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Carl Menger: The Nature and Origin of Money

Carl Menger: The Nature and Origin of MoneyIn the early stages of trade, when economizing individuals are only slowly awakening to knowledge of the economic gains that can be derived from exploitation of existing exchange opportunities, their attention is, in keeping with the simplicity of all cultural beginnings, directed only to the most obvious of these opportunities.

Carl Menger: The Nature and Origin of Money
**The following essay was written by the father of Austrian Economics, Carl Menger, and was published in 1892. “The Nature and Origin of Money” was originally published after Menger testified before the Currency Commission in Austria-Hungary the same year. The essay is reprinted here on Bitcoin.com for historical preservation. The Austrian school of economics, Bitcoin, and other free-market, permissionless cryptocurrencies have a lot in common. The opinions expressed in this essay are the author’s own. Bitcoin.com is not responsible for or liable for any opinions, content, accuracy or quality within the historical editorial.**

In considering the goods he will acquire in trade, each man takes account only of their use-value to himself. Hence the exchange transactions that are actually performed are restricted naturally to situations in which economizing individuals have goods in their possession that have a smaller use value to them than goods in the possession of other economizing individuals who value the same goods in reverse fashion. A has a sword that has a smaller use value to him than B’s plough, while to B the same plough has a smaller use value than A’s sword—at the beginning of human trade, all exchange transactions actually performed are restricted to cases of this sort.

It is not difficult to see that the number of exchanges actually performed must be very narrowly limited under these conditions. How rarely does it happen that a good in the possession of one person has a smaller use value to him than another good owned by another person who values these goods in precisely the opposite way at the same time! And even when this relationship is present, how much rarer still must situations be in which the two persons actually meet each other! A has a fishing net that he would like to exchange for a quantity of hemp. For him to be in a position actually to perform this exchange, it is not only necessary that there be another economizing individual, B, who is willing to give a quantity of hemp corresponding to the wishes of A for the fishing net, but also that the two economizing individuals, with these specific wishes, meet each other. Suppose that Farmer C has a horse that he would like to exchange for a number of agricultural implements and clothes. How unlikely it is that he will find another person who needs his horse and is, at the same time, both willing and in a position to give him all the implements and clothes he desires to have in exchange.

Carl Menger: The Nature and Origin of Money

This difficulty would have been insurmountable, and would have seriously impeded progress in the division of labor, and above all in the production of goods for future sale, if there had not been, in the very nature of things, a way out. But there were elements in their situation that everywhere led men inevitably, without the need for a special agreement or even government compulsion, to a state of affairs in which this difficulty was completely overcome.

The direct provision of their requirements is the ultimate purpose of all the economic endeavors of men. The final end of their exchange operations is therefore to exchange their commodities for such goods as have use-value to them. The endeavor to attain this final end has been equally characteristic of all stages of culture and is entirely correct economically. But economizing individuals, would obviously be behaving uneconomically if, in all instances in which this final end cannot be reached immediately and directly, they were to forsake approaching it altogether.

Assume that a smith of the Homeric age has fashioned two suits of copper armor and wants to exchange them for copper, fuel, and food. He goes to market and offers his products for these goods. He would doubtless be very pleased if he were to encounter persons there who wish to purchase his armor and who, at the same time, have for sale all the raw materials and foods that he needs. But it must obviously be considered a particularly happy accident if, among the small number of persons who at any time wish to purchase a good so difficult to sell as his armor, he should find any who are offering precisely the goods that he needs. He would, therefore, make the marketing of his commodities either totally impossible, or possible only with the expenditure of a great deal of time, if he were to behave so uneconomically as to wish to take in exchange for his commodities only goods that have use value to himself and not also other goods which, although they would have commodity-character to him, nevertheless have greater marketability than his own commodity. Possession of these commodities would considerably facilitate his search for persons who have just the goods he needs.

