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 buy bread every day due to a social arbitrary decision.

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The reality is that we buy bread because we know it feeds us, it fulfills a necessity. 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 means and ends, somehow implying that ends are real needs, and means are virtual or expendable needs (a necessary “evil” or “burden” to achieve the real thing). 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 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 exchange 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.

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