Marc Hochstein is the managing editor of CoinDesk and the former editor-in-chief of American Banker. The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.
The most expensive dunce cap in the world is a hat I bought with bitcoin about five years ago.
I'm not going to bother looking up exactly how much bitcoin I paid for it, and what that would be worth if I had just HODL'd. It's too mortifying to contemplate.
But you know what's even more embarrassing than my failure then to grasp one of the fundamental advantages of bitcoin? Joseph Stiglitz's failure to grasp it now.
Bitcoin "doesn’t serve any socially useful function," the Nobel Prize-winning economist blithely declared on Bloomberg television last week. Wrong, Joe.
Stepping back, a longstanding knock on bitcoin's suitability as a currency was that its fixed, predictable supply and zigzagging but generally increasing value against the dollar encouraged hoarding. But "hoarding" in this context seems little more than a morally loaded term for what our grandparents called "saving."
In his forthcoming book "The Bitcoin Standard: The Decentralized Alternative to Central Banking," economist Saifedean Ammous argues that wider adoption of bitcoin would have a salutary influence on people's behavior.
"When the value of money appreciates, people are likely to be far more discerning with their consumption, and to save far more of their income for the future," writes Ammous, who is an assistant professor of economics at Adnan Kassar School of Business at Lebanese American University in Beirut. "The culture of conspicuous consumption, of shopping as therapy ... will not have a place in a society with a money which appreciates in value over time."
Sounds great in theory, you might say, but how do we know it will work in practice? Well, it already is – at least anecdotally.
As developer Jimmy Song wrote in a blog post in September:
Leaving a legacy
That long-term thinking is perhaps most evident in the volunteer army toiling away at bitcoin's code, as suggested by this telling observation from CoinDesk editor-in-chief Pete Rizzo in his July article unpacking the scaling debate:
Think about that. These devs are so future-oriented that they're OK if the full payoff comes when they're dead.
If Dimon and Buffett did a little digging, they might see that bitcoin can have the opposite effect on individual behavior.
No price floor
To be sure, continued price increases are far from guaranteed.
But given that the U.S. personal savings rate has plummeted from above 10% for most of the 1960s to around 3% today – with near-rock-bottom interest rates punishing those who save the old-fashioned way – I'd say anything that motivates young people to think about tomorrow (to quote a favorite song of Stiglitz's former boss) serves a very socially useful function.
Marshmallow image via Shutterstock
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