The philosophy of Bitcoin and the question of money

This article summary is part of my personal background research work. The top part of each post had a detailed summary of the article. Scroll farther down the page for the article's broader implications for Bitcoin.

Article Summary

Link

https://doi.org/10.1177/02632764211049826

Keywords

• Political dimension of money
• State control of money
• Bitcoin as non-state money
• Commodity vs. claim theory
• Supply of money
• Ingham’s money question
• Simmel's Philosophy of Money
• Modern Monetary Theory
• Austrian School of economics
• Fiat vs. Bitcoin

Short summary

This article by Simon Butler, published in Theory, Culture & Society in 2022, explores the deep-rooted philosophical and economic questions surrounding money, with a particular focus on Bitcoin as a potential solution to long-standing issues associated with state-controlled money.

The author delves into the historical debate between commodity theory and claim theory, emphasizing that the core issue lies in the political control of the money supply rather than in the physical or abstract nature of money itself. Butler applies Georg Simmel’s The Philosophy of Money to Bitcoin, arguing that while Bitcoin shares the symbolic nature of fiat money, it offers a distinct advantage due to its controlled supply and decentralization from state power. The article critiques the state’s historical misuse of money, particularly through inflation and monetary policy, and examines Bitcoin’s potential to challenge the state’s monetary monopoly.

The discussion highlights Bitcoin as both a financial instrument and a social movement that confronts the intertwined powers of state and financial institutions. Ultimately, the article positions Bitcoin as a purer form of money in the Simmelian sense and as a political tool that could reshape the future of money by decentralizing its control.

Issues (Threats and Opportunities)

• State Control of Money: The article identifies the state’s control over the money supply as a fundamental issue, leading to inflation, currency devaluation, and economic inequality. The concentration of monetary power in the hands of the state raises concerns about the fairness and stability of the monetary system.
• Misuse of Monetary Policy: The state's ability to manipulate the money supply for political and economic purposes, often at the expense of the broader population, is a recurring theme. This issue is particularly relevant in light of Modern Monetary Theory and the growing national debts worldwide.
• Bitcoin’s Fixed Supply: Bitcoin's fixed supply and decentralized nature are highlighted as critical factors that distinguish it from fiat currencies, making it a potential solution to the problems of state-controlled money. This scarcity is seen as a safeguard against inflation and monetary manipulation.
• Commodity vs. Claim Theory: The long-standing debate between commodity and claim theory is reexamined in the context of Bitcoin, which challenges traditional notions of what constitutes money. The article argues that the focus should shift from the nature of money to the control of its supply.
• Austrian School of Economics: The Austrian School’s critique of state intervention in the economy, particularly through monetary policy, is discussed in relation to Bitcoin. The article suggests that Bitcoin aligns with the Austrian emphasis on hard money and free-market principles.
• Simmel’s Philosophy of Money: The application of Simmel’s ideas to Bitcoin provides a philosophical foundation for viewing Bitcoin as a legitimate form of money, despite its lack of intrinsic value. This perspective challenges traditional economic views and supports the idea of Bitcoin as a symbolic form of money.
• Political Resistance to Bitcoin: The article explores the political resistance to Bitcoin, rooted in its challenge to the state’s monetary authority. This resistance is seen as a barrier to broader acceptance and adoption of Bitcoin as a mainstream currency.
• Bitcoin as a Social Movement: Beyond its technical aspects, Bitcoin is portrayed as a social movement aimed at decentralizing monetary power and challenging the status quo. This movement is driven by a diverse group of users who see Bitcoin as a tool for achieving greater economic freedom.
• Economic Inequality: The article connects the state’s control of money with growing economic inequality, arguing that Bitcoin’s decentralized nature could help mitigate this issue by reducing the concentration of wealth and power.
• Trust in Money: Trust in state-issued money is questioned, with Bitcoin offering an alternative that does not rely on trust in a central authority. This issue is central to the article’s argument that Bitcoin represents a more democratic and transparent monetary system.

Methodology

The article employs a theoretical analysis of historical and contemporary monetary theories, particularly focusing on Georg Simmel’s The Philosophy of Money. The author contextualizes Bitcoin within these theories to explore its potential as a solution to the problems associated with state-controlled money. The methodology is primarily qualitative, drawing on existing literature and philosophical arguments to build a case for Bitcoin as a new form of money.

Results

The article concludes that Bitcoin, as a decentralized and scarce form of money, offers a significant departure from traditional state-controlled fiat currencies. By applying Simmel’s philosophical framework, the author argues that Bitcoin can be considered a purer form of money, free from the risks of state manipulation. The results highlight the potential for Bitcoin to address issues of inflation, monetary policy misuse, and economic inequality by decentralizing control over the money supply.

The article also finds that Bitcoin’s role extends beyond just a financial instrument; it functions as a social movement that challenges the existing monetary and political order. The decentralized nature of Bitcoin, combined with its fixed supply, positions it as a credible alternative to fiat currencies, particularly in an era of growing mistrust in state institutions and financial systems.

Implications

The implications of the article are significant for both policymakers and the broader public. For policymakers, the rise of Bitcoin signals a need to reconsider the role of the state in controlling the money supply and to address the growing public distrust in fiat currencies. The potential for Bitcoin to disrupt traditional monetary systems could lead to a re-evaluation of monetary policy, particularly in terms of inflation control and economic inequality.

