Will Bitcoin help us move past Keynes

One of the reason Austrian economics stayed fringe, and Keynes got the mainstream attention is because it tried to beat something with nothing. And, an old political truism goes: “You can’t beat something with nothing.”

It was true in the middle of nineteenth century. But, is it possible that with the invention of Bitcoin, now the playing field is different.

Pre Bitcoin

Arsenal of Keynes: Government intervention

Arsenal of Austrian: do nothing

Post Bitcoin

Arsenal of Keynes: Government intervention

Arsenal of Austrian: Bitcoin. Trust the code over government

Here is summary of a beautiful piece by Gary North. He talks about why the book Economics in One Lesson was not a hit, and why Keynes got the mainstream attention.

• Economics in one Lesson uses lesson conveyed by Bastiat’s analogy of broken window to explain economics concept
• Hazlitt goes on show how second order effect or third order effect gets overlooked; or how short term perceived value trumps long term thinking
• Broken window fallacy: We say a guy who breaks a window is doing social service because it helps create job. A broken window is a job for window fixers. No broken window, no job for window fixers. Here, the second order thinking helps us see the fallacy. The owner of the house would spent the money somewhere else if the window were not broken
• He goes on to apply broken window fallacy to taxation, government spending. Goes on to show how supporting taxation and government spending is like saying broken window is good
• The book, economics in one lesson, teaches by negation. It avoided the issue of moral right or wrong
• You can’t beat something with nothing. The book ignored the slogan. It shows what does not work, so repeal the government intervention
• Background of the book: Post great depression, there was not a cogent explanation of why free market didn’t recover after 1932. By 1946, it seems it was government intervention that has saved us all. No one blamed government intervention for causing or prolonging the depression
• Keynes general theory of employment in 1936 did support this
• Hazlitt could not refer to economic literature for to show that it was centralized planning that caused depression, not free market, so he used a different tactic
• He showed what was wrong with the intervention. Made a case for nothing against something. Just abolish the intervention
• Politically futile strategy. People need something. if people can not trust businessman and bankers then voters would have to trust the state
• Hazlitt didn’t persuade anyone in power. Truman abolished price control, but he was influenced by the head of office of price control
• He did not even persuade anyone in the academia. Keynes died and became a legend
• Mises’ Human Action in 1949 did well, but it was not a best seller
• Keynes was successful because it helped rationalized Government across the world the war they got into, and taxation they brought
• Income tax and Federal reserve help government fight the war. Post war recovery was considered a success of government intervention. No one thought once you hit the bottom (war), you can only go up. It was not the government intervention that helped the recovery