and documented in the literature of the Austrian School of economics – Theory of Money and Credit by Ludwig von Mises and Man, Economy and State by Murray N. Rothbard being prime examples. The contribution of the Austrian greats to the understanding of money and its origin made clear exactly what money is (e.g. the most marketable commodity), the different types of media that are employed in exchange between people (e.g. commodity money, credit money, fiat money and money substitutes) and a theoretical explanation for their origin (the Regression Theorem). The Austrian School has also given arguably the most convincing analysis of the relationship between the money type in use, the manner by which it is controlled and the business cycle – emphasizing the importance of sound money. But except for a few sparse outliers, what the Austrian School has yet to do is fully recognize Bitcoin as a valid scholarly and academic topic. With this article, I hope to contribute to its recognition.
Money’s characteristics
Money enabled people in early stages of civilization to go from direct exchange, with difficulties such as the double-coincidence of wants, to indirect exchange. This improved mechanism paved the way for facilitating man’s specialization in his tasks, thereby enabling division of labor within society since each specialized laborer was able to trade his goods for others indirectly with the use of a medium of exchange. Money has taken many forms but there are certain characteristics all forms should have. Aristotle, for instance provided the following four:
Continue reading “The Benefit of Specialization – Bitcoin as an Invented Currency” »