Development and Underdevelopment in the History of Economic Thought

The Political Economy and Feasibility of Bitcoin and Cryptocurrencies: Perspectives from the History of Economic Thought

Pack Spencer, Connecticut College

This paper considers the theoretical and political feasibility of bitcoins and other cryptocurrencies becoming a popular, extensively used new form or type of money through the prism of the history of economic theorizing about money. Key controversies in this history include (but are not limited to): a. the historical origins of money; b. the desirability of various types or forms of money; c. the quality of money; d. uses of money; e. the relationship between money and credit; f. the effects of money and various types or forms of money on economic efficiency, stability, economic growth, unemployment, changes in inflation, deflation etc. Theorists studied include Aristotle, Smith, Law, Marx, Keynes, Rothbard and Hayek. The provisional conclusion is that it is theoretically possible for new forms of private money such as bitcoin and other cryptocurrencies to become extensively used, provided, among other things: a. the supply of these currencies can indeed be kept limited as their proponents claim. And, b. there is a demand for them, which, for various noble and not-so-noble reasons, seems to be the case. The creation and general use of private money fits in with contemporary libertarian social and economic thought and was also proposed by Hayek shortly after the fall of the Bretton Woods system. However, concern with the quality and forms of money has almost always been of deep interest to the state for many important reasons, as historically elaborated, explained, and debated in the history of economic thought. Hence, for political economy reasons, one should expect state resistance to the widespread use and acceptance of these new forms of private money by the major economic states (including the EU).


Keywords: cryptocurrencies bitcoin blockchain money credit