And the invisible hand of the market speaks: it will be money!
Old Roman coins. Photo by Alexandru Tudorache via Flickr.com. License: Creative Commons
How Carl Menger has explained how money was created on the market with the help of sales skills – and why Bitcoin is perhaps the perfect medium for money in technical terms.
People have the tendency to understand everything somehow centralistically. Everything that is, please – no must! – have a center. Many people confuse that this is not the case with Bitcoin. How did it start? How can it be stable? How can you turn it off? Someone, such a frequent reaction, must be able to.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
Maybe Carl Menger would have been less amazed. The founding father of the famous Austrian School of Economics already. Century written a remarkable essay on the creation of money. In this he suggests an alternative theory to the typical centralistic approach. The text is old, but still exciting and surprising.
If you think about how money was created, it likes to work as follows: bartering is a harassment for every participant because it is poorly scaled and because – to name a stupid example – I don’t always find a carpenter as a cowbuilter who happens by chance a cabinet for a cow. So it may be that as a cow builder I stay on my dead cow because nobody wants to give me what I need right now.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
Why should someone swap beef for useless metal coins?
Good. The bartering is stupid and there are good reasons for human civilization to leave it behind. Most people should agree with that so far.
However, one question remains open. Carl Menger asks, “why an economically thinking person is ready to accept a certain type of goods in exchange for all goods he brings on the market, even if he does not need it or if his need for it is already covered.“In other words: Why should someone be ready to do doofe metal pieces for which they have no real use, or even shells or pearls that do not help him to accept in exchange against beef or cheese?
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
Before Menger was the usual answer “Convention or Law.“A wise king or another central authority once said that it would be money! And from then on everyone who wanted to stay part of the community and escape a punishment had to accept money. Because everything is nothing without the center, and without the center there can be no money. Or?
Not all of the goods are equally good for sale
Carl Menger suggests a more decentralized theory. He assumes that it did not need a central state authority that prescribed money, but that the market as the sum of the selfish action of the individuals has found a money on its own.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
In order to understand Menger’s theory, you have to understand your concept of “sales” of goods beforehand. “Sales ability” means “sales” of goods – the opportunity to sell a product without losses. And not everything is equally sold.
In principle, the sales ability of all things are subject to various spatial and temporal limits: meat rapid quickly, wood causes relatively high storage costs, shoes do not fit everyone, stones are difficult to transport and so on. It is difficult for most things to find a buyer on the market, and you cannot assume that you can quickly find a buyer who pays the full price.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
According to Menger, the following is now happening on an exchange market: “If someone has brought goods to the mart with low sales capability, it is his most urgent striving not to exchange them alone for something that he needs to be, but, if this is not directly possible, to exchange them for other goods that they do not want for themselves, but they are more sales -capable than their own than their own.“So good retailers exchange their goods for goods that are more sold out both in terms of time and spatially. So against goods that are as constant as possible to transport well as possible and generally consider it valuable.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
You will definitely suspect what this is going out now. At some point this hustle and bustle on the market is created as by itself – through the “invisible hand” – something that is used as money. And as soon as something has established itself as money, his sales skills continue to increase.
How the market itself finds the perfect money in precious metals
So you don’t need a central power with Mengers model, so that money is created. The market chooses a good thing that fulfills the role of money. This does not have to be planned or prescribed by law.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
But why, asks Carl Menger, different centers of civilization – Greece, China – used precious metals as money? Centralism theory would have to say succinctly here that it happened that several rulers came up with the idea of prescribing precious metals as money.
With Menger’s theory, on the other hand, we can say: precious metals are simply exceptionally sold! They are scarce, but evenly distributed, which is why every culture has learned to process them into jewelry. Gold and silver are in demand from early on every angle of the earth and are therefore excellently sold out; They are relatively easy to transport and store (compared, say, we, cupboards), they are very easy to scaled, because you can divide them into small pieces without being destroyed (like, let’s say, a horse), they are practically endlessly durable, they are easy to recognize due to color and weight, so they are like one of the other, so they are fun with the other.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
Precious metals are good on the market, which is popular with its high levels of sales solely. Even more than the shine and the industrial properties, precious metals are useful because of their suitability as money.
This leads to a dynamics that are in demand. If high sales skills become value alone, and the more people understand this value, the higher it becomes. “It became the guideline in the mind of the more intelligent among the dealers, and finally, when the situation was generally understood, in which everyone had to be exchanged for other goods that was intended to be exchanged for other goods first.”
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
Why Bitcoin is technically perfectly sold
So far so good. I think this theory is conclusive and pretty, but as so often, when you go back to pre-history, the proof is missing. We do not know what color the eyes of the dinosaurs, we do not know how the songs of the Neanderthals sounded (and whether they sang songs at all), and we do not know whether Menger’s market dynamics have led to the emergence of money or the flash of humans of a mighty man.
But what this theory shows is that it is not an arbitrariness, what becomes money and what is going through in the struggle of the centuries as money. The property of “sales ability” is well suited to assess the quality of a money. For example, because of its extensive sales capability, for example, better money than the Swedish crown, notes are better than coins, since the transport costs are lower, and dollars are better than Venezuelan Bolivar, as these are only limited in terms of inflation.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
And Bitcoin? Bitcoin could be perfectly sold:
- Every country in the world has computers and the Internet, which in principle enables everyone to buy or sell bitcoins.
- Bitcoins can be kept without limitations in principle. Thanks to the limited amount, bitcoins, unlike euros, dollars and any other paper money, have a good chance of being sold at least as high in the future. The storage costs go for zero – you just have to save a key – while you can protect bitcoins from theft easily and effectively by encrypting the key.
- The transport of bitcoins is independent of spatial limits and, especially at long distances, as cheap as it is quickly and quickly.
- Bitcoins can be almost absolutely fun-even if this may be the most endangered property of Bitcoin thanks to blockchain crawlers.
- A Bitcoin can be identified with (relatively) simple cryptographic means. Falsifications more or less excluded.
From a technical perspective, Bitcoin is a digital product that is more or less perfect for offering the greatest possible sales ability. However, sales skill is not only a technical, but also a social category: it must be a worldwide, stable and liquid demand for bitcoins as possible. And it looks like it is currently in the process of being created.
a:hover imgbox-shadow:0 0 20px 5px rgba(255,0,0,0.6);
