Dear Libertarians: Bitcoin Fixes This

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Dear Libertarians: Bitcoin Fixes This

By Rollo McFloogle

Posted January 5, 2020

As libertarians, we know that the emperor is not wearing any clothes.  It’s brutally obvious to us that the state is not only evil but also unable to realize a peaceful, productive society for all to enjoy.  We can rigorously arrive at this conclusion through any number of ways: from pure consequentialism to deontology to ethical intuitionism.  The logic, economics, and ethics all make sense on their own, but what strengthens their conclusions is that they all compliment each other in a wonderfully elegant way.  A rock-solid case can be made for libertarianism and is worlds better than even the best steelman of any of the state-centered alternatives.

Unfortunately, many of those around us don’t see this.  Can they not actually see it?  Or maybe they just don’t want to see it.  It’s difficult to know because humans are complex creatures whose experiences and environments create an infinite amount of biases and perceptions.  You can walk someone through each logical step of your libertarian justification, and he will nod in wholehearted agreement, but when you tie all the steps into their logical conclusion, he will undoubtedly reject it.  And he won’t have a good reason.  The conclusions of libertarianism are so far outside of the paradigms of polite society that it’s just too much for most people accept.

So we look for various strategies and methods to do our evangelization.  Some work better than others.  Memes, for example, have proven to be a wonderful way of delivering messages.  Many, myself obviously included, have taken it to the blog and podcast world.  But unless these things are truly a passion that you like doing, it can get very discouraging because the ratio of changed hearts and minds to the overall effort exerted is just so low.  I’m not saying that it never works, but that this strategy working on a large scale is simply impractical.

For the majority of people, it takes too large of an investment of time and focus to grok the information well enough to not only unlearn years of misinformation but also absorb everything else that needs to be learned.  As such, we should not hitch our hopes and dreams to the culture change wagon.

Meanwhile, there are a number of libertarians who hope that a collapse of the state (and/or economy) will shake up society enough for at least some areas to splinter off as libertarian communities.  I wrote about the problem both approaches face in a previous article:

If the state were to collapse tonight, what would happen tomorrow morning?  We’d probably end up with something that is pretty close to what we had just before.  Of course, it wouldn’t happen that quickly, but the point is that in order for the structure of society to have a major shift towards liberty, a huge paradigm shift would need to occur in the minds of the people in that society.  If a stateless society were to come out of the collapse of the current state, the collapse would need to affect the mindset of a significant portion of the people in a way that they would come to reject the state. Maybe that would happen for some people.  But based on history, the result of collapses and revolutions has been to try the state again but in a bit different way.  People just try it with different rulers. This means the root cause of the problem is not solved.  Rinse and repeat. This is why the incremental replacement of state institutions by private markets is superior in an effort to have the market make the state obsolete.  This slow approach makes people change without them even realizing it.

There is room to optimize this strategy to avoid some potential issues.  While services like Uber and Lyft can disrupt the legacy taxi system, these markets tend to get corrupted because governments still have a central point to attempt to influence.  Furthermore, they won’t stop the state from waging endless wars and doing the other terrible things it does.  Progress is very slow as the government plays Whac-A-Mole with entrepreneurs who search for and exploit loopholes in regulations.  The hope is to make the state die by a thousand cuts and just give up after being overwhelmed.  The better tactic against the state, however, is not aimed at avoiding its control but rather in destroying its ability to control.

In a 2014 interview, Cody Wilson had the right idea when he presented this strategy against the state: “Give it something it can’t shoot with firepower and we’ll see what it does.”  This is great, but what do we attack and how?

Enter Bitcoin.

Bitcoin is a decentralized digitally scarce and censorship-resistant medium of exchange.  It provides people an alternative to the central bank fiat system where governments enjoy the benefits of seigniorage, the profits made by inflating the money supply.  Seigniorage is instrumental in their ability to finance tremendous amounts of debt as they pay for programs and wars of infinite scope.  They could never directly tax their subjects to fund all of this—the necessary taxes would be far too burdensome for everyone to accept.  Instead, inflation is the insidious devaluing of wealth while everyone gets drunk on the easy credit and money that become available instead of noticing what’s going on.

But if there is a harder alternative money available, it will monetize in place of the incumbent money.  We all know how much the US dollar has lost in purchasing power; meanwhile, Bitcoin has a hard supply cap of 21 million that will be reached around the year 2140.  Want to change the monetary policy of Bitcoin?  You’re going to have to convince enough of the individuals running their own full nodes to change the consensus to run your ruleset.  Given that they chose Bitcoin to avoid this sort of thing, it’s nearly a nearly impossible task.  Want to censor transactions or manipulate the status of the ledger?  Be prepared to spend huge amounts of money on capital equipment to run a mining operation that would be so expensive to run, you’re likely to bankrupt yourself before you’re able to achieve your goals.

Forget “End the Fed.”  Let’s make the Fed obsolete.

As more people start to hold Bitcoin and demand it as payment because they prefer the currency that appreciates over time, governments will be pressured to abandon their fiat systems whose values plummet to zero.  They will be losing their most productive workers to private industry who woo them away the promise of pay in hard money while the government still tries to convince people to accept their value-hemorrhaging fiat.  With no other option than to adopt Bitcoin, they will no longer be able to simply print money to fund their ventures.  Direct taxation and service fees will be their options for income generation, which means they will have to drastically reduce what they do in their size and scope.  They will be left with performing the “essential” services, while entrepreneurs will have the room to solve problems in the much freer markets that governments simply do not have the resources to attempt to regulate.

In the meantime, cheap credit and easy money will be a thing of the past as prices begin to actually reflect the conditions of the markets.  Resources will be directed to the places where they are most needed, reducing inefficiencies and waste, which provides a huge shot in the arm to overall economic output.  Business cycles will cause less harm across economies.  As capital is accumulated and wealth is transferred from those favored by the government to those who truly deserve it, entrepreneurs can focus on more directly competing with whatever services that the state is still providing.

People won’t adopt Bitcoin because they buy into some cypherpunk or libertarian ideology.  They’ll adopt it because it provides them with a better tool to transport wealth across time and space to deal with future uncertainty.  It won’t even have to be a conscious decision.

The prevalence of sound money also permeates society with other positive benefits.  Under an inflationary monetary system, people are incentivized to spend their money today because it will be worth less tomorrow.  This creates a very short-sided, or high time preference, mindset.  People care more about instant gratification than building things that last in their lives.  Bitcoin fixes this because it reverses that incentive.  With money being worth more tomorrow than it is today, people will tend to delay gratification in the short term in an effort to save their money to maximize its impact, thus lowering their time preferences.  People will become more future-oriented, taking great care not to take actions today that would have harmful future consequences.  This builds the necessary momentum for changing societal cultural preferences for the better.

When the security markets mature enough that people stop paying taxes for police and courts, government agents sent out to extract money from people will finally be seen as the marauders and pirates that they are.  The private security agents will be too well equipped with too much market share at stake to let their clients be robbed by the government; the government agents will see trying to fight back as useless.  This will be the final death blow of the state.  Anything worth being done will be done by private industry and the state will have lost the monopoly of violence that kept the spigots of funding open.

“Libertarianism” as we know it will die off because it will simply become the status quo.

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