The Bitcoin Standard

Chapter 6Capitalism's Information System

“The cause of waves of unemployment is not ‘capitalism’ but governments denying enterprise the right to produce good money.”

—Friedrich Hayek

Money's primary function as a medium of exchange is what allows economic actors to engage in economic planning and calculation. As economic production moves from the very primitive scale, it becomes harder for individuals to make production, consumption, and trade decisions without having a fixed frame of reference with which to compare the value of different objects to one another. This property, the unit of account, is the third function of money after being a medium of exchange and store of value. To understand the significance of this property to an economic system, we do what wise people always do when seeking to understand economic questions: turn to the work of dead Austrian economists.

The Use of Knowledge in Society, by Friedrich Hayek, is arguably one of the most important economic papers to have ever been written. Unlike highly theoretical, inconsequential, and esoteric modern academic research that is read by nobody, the 11 pages of this paper continue to be read widely 70 years after its publication, and have had a lasting impact on the lives and businesses of many people worldwide, perhaps none as significant as its role in the founding of one of the most important websites on the Internet, and the largest single body of knowledge assembled in human history. Jimmy Wales, Wikipedia's ...