In the times of which I am speaking, cattle were, as we shall see below, the most saleable of all commodities. Even if the armorer is already sufficiently provided with cattle for his direct requirements, he would be acting very uneconomically if he did not give his armor for a number of additional cattle. By so doing, he is of course not exchanging his commodities for consumption goods (in the narrow sense in which this term is opposed to “commodities”) but only for goods that also have commodity-character to him. But for his less saleable commodities he is obtaining others of greater marketability. Possession of these more saleable goods clearly multiplies his chances of finding persons on the market who will offer to sell him the goods that he needs. If our armorer correctly recognizes his individual interest, therefore, he will be led naturally, without compulsion or any special agreement, to give his armor for a corresponding number of cattle. With the more saleable commodities obtained in this way, he will go to persons at the market who are offering copper, fuel, and food for sale, in order to achieve his ultimate objective, the acquisition by trade of the consumption goods that he needs. But now he can proceed to this end much more quickly, more economically, and with a greatly enhanced probability of success.

Carl Menger: The Nature and Origin of Money
Carl Menger is responsible for the school of Austrian economics and he has been revered by people like Murray Rothbard, Ludwig von Mises, and more.

As each economizing individual becomes increasingly more aware of his economic interest, he is led by this interest, without any agreement, without legislative compulsion, and even without regard to the public interest, to give his commodities in exchange for other, more saleable, commodities, even if he does not need them for any immediate consumption purpose. With economic progress, therefore, we can everywhere observe the phenomenon of a certain number of goods, especially those that are most easily saleable at a given time and place, becoming, under the powerful influence of custom, acceptable to everyone in trade, and thus capable of being given in exchange for any other commodity. These goods were called “Geld” by our ancestors, a term derived from “gelten” which means to compensate or pay. Hence the term “Geld” in our language designates the means of payment as such.

The great importance of custom in the origin of money can be seen immediately by considering the process, described above, by which certain goods became money. The exchange of less easily saleable commodities for commodities of greater marketability is in the economic interest of everyeconomizing individual. But the actual performance of exchange operations of this kind presupposes a knowledge of their interest on the part of economizing individuals. For they must be willing to accept in exchange for their commodities, because of its greater marketability, a good that is perhaps itself quite useless to them.

This knowledge will never be attained by all members of a people at the same time. On the contrary, only a small number of economizing individuals will at first recognize the advantage accruing to them from the acceptance of other, more saleable, commodities in exchange for their own whenever a direct exchange of their commodities for the goods they wish to consume is impossible or highly uncertain. This advantage is independent of a general acknowledgement of any one commodity as money. For an exchange of this sort will always, under any circumstances whatsoever, bring an economizing individual considerably nearer to his final end, the acquisition of the goods he wishes to consume.

Since there is no better way in which men can become enlightened about their economic interests than by observation of the economic success of those who employ the correct means of achieving their ends, it is evident that nothing favored the rise of money so much as the long-practiced, and economically profitable, acceptance of eminently saleable commodities in exchange for all others by the most discerning and most capable economizing individuals. In this way, custom and practice contributed in no small degree to converting the commodities that were most saleable at a given time into commodities that came to be accepted, not merely by many, but by all economizing individuals in exchange for their own commodities.

Within the boundaries of a state, the legal order usually has an influence on the money-character of commodities which, though small, cannot be denied. The origin of money (as distinct from coin, which is only one variety of money) is, as we have seen, entirely natural and thus displays legislative influence only in the rarest instances. Money is not an invention of the state. It is not the product of a legislative act. Even the sanction of political authority is not necessary for its existence. Certain commodities came to be money quite naturally, as the result of economic relationships that were independent of the power of the state.

What do you think about Carl Menger’s Origin of Money essay? Let us know in the comments section below.

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Devon Brewer: Rediscovering the Golden Rule

The Golden Rule may be the most basic moral approach to dealing with others. It seems universal across cultures and religions. The Golden Rule is instinctive. We all know it, even as children without education.

