Economy 14-06-2024 10:04 20 Views

Bitcoin Is ‘Resistance Money’

A terrestrial bitcoin access point in Tomaszów, Poland.

Bitcoin looks different to everyone observing it, a modern parable of the blind men and the elephant.

To economists, it looks like inferior money since it doesn’t have a supply response.

To regulators, it looks like sneaky attempts to launder money and evade taxes. 

To the wider public, it looks something like the hideous offspring of financial speculators and technobabbling preppers. Most people therefore ignore it. 

With Resistance Money: A Philosophical Case for Bitcoin by Andrew Bailey, Bradley Rettler, and Craig Warmke, the philosophers have entered the arena. The trio, professors at Yale-NUS, the University of Wyoming, and Northern Illinois University, considers nothing more important than bitcoin and have consequently wound down all their other research agendas. After a few early papers and research reports (here, here, and here) — including, for disclosure, an AIER workshop sponsored by the Bitcoin Policy Institute — a book was inevitable. 

“This is by far the hardest and most important intellectual project I have ever completed,” Bailey said a few months ago about the book, out this week by academic publisher Routledge. It’s a calm and serious book, accessible to curious beginners and those not already sold on bitcoin as a quick-fix for every societal ill. 

Bitcoin is, in John Oliver’s famous words, “Everything you don’t understand about money, combined with everything you don’t understand about computers.” Some technical explanations are unavoidable, but the reader isn’t subject to an avalanche of technical mumbo-jumbo, nor passionate rallying cries that approach sales pitches. 

The authors openly say they hold bitcoin and think it is a benefit to the world. That confession shouldn’t discount their many arguments. The approach of looking at funding or financial incentives and discarding arguments accordingly is lazy: “We humbly submit that the grift critique gets things backwards. We advocate for bitcoin because we believe in it after years of study; we didn’t study bitcoin for years because we own bitcoin.” Therefore, “our arguments stand or fall on their merits.”

And of merit there is plenty. The authors don’t overplay their hand, like many bitcoiners are otherwise wont to do, but situate their argument right off the bat: 

“Despite the hopes of many bitcoin diehards, it won’t end war, restore the traditional family, or fix the real estate market. It won’t improve nutrition, inspire a return to Renaissance-style art, or revive nineteenth-century architecture. Bitcoin does not fix everything. It fixes a few things — and even breaks some others.”

Definitely Criminal

What many people believe about bitcoin is true: It is for criminals. But it’s also for the freedom fighters, for those cut off from the global monetary system, for those kept financially ostracized by the laws or customs of their lands. It’s for Russian or Nigerian dissidents trying to receive and spend funds, it’s for Afghan women under patriarchal rule, it’s for refugees trying to cross a border with their (financial) assets intact. It’s for Westerners, trying to escape the worst consequences of inflation, for marijuana dispensaries whose business is legal in the states they operate but illegal at the federal level (and therefore unable to make use of the banking system that’s under heavy, centralized control).

Actually, all of these uses are the same thing — many parts of the same elephant. The nature of money is to be usable between enemies that can’t otherwise trust or compel one another to behave. (Friends can use credit and favors.) It’s a bearer instrument that doesn’t require identification, a bank account, or the permission of a ruler.

“Bitcoin,” write Bailey, Rettler, and Warmke powerfully and succinctly, “is resistance money.” It’s a monetary way of opting out, of avoiding hurdles. No wonder the criminals like it too.

Resistance Money isn’t a libertarian book, singing the free market case for bitcoin or musings about a collapsing dollar. Such books exist. The trio, explicitly not libertarians, instead try to create something bigger. They investigate not whether the things bitcoin breaks are worth breaking, but “whether we ought to prefer a world with bitcoin to a world without bitcoin.” They do so prudently and thoroughly, using the philosopher’s tool of John Rawls’s veil of ignorance

Supposing that you don’t know who you are, what country you were born in, and what your skills, interests, and opportunities are (that is, trying to strip readers of their monetary and financial privilege) — would you still support bitcoin’s existence?

Under the framework of the veil, the authors try to make as close to an unobjectionable case for bitcoin as possible. That’s both admirable and valuable. Not seeing a problem with censorship and financial oppression is tantamount to believing that only Bad People get in trouble with (benevolent) authorities. In reality, “good guys and gals often get censored, too.”

Resistance Money asks you to look further into time and wider across the globe: “If you could imagine yourself ever being in a position that you’d need resistance money or you’d need to teach someone else how to use resistance money, it would be wise to learn how to use bitcoin.” That’s the reality for some four billion people who live under authoritarian rulers who restrict, capture, oppress, or otherwise punish dissidents for doing or saying the wrong things. Freedom money, wielded by its users and resistant to capture, identification, and censorship, doesn’t dispel unfair laws or make evil rulers go away — but almost nothing else does that either, so it’s an unfair standard. Using bitcoin does make spending and moving money much harder for such rulers to stamp out. 

That’s an obvious improvement, a benefit to humanity. Bitcoin is freedom money, an escape hatch from under a tyrant’s heavy boot. Behind the veil, we have horrifying large chances of being one of those people. 

Still, this framework is a little too low of a bar. To an economist, certainly, it’s a very undemanding construction: Expanding the decision set and available opportunities can more or less only benefit users (independence of irrelevant alternatives). More options are better. Given different individual preferences and circumstances, the state of the world with bitcoin is an improvement for some. It’s therefore pretty trivial to conclude that it’s better for these people to have access to bitcoin than not. 

A world with bitcoin does come with some costs. There’s some amount of money-laundering, ransomware, and siphoning off of government income through taxation and seigniorage that wouldn’t have occurred if something like bitcoin was never invented (well, discovered…). The authors admit that such things, to the extent they are enabled by bitcoin, are negative for the world, but that they’re not “not a serious threat to bitcoin’s overall net benefit to the world.” 

In one sense, Resistance Money is the natural follow-up to Alex Salter, Pete Boettke, and Dan Smith’s Money and the Rule of Law.. “With respect to monetary institutions,” write Bailey, Rettler, and Warmke, “bitcoin brings the rule of law to the world of money, and is an attractive alternative and opt-in money, especially for the billions who suffer under bad monetary rulers.” 

And they’re pretty radical about the implications of this monetary institution: 

“Bitcoin is a monetary institution that aims at predictability and radical disintermediation. It exists, not to pursue price stability or full employment, but to remove the need for central money makers, mediators, and managers altogether.” We need serious books about money and bitcoin. ResistanceMoney is precisely that.

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