Interview with Jeffrey Tucker on All Things Crypto, Part One
Conducted by Wendy McElroy
The multi-faceted Jeffrey Tucker is an American writer who focuses on market freedom, anarcho-capitalism, and cryptotech. He is the author of eight books on economics, politics and culture, a much-sought after conference speaker, and an Internet entrepreneur. Jeffrey is editorial director and vice president of the venerable American Institute for Economic Research, founded in 1933. His career has focused on building many of the web’s primary portals for commentary and research on liberty, and is undertaking new adventures in publishing today.
I have incredible good fortune, as Jeff has written the preface to my book “The Satoshi Revolution,” which will be published in early 2019 by bitcoin.com. Meanwhile, a rough draft of the book is available online for free, compliments of bitcoin.com. Be sure to come back for the substantially-rewritten and thoroughly-edited book. I expect there will be a forum established here for me to chat with readers and answer their questions.
Let the interview begin…
Wendy: You have written extensively on Austrian Economics and cryptocurrency. Can you sketch out how cryptocurrency fits in with that economic tradition?
Jeff: The most obvious point concerns the capacity of the market to produce money as if were a normal good and service. This is remarkable, unthinkable 20 years ago, life-changing, epic.
Governments have mostly monopolized money for a century, and have been dominant in the monetary sector for some 6,000 years. We are living through a shift now that we know for sure that monetary secession is possible and operational.
Most Austrians in the 20th century worked toward reestablishing the gold standard. That’s good, but it never happened. It was Hayek who first threw down the gauntlet: get government completely out of the realm of money and let innovation take its course.
I would say that crypto has five Austrian founding fathers: Menger for showing that money has a market origin, Mises for his warning against central banking, Hayek for coming up with the idea of radical competition in money, Rothbard for his emphasis on money as property, and Kirzner for showing how entrepreneurship can defy our existing knowledge to reveal something completely new.
Aside from money, crypto’s core tech is the best innovation in history for definitely tracing provenance, which is the documented history of trades in private property. You need a technology for this. In the ancient world, it was clay tablets. Much later it was papyrus and then parchment and vellum. Databases were a glorious innovation. But all these technologies suffered from a problem which had heretofore been insoluble: they had a central point of failure. Blockchain has fixed that.
For this reason, the innovation of crypto is even more fundamental than giving us a new form of money. It is a technology of documentation. It scientifically tracks ownership rights. It has thus given us a better way to conduct human affairs in a more peaceful and prosperous way. I suspect it will be another ten years before this point is widely understood.
Wendy: You knew and worked with Murray Rothbard for many years. What do you think his take on crypto would have been? What would you have said to him in return?
Jeff: People always ask me: what would Murray say? My answer is that Murray was always learning, adapting, reapplying principles, discovering new information, just like any great intellectual. There is not one Murray. There are many, simply because he had such an active mind. That process ended when he died in 1995. He left us an enormous legacy. I don’t think it is fair to him or his legacy for anyone to pretend that he or she has a precise fix on what he would be thinking right now about current politics.
Some people claim Murray would be wildly pro-Trump, for example, but I think it is just as likely that the experience so far with the Trump administration would have rekindled his 1960s-style loathing of rightist authoritarianism and his burning critique of revanchist politics, particularly on the trade point but also on immigration. For forty years, Murray wrote for free trade and free migration. In his last years, he wrote a few sentences that raised some doubts about migration based on the political implications. Which Murray is the true one? I think this is the wrong question. The right question is: how can we apply in our times the principles that Murray stood for in his long career?
On the matter of crypto, I will say this. Murray did not agree with Hayek on money. In fact, Murray didn’t believe that a new money could ever compete with an older money once that money has become generally accepted. He cited Mises’s theory of money’s origins to support his position. For this reason, he only approved of the path of reforming the dollar. His view of money was rather static and rationalistic, and I know this because I held that view also, for many years. I saw many attempts at private e-money fail, and this reinforced my opinion.
I’m guessing, then, that Murray would have been slow to recognize what Bitcoin achieved, just as I had been slow. I had seen digital money fail but I didn’t precisely understand why they had failed: none had solved the problem of double spending. If you get that wrong, you set up a situation in which money becomes as reproducible as anything on the Internet, which is to say it is unsound. Bitcoin solved that problem. It enabled the creation of a scarce good which has all the features of money, plus building in a payment system into the architecture itself.
Might Murray have been convinced by the evidence? If he had the right person to explain it to him, possibly yes. From 2009 until about 2014, it was actually difficult to find material written for the economist who could explain why Bitcoin was money. Most everything available was written in the language of computer science, and so economists were generally left out.
