My Musings From The Road to Serfdom by F.A. Hayek applied to Bitcoin and Cryptocurrency

Intro

I decided to read The Road to Serfdom by F.A. Hayek. Hayek was a leader within the Austrian school of economics, and was also considered a classical liberal (libertarian.). With its long meandering sentences, the book for me was at times hard to digest. Luckily it was a short book. I took great care while reading it of seeking out passages I felt directly applied to Bitcoin and cryptocurrency. I decided to quote one such passage below and write about it.

The Passage

Because in modern society it is through the limitations of our money incomes that we are made to feel the restrictions which our relative poverty still imposes upon us, many have come to hate money as the symbol of these restrictions. But this is to mistake for the cause the medium through which a force makes itself felt. It would be much truer to say that money is one of the greatest instruments of freedom ever invented by man. It is money which in existing society opens an astounding range of choice to the poor man—a range greater than that which not many generations ago was open to the wealthy… If all rewards, instead of being offered in money, were offered in the form of public distinctions or privileges, positions of power over other men, or better housing or better food, opportunities for travel or education, this would merely mean that the recipient would no longer be allowed to choose and that whoever fixed the reward determined not only its size but also the particular form in which it should be enjoyed.

The Road to Serfdom, F.A. Hayek (1994 Edition). P.98-99

Context Of the Book

I thought this passage was noteworthy in terms of its applicability to Bitcoin and cryptocurrency. While the level of income one receives, or the limitations placed upon income levels can restrict freedom, there are so many other facets as well. Facets that Mr. Hayek could not have anticipated human beings having control over. One must keep in mind the book was originally written in March 1944 at the tail end of World War 2, preceding the Bretton Woods conference by just a few months. Before Bretton Woods, currencies of sovereign nations were backed individually by gold. Bretton Woods nominated the US Dollar as the international medium of exchange and pegged it to an ounce of gold at the price of $35. In 1971, President Nixon eliminated the gold standard altogether, meaning that dollars could no longer be exchanged for gold at a fixed price. It was at this point, the dollar became fiat money, and the government was free to inflate its supply to its heart’s content.

Hayek's Thoughts beyond 1971

So within the context that this book was written, money globally was on a gold standard, so it had intrinsic value associated with it. It was at this time that Hayek considered money to be one of the “greatest instruments of freedom ever invented by man”. It quickly lost its luster however as Hayek himself discussed in the following video, where he pleaded for the denationalization of money.

You must watch this video!

What Would Hayek Say About Bitcoin?

I believe Hayek was pleading for Bitcoin and its contemporaries, even though he died long before they were developed. He was pleading for competition within the money space, not maximalism of any stripe. Not even Gold maximalism, as he states in the video Gold would not be an ideal money. I'm not sure he would have considered Bitcoin to be an ideal money in its current state either. If he had lived to embrace crypto, Bitcoin, Ethereum, or any other sort of cryptocurrency, maximalism would have been abhorrent to him. If that were the case, I would agree with him, we need a vibrant and competitive market for money. Whether or not Bitcoin, Gold, or Dogecoin actually dominates, competition is key.

Hayek on Keynes

"He was one of the cleverest men I knew, but he was not really a very competent economist at all."

Keynes of course was a fan of inflation, and would most likely would not have been a fan of Bitcoin for that reason.

What Do You Think?

What do you think, would Hayek have been a fan of Bitcoin and cryptocurrencies? Would he have been a maximalist for any currency?

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