**The following essay was written by Devon Brewer. “Rediscovering the Golden Rule” was originally published on Voluntaryist.com and is reprinted here on Bitcoin.com for historical preservation. Moreover, Satoshi Nakamoto’s Bitcoin technology is based on the voluntary consent of free-market participants and the Non-Aggression Principle is very much aligned with Nakamoto’s great invention. The opinions expressed in this article are the author’s own. Bitcoin.com is not responsible for or liable for any opinions, content, accuracy or quality within the historical editorial.**

I like the negative form of the Golden Rule the best. One of the earliest written versions comes from ancient Egypt: “That which you hate to be done to you, do not do to another.” By definition, politics and government violate this rule. Through government, some people make other people do something (or not do something) against their will, even when no one would be harmed if government didn’t get involved. I believe voluntaryism, at its heart, is the Golden Rule.

I was politically active most of my life. I followed political news closely, argued with others about politics, voted in every possible election I could, and gave small amounts of money to a few political campaigns. My political views shifted over time, eventually crossing most of the political spectrum.

Somehow, whenever we participate in politics, regardless of viewpoint, we forget the Golden Rule. Political advocates, civic leaders, and school curricula make political participation seem righteous and noble. We make excuses for our political involvement, such as “helping others,” “getting what we deserve,” and “standing up for ourselves.” These excuses blind us to the fact that through government, we take from and harm others (and ourselves). Democratic practices – mob rule – violate the Golden Rule just as much as dictatorial ones.

Barter and trade, hedging with precious metals, and leveraging cryptocurrencies are good ideas that don’t require force. If you would like to learn more about the benefits of bitcoin and how the technology can improve economic freedom click here.

People engage in politics to control other people through government – whether to “change the world” or prevent change. My focus on controlling others through government seeped into my personal life. Sometimes I tried to interfere with the lives of my children and wife, attempting to control them in ways that I wouldn’t have liked had they done the same to me. Of course, I told myself that I was acting in their best interests. It can be especially difficult to respect the Golden Rule as a parent. Nurturing, protecting, teaching, and encouraging a child is essential, but can easily slip into manipulating. Fortunately for me, my family endured my behavior. But I regret very much the times that I broke the Golden Rule with them.

If you’d like to learn more about the philosophy of free-market anarchism and voluntaryist ideology then check out the articles highlighted below Devon Brewer’s editorial.

Over several years, I gradually rediscovered the Golden Rule. Remarkably, my reawakening began with my growing disillusionment with politics and learning more about libertarianism. Yet even libertarianism, as practiced by the Libertarian Party in the United States and expressed often in Reason magazine, was ultimately insufficient. The party in particular supposedly holds sacred the non-aggression principle, which is really just a fancy version of the Golden Rule in its negative form. Yet the party seeks to rule in government, contradicting the principle.

So I continued to read about various types of libertarianism and anarchism. I eventually realized that the simplest, most coherent anarchist philosophy was fundamentally an elaboration of the Golden Rule. I think voluntaryism is the best way to describe this belief and way of life. Once I saw how politics goes against the Golden Rule, it was easy to generalize the principle by applying it more consistently in my personal life. In turn, I think I became a better parent and husband.

Embracing the Golden Rule fully was also psychologically liberating for me. By recognizing the proper and effective limits to my actions, I stopped worrying about matters beyond my control or responsibility. Life is too short to be focused on frustrating attempts to control others. Isn’t it enough to manage one’s own life?

Do you want to learn more about why taxation is theft, educate yourself about the NAP, otherwise known as the “Golden Rule,” and voluntaryism? Check out the links below for more resources.

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Eric Hughes: A Cypherpunk’s Manifesto

Eric Hughes: A Cypherpunk's ManifestoPrivacy is necessary for an open society in the electronic age. Privacy is not secrecy. A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know. Privacy is the power to selectively reveal oneself to the world.

