Money, Bitcoin and social consensus

It is a common popular belief that money is a general social consensus by which we all arbitrarily agree that a specific thing is going to have value in the future, thus we confidently accept it today trusting it will be accepted tomorrow. This is as wrong as stating that we use telephones due to a social arbitrary decision.

The reality is that we use telephones because they allow us to communicate. Of course telephones are useless outside of a network (i.e. for Robison Crusoe), but that does not imply that telephones are instrinscally useless. Money is no different, we select the thing that better fulfills the need for exchange based on its properties, and its value is derived from the utility of those properties.

Most economists differentiate between intermediate means and the final means to satisfy ends, somehow implying that intermediate means are virtual or expendable (a necessary “evil” or “burden” to satisfy the real need). In my view, this is an anchor to natural science which is useful for descriptive and didactical purposes but unnecessary to determine if a thing is economically useful or not. Anything that fulfills a need is useful, no matter if it is a final or intermediate need.

The need for exchange is one of our most important needs. Without exchange our access to economic goods produced by others would be extremely limited, we would have very little division of labor, we wouldn’t have monetary prices, without monetary prices the economic calculus and coordination would be impossible as demonstrated by Ludwig Von Mises. So qualifying as worthless or useless something that its only use is being medium of indirect exchange, money or not, is an extremely reckless claim.

Money is a social institution, but in no way the thing that performs the role of money is arbitrarily selected. It is discovered through a process of trial and error where the market continually assesses how the properties of monetary goods or potential monetary goods satisfy the need for exchange. Which is economically no different from the process by which the market selects bread as useful to satisfy appetite.

So no, money is not a social arbitrary consensus and neither is Bitcoin. If Bitcoin someday is money, it will be because the market deems it useful as money based on its very specific properties, not based in some capricious idea.