Thanksgiving is a time to reflect on trust and to be grateful for its presence in our lives. Originally, Thanksgiving was a celebration of trust between two different peoples, the indigenous Indians and the Pilgrim settlers. Despite their different cultures and religions, they were able to trust one another enough to contribute food to a feast and sit down to dine with one another.
Today Thanksgiving is quintessentially a family celebration. At its best, it is suffused with trust because the family is a locus of trust. Because of the bonds among kin, for most of human history much commerce took place among extended families. And most of the rest of it took place between people who were known to one another. Being a repeat player who must live in a community inspires trust in others, particularly past eras when being ostracized was very costly.
But as civilization developed, communities became larger and the opportunities for gains from trade extended beyond those that could be easily satisfied by family, new institutions had to arise to police trust.
The timing could not have been more propitious for Liberty Fund’s conference on cryptocurrency this past weekend. Last week Bitcoin hit an all-time high, even as it decreases in volatility. In their book, The Age of Cryptocurrency, Paul Vigna and Michael Casey offer five stages of the evolution of social attitudes toward Bitcoin. The first is disdain. The second is skepticism. The third is curiosity. The fourth is crystallization, where an understanding of the currency leads to a recognition that Bitcoin is a coherent design that fulfills an important function. And the final stage is comfort with and acceptance of the innovation.
Most people at the conference had passed through the first three stages and are resting at either stage four or five. The reason for this progression is that Bitcoin is earning more trust. It was always theoretically possible that Bitcoin could develop into a more trustworthy store of value than many government currencies, because many governments have proved themselves so untrustworthy. But only time would give people reason to trust an algorithm that was far too complicated for most fully to understand. And Bitcoin itself has worked now for more than eight years, generating more trust.
But even as of 2017 many people had legitimate worries. The greatest was fear of a so-called hard fork—a disagreement about changing the algorithm that results in two versions of the currency going forward.
The Roberts Court’s decisions on campaign finance are its most important, because campaign regulation shapes the elections that affect all policy outcomes. No issue has generated more unyielding divisions on the Court. A fault line generally divides the principles of one set of the Justices—Chief Justice Roberts and Justices Scalia, Kennedy, Thomas, and Alito—from those generally in dissent—Justices Ginsburg, Breyer, Sotomayor, and Kagan currently (and Souter and Stevens when they were on the Court).
I have a new paper that explains the division of the justices. The majority believes that campaign finance regulations should be analyzed under free speech principles established in other contexts. The latter generally seeks to decide campaign finance regulation issues by considerations unique to campaign finance regulation.
This doctrinal disagreement plays out at a variety of levels. The Citizens United majority protected corporations in the context of campaign finance regulation as the Supreme Court has in other areas of the First Amendment. The dissenters would not have. That majority rejected as interests asserted for the regulation, like concerns over distortion or equality, when they were rejected elsewhere in First Amendment jurisprudence. The dissenters would have accepted such interests as justifications. The Justices also disagreed on the doctrinal tests to be applied to assess the bona fides of campaign finance regulation. The Citizens United and McCutcheon majorities applied traditionally stringent tests for justifying intrusion on First Amendment interests. The dissenters would have given deference to the legislature.
Finally, the majority and the dissenters persistently disagreed on the structure of the First Amendment itself.
A currency has three important functions. It provides a medium for exchange, a measure for the cost of goods, and a store of value. It is one of the most important technologies ever invented and like all technologies might be improved. It is also a matter of intense public concern, because the power over money brings with it immense political power.
The computational revolution is bidding to transform our relation to money by replacing fiat money with a digital currency. Fiat money consists of token issued by the government, like the dollar. Its success depends on trust in the government to maintain the currency as a stable store of value. But governments face political temptations to debase the currency for political ends. Just ask people in Argentina how well the peso has operated as a store of value. Even the dollar has dramatically fallen in value, as in the inflation of the 1970s. Moreover, fiat currencies of today often impose substantial transactions costs in the process of exchange. Banks make substantial profits from these transactions.
Thus, a stable currency outside of the control of the state without substantial transaction costs might well both make the economy more efficient and limit the power of government. It could be a wonder of the modern world. That is the potential promise of a digital currency—a form of money that is created and exchanged in cyberspace. The most famous such currency is Bitcoin and Nathaniel Popper has written a superb book, Digital Gold, chronicling its birth and wild rise. In the next post, I will review the book, which has a cast of characters to rival the most improbable of picaresque novels.
But first a short and necessarily simplified summary of the complex mechanics of Bitcoin: