The Political Philosophy of Bitcoin

What is the best form of government? Aristotle writes of three correct regimes, Monarchy, Aristocracy, and Polity, as well as their three deviant counterparts in Tyranny, Oligarchy, and Democracy. Plato famously described an ideal republic led by philosopher kings with three strictly separated social classes. The Roman republic conquered most of the known world before transforming into an empire going through the phases of Principate and Dominate. Medieval kingdoms saw the separation of the spiritual and temporal power between the church and the monarch. Our current forms of liberal government saw their rise in the early modern period with the transition to constitutional republics and constitutional monarchies.

What was so special about written constitutions that led to the revolutionaries of 1776, 1789, and 1848 to demand them as the bedrock of their political reforms? Put simply, written constitutions represent faith in rules not rulers.

In the battle of letters and ideas that proceeded and accompanied these revolutions, reactionaries put forth arguments in defense of absolute monarchy that parallel many arguments for fiat-based central banking we see deployed against Bitcoin today. I think this parallel gives us some insight into the monetary revolution we are living through, and how it may be as world changing as the political revolutions of the 18th and 19 centuries.

The primary argument in the defense of despotism is that a ruler unencumbered by the need for consent of the governed can focus on the long-term health of the nation. With the nation as his personal property, the king must want to see its flourishing and acts as a father figure, imposing unpopular actions in the present which he tells us will improve our fortunes in the future.

The central bank needs to be able to make policy without short term political concerns. - Ben Bernanke

The second argument is that binding the king to the strict rules of the constitution would leave him without the flexibility to respond rapidly to some future crisis. Why does the king need to go through a cumbersome process of gaining the consent of the governed when some emergency might require his immediate action?

"In facing the unpredictable nature of economic shocks, central banks must be equipped with a broad toolkit and the agility to deploy measures that can effectively address emergent threats to stability. Our experience underscores the critical need for readiness and the ability to adapt strategies in real-time." - Janet Yellen

The third argument is that the king is somehow enlightened, either by his noble birth or divine appointment. We’re led to believe that the wise king sees farther than us and despite being unpopular in the present, will eventually be proven right.

The Federal Reserve Board employs more than 500 researchers, including more than 400 Ph.D. economists, who represent an exceptionally diverse range of interests and specific areas of expertise. Board researchers conduct cutting edge research, produce numerous working papers and notes, and are among the leading contributors at professional meetings and in major journals. Our researchers also produce a wide variety of economic analyses and forecasts for the Board of Governors and the Federal Open Market Committee. - federalreserve.gov

Like the early modern revolutionaries, Bitcoiners reject these arguments wholeheartedly. We recognize that every person and institution is motivated to some degree by personal self interest and a ruler unencumbered by rules will eventually expropriate the wealth of the nation for his own benefit. In order for any system affecting multitudes of people to preserve liberty, some fixed set of rules must be articulated and enforced on all parties. These rules should be public and subject to audit, ensuring that each individual can understand how the rules protect him through the use of his own reason.

The Bitcoin software is open source, simple, and well understood. A person need only study it to reach the inevitable conclusion that the fixed supply, cryptographic protections, and proof of work consensus system preserve his liberty and property while interacting with the wider ecosystem. The Bitcoin rules are applied with absolute equality. While modern liberal governments claim “no one is above the law” we see in fact that public officials and rich individuals rarely receive the same legal scrutiny as the average citizen.

It is impossible to know the future, and whether one set of rules will remain adequate in perpetuity. The political revolutionaries and Satoshi Nakamoto prepared for this eventuality with the same solution. The rules may be changed, but only with overwhelming consensus among participants. No emergency, however dire, justifies an immediate and unilateral change to the rules. Only long deliberation and wide public engagement can reach the threshold necessary to change the system.

Despite these lofty Liberal ideas, we see that constitutional governments in practice do not preserve liberty to the absolute degree envisioned by the revolutionaries that brought them into being. Too often the governed are frightened into believing the old arguments for despotism, where each emergency justifies some unpopular usurpation of the people’s freedom. In the most egregious example, governments have chartered central banks totally outside the constitutional order with the same arguments for “long term thinking”, “flexibility”, and “expertise”.

These breeches of the written rules are slipped in through the weak consensus of civic engagement. Citizen preferences are attenuated through their self interested representatives. Continuous energy and attention is required to identify rule violations and fight against them. By moving the enforcement of rules onto computers, Bitcoin alleviates this problem. Our nodes are always vigilant and decisive in identifying and rejecting violations of the rules.

The march of liberty is far from complete after centuries of struggle. We see in this monetary revolution the echos of political revolutions past that unlocked some freedom for each individual from arbitrary despotic rule. We must continue on.