For the broader public, the article suggests that Bitcoin represents a shift towards a more decentralized and democratized form of money, which could reduce the concentration of economic power and provide individuals with greater financial autonomy. The social movement surrounding Bitcoin highlights the growing demand for alternative monetary systems that are transparent, secure, and free from state control.

Research Questions

State Control of Money

• How does the concentration of monetary power in the state affect economic inequality over time?
• What are the potential risks and benefits of decentralizing monetary control from the state to non-state entities like Bitcoin?

Misuse of Monetary Policy

• How has the state’s manipulation of the money supply historically impacted inflation rates in various economies?
• What mechanisms could be implemented to prevent the misuse of monetary policy by the state?

Bitcoin’s Fixed Supply

• What are the long-term economic implications of a fixed supply currency like Bitcoin on global financial stability?
• How does Bitcoin’s fixed supply compare to the inflationary nature of fiat currencies in terms of wealth preservation?

Commodity vs. Claim Theory

• How does Bitcoin challenge traditional commodity and claim theories of money?
• What theoretical frameworks could better explain Bitcoin’s role in the modern economy?

Austrian School of Economics

• How does Bitcoin align with the principles of the Austrian School of economics, particularly regarding hard money?
• What are the potential economic consequences of adopting Bitcoin in line with Austrian economic theory?

Simmel’s Philosophy of Money

• How does Simmel’s concept of money as a symbolic form apply to the use of Bitcoin in contemporary society?
• What philosophical arguments support or challenge the notion of Bitcoin as a purer form of money?

Political Resistance to Bitcoin

• What are the main political arguments against the widespread adoption of Bitcoin, and how can they be addressed?
• How does political resistance to Bitcoin differ across various countries and political systems?

Bitcoin as a Social Movement

• In what ways does Bitcoin function as a social movement, and how does this influence its adoption and usage?
• What are the social and political implications of Bitcoin’s potential to decentralize monetary power?

Economic Inequality

• How might the adoption of Bitcoin impact global economic inequality? 18. What role does Bitcoin play in redistributing economic power from traditional financial institutions to individuals?

Trust in Money

• How does the level of trust in state-issued fiat currencies compare to the trust in decentralized currencies like Bitcoin?
• What factors influence the public’s trust in Bitcoin as a viable alternative to traditional money?

Five Key Research Needs

1. Trust in Decentralized Currencies. Understanding the factors that influence public trust in decentralized currencies like Bitcoin is crucial for assessing its viability as a mainstream monetary system. This research could provide insights into how trust is built and maintained in a system without a central authority, which is essential for the broader adoption of Bitcoin and similar technologies.
2. Economic Implications of Fixed Supply Currency. Exploring the long-term economic implications of a fixed supply currency like Bitcoin is critical to understanding its potential impact on global financial stability. This research is needed to evaluate how Bitcoin’s deflationary nature could influence economic growth, wealth distribution, and financial planning at both individual and national levels.
3. Social and Political Implications of Bitcoin. Investigating the social and political implications of Bitcoin as a tool for decentralizing monetary power can provide valuable insights into its role as a social movement. This research could help policymakers and stakeholders understand the broader societal changes that could result from the widespread adoption of Bitcoin and other decentralized currencies.
4. State Control vs. Decentralization. Researching the risks and benefits of decentralizing monetary control from the state to non-state entities like Bitcoin is essential for evaluating the potential shifts in economic and political power dynamics. This research would be particularly valuable for policymakers considering regulations around decentralized currencies.
5. Impact on Global Economic Inequality. Understanding how the adoption of Bitcoin might impact global economic inequality is crucial for assessing its potential as a tool for economic empowerment. This research could shed light on whether Bitcoin can help reduce inequality by providing greater financial autonomy and access to underbanked populations.

Additional Considerations

The article's analysis suggests that Bitcoin's adoption could be driven by its ability to offer an alternative to state-controlled currencies, particularly in regions with high inflation or political instability. As more individuals and businesses seek to protect their wealth from the adverse effects of fiat currency devaluation, Bitcoin’s fixed supply and decentralized nature make it an attractive option. However, widespread adoption faces hurdles, including political resistance from governments that may view Bitcoin as a threat to their monetary sovereignty. Furthermore, the article underscores the importance of trust in any monetary system. For Bitcoin to achieve broader adoption, it must overcome public skepticism and the association with illicit activities that have plagued its reputation. The growing use of Bitcoin as a store of value and medium of exchange in various parts of the world suggests that adoption could accelerate, especially as more people become disillusioned with traditional financial systems.

Butler’s article positions Bitcoin not just as a financial instrument but as a social movement with the potential to redefine the relationship between individuals and the state. In modern society, where trust in state institutions and financial systems is eroding, Bitcoin’s decentralized nature offers an alternative that aligns with the increasing demand for financial autonomy and privacy. The article suggests that Bitcoin could play a significant role in promoting economic freedom, particularly in societies where the state exercises heavy control over financial transactions and monetary policy. Moreover, as digital currencies become more integrated into global financial systems, Bitcoin’s use could expand beyond individual transactions to larger-scale applications, such as cross-border trade and remittances. However, this expansion will likely require significant advancements in scalability and regulatory frameworks that address concerns around security, consumer protection, and market stability.