In 2013, I undertook a major effort to educate myself about cryptography, distributed networks, hashing technology, and digital ledgers. I combined that new knowledge with my existing knowledge base and gradually came to understand. It was a big project. One of the most exciting of my life. By the time I was ready to write about it, I had not prepared myself for the reality that most economists were nowhere near the point of comprehending what this was all about.
So after I wrote my first article – February 2013, I believe – I faced a tremendous avalanche of attacks from old colleagues. I was stunned. This is a huge problem with intellectuals actually. They think they know, and so their knowledge blinds them to new understanding. It’s the opposite with the market, which is always in discovery mode. This is why Hayek constantly emphasized that a seriously pro-market economist must adopt a stance of humility and openness to the boundless creativity of the market. The market must be our teacher. The market teaches more than textbooks but you have to be willing to have a teachable spirit and look outside the window.
Wendy: What is your impression of how crypto is being received by most Austrian economists? Which ones, if any, seem particularly enthusiastic about it? Which ones seem particularly hostile?
Jeff: Many Austrians had come to misapply Murray’s own theory in the crudest possible form: no new money was ever possible. This is wrong on its face. We have countless examples of new money being produced. For example, every prison has its own money. It could be mackerel cans or ramen noodles. Doesn’t matter really. It happened in school when we were kids: people trade marbles or bathroom passes or anything as money.
The penchant to invent money flows from the needs of trade. Remember the definition of money: something acquired not for consumption but for later use in indirect exchange. There are, as Menger said, degrees of moneyness based on the range of acceptability. Something can be money in one context and just another exchangeable good in a different context. The whole concept is far more fluid than is generally supposed.
By 2013, most economists, Austrian or not, had become complacent in believing that they had money figured out. Bitcoin was just too new and bizarre for them to comprehend. I don’t think a single article from an economist had been accepted on the topic in any conventional academic journal. George Selgin, I think, was the first serious economist to write competently about synthetic money as a new form of money and payment system. Why Selgin and why not the others? I think it is because he is among the most empirically aware and institutionally curious of all the Austrians. He truly understands monetary history. He wrote an entire book on private monies in the Industrial Revolution, so he was profoundly aware of how failed public services inspire private monetary entrepreneurs.
Other Austrians just dug in their heels in those days and screamed: gold is money. Speaking as a matter of history, this is a correct statement. But the gold standard had been gradually destroyed by governments over the course of the 20th century. There are conditions under which gold could become money again, but governments and central banks don’t want that. Crypto came along as a kind of digital gold. Even the metaphors of the crypto world (think of the term mining) come from the history of the gold standard.
Another problem is the lack of technological sophistication of old-school Austrians. Many of them can’t explain why Facebook is valuable or anything else about information economics. They are too quick to observe any facet of the digital world and deem it a bubble because it is not grounded in physical things. That’s a very strange attitude for Austrians who are supposed to believe in subjective value but there it is.
I recall being completely befuddled by the tremendously dopey things that Austrians were writing in those days, even on once-respected venues. I called up one prominent writer and tried to explain crypto to him. He kept saying over and over again: “Bitcoin is not real; it is only digital.” I was having this conversation with him on Skype. I said: “Do you think this conversation is real?” He said yes. I then asked him if he understood that both the voice and the visuals were entirely digital. He just blinked his eyes in confusion. Then he went right back to writing dumb things.
These days, matters are much better. We have an entire team of economists at the American Institute for Economic Research – including people like William Luther, Max Gulker, Pete Earle, Scott Burns, Brian Albrecht, J.P. Koning, Lawrence White, J.P. Koning, Alexander Salter – who are super sophisticated on the topic of cryptocurrency and blockchain technology. They don’t all agree with each other but they get the core of it. They don’t pretend to know things they do not know.
There are still people extant whose primary objection to Bitcoin is that it is “not backed.” They still don’t understand that it is possible for the digital world to reproduce value relationships that exist in the physical world. Unless you get that intellectual, you will never understand how markets can produce and manage money in the 21st century.
[To be continued next week.]
Reprints of this article should credit Bitcoin.com and include a link back to the book
Wendy McElroy has “published” her new book The Satoshi Revolution exclusively with Bitcoin.com. However, things aren’t over yet. Every Saturday you’ll find another installment in a series of interviews about sections of the book with people like Doug Casey, L.Neil Smith, Jeff Tucker, Carl Watner…and so on. Altogether they’ll make up her new book ”The Satoshi Revolution”.