Paul Krugman, the Nobel Prize winning economist who likes to explain things to we mortals via the New York Times, is a man some people love to hate, right along with the Times. But we’re not about hatred here, we’re about the science of Bitcoin, so we want to point out to the good Nobelist just how he got it wrong in his “Bits and Barbarism” op-ed piece of December 22 in the Newspaper of Record.
Krugman is absolutely right about the barbarism of gold, past and present. For the vast majority of people, finding gold in your neighborhood is like the curse of oil; it benefits only the elites who can mine it, store it, and transport it. For everyone else, it is a disaster. Ask the Tainos, Caribs, the Aztecs. Ask folks in present day Papua, South Africa, Congo, Peru or Nevada how much Gold 1.0 is doing for them.
Where Krugman is wrong is in taking at face value (pun intended) the notion, spread by some media outlets, speculators and others that Bitcoin is Gold 2.0. It isn’t. In fact, the differences between Bitcoin and gold could not be more stark. The only intersection is a political one, an intersection of two different camps in a narrow political space that exists to push against a perceived common foe: central banks, federal governments and international cabals of the uber rich. This has nothing to do with the fundamental tendencies of these two, very distinct entities. Look at the rhetoric of gold fanatics. They do, as Krugman says, look to the (imaginary) past. Look at the aspirations of the Bitcoin community. They are solidly fixed on the future.
So let’s look at the differences between gold and Bitcoin. Gold is a physical representation of wealth created by the exploitation of land and human labor, be it slave, wage-slave or serf. Its very nature makes it amenable to centralization and hoarding in banks. It is difficult to transport and exchange, and it is relatively easy to guard with a few guns. It accumulates to those with ships and armies. Bitcoin is a digital representation of wealth created by the exploitation of non-human labor, that is, computer power. Its very nature makes it amenable to decentralization and networked distribution. It is easy to transport and exchange and it is (therefore) more difficult to guard. It will tend to accumulate with those within the network who facilitate its transaction. In this regard, it is much more like paper money than gold.
Gold is the natural preference of the already rich, and the envy of those who want to be like them. It is the store of wealth for those who can afford to hoard it. Bitcoin is the natural preference of those who are not rich, for whom the cost of every transaction is a burden; it is ideal for those who do not have the ability to accumulate large amounts of capital because poverty keeps them living hand-to-mouth.
Yes, Mr. Krugman, I agree with you about the barbarity of gold. But if you would just take the time to actually examine the nature of Bitcoin instead of using the misperceptions of others as a cudgel against Bitcoin, perhaps you’d discover something.
Isn’t discovering things that are new and perhaps not as they appear in popular misconceptions what Nobel Prizes are awarded for?