Eric Hughes: A Cypherpunk's Manifesto
**The following essay was written by Eric Hughes and published on March 9, 1993. “A Cypherpunk’s Manifesto” was originally published on activism.net and is reprinted here on Bitcoin.com for historical preservation. The opinions expressed in this article are the author’s own. Bitcoin.com is not responsible for or liable for any opinions, content, accuracy or quality within the historical editorial.**

If two parties have some sort of dealings, then each has a memory of their interaction. Each party can speak about their own memory of this; how could anyone prevent it? One could pass laws against it, but the freedom of speech, even more than privacy, is fundamental to an open society; we seek not to restrict any speech at all. If many parties speak together in the same forum, each can speak to all the others and aggregate together knowledge about individuals and other parties. The power of electronic communications has enabled such group speech, and it will not go away merely because we might want it to.

Since we desire privacy, we must ensure that each party to a transaction have knowledge only of that which is directly necessary for that transaction. Since any information can be spoken of, we must ensure that we reveal as little as possible. In most cases personal identity is not salient. When I purchase a magazine at a store and hand cash to the clerk, there is no need to know who I am. When I ask my electronic mail provider to send and receive messages, my provider need not know to whom I am speaking or what I am saying or what others are saying to me; my provider only need know how to get the message there and how much I owe them in fees. When my identity is revealed by the underlying mechanism of the transaction, I have no privacy. I cannot here selectively reveal myself; I must always reveal myself.

Therefore, privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system. An anonymous transaction system is not a secret transaction system. An anonymous system empowers individuals to reveal their identity when desired and only when desired; this is the essence of privacy.

Privacy in an open society also requires cryptography. If I say something, I want it heard only by those for whom I intend it. If the content of my speech is available to the world, I have no privacy. To encrypt is to indicate the desire for privacy, and to encrypt with weak cryptography is to indicate not too much desire for privacy. Furthermore, to reveal one’s identity with assurance when the default is anonymity requires the cryptographic signature.

We cannot expect governments, corporations, or other large, faceless organizations to grant us privacy out of their beneficence. It is to their advantage to speak of us, and we should expect that they will speak. To try to prevent their speech is to fight against the realities of information. Information does not just want to be free, it longs to be free. Information expands to fill the available storage space. Information is Rumor’s younger, stronger cousin; Information is fleeter of foot, has more eyes, knows more, and understands less than Rumor.

Eric Hughes: A Cypherpunk's Manifesto

We must defend our own privacy if we expect to have any. We must come together and create systems, which allow anonymous transactions to take place. People have been defending their own privacy for centuries with whispers, darkness, envelopes, closed doors, secret handshakes, and couriers. The technologies of the past did not allow for strong privacy, but electronic technologies do.

We the Cypherpunks are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.

Cypherpunks write code. We know that someone has to write software to defend privacy, and since we can’t get privacy unless we all do, we’re going to write it. We publish our code so that our fellow Cypherpunks may practice and play with it. Our code is free for all to use, worldwide. We don’t much care if you don’t approve of the software we write. We know that software can’t be destroyed and that a widely dispersed system can’t be shut down.

Eric Hughes: A Cypherpunk's Manifesto

Cypherpunks deplore regulations on cryptography, for encryption is fundamentally a private act. The act of encryption, in fact, removes information from the public realm. Even laws against cryptography reach only so far as a nation’s border and the arm of its violence. Cryptography will ineluctably spread over the whole globe, and with it the anonymous transactions systems that it makes possible.

For privacy to be widespread it must be part of a social contract. People must come and together deploy these systems for the common good. Privacy only extends so far as the cooperation of one’s fellows in society. We the Cypherpunks seek your questions and your concerns and hope we may engage you so that we do not deceive ourselves. We will not, however, be moved out of our course because some may disagree with our goals.

The Cypherpunks are actively engaged in making the networks safer for privacy. Let us proceed together apace.

Onward.

What do you think about Eric Hughe’s “A Cypherpunk’s Manifesto?” Let us know what you think comments below.

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