Bitcoin is more than just a digital currency – it is a phenomenon that reflects the principles of the Austrian school of economics in a way that its founders could hardly have foreseen. From Carl Menger’s theory on the origin of money to Friedrich Hayek’s vision of competing currencies, Bitcoin provides a modern stage for the ideas of these thinkers. But how does Bitcoin fit into the framework of Austrian economics? Is it the digital realization of their dreams or a challenge to their assumptions? This article takes a look.
The evolution of money: Menger’s legacy
Carl Menger, the founder of the Austrian school, argued that money is not created by government decree, but by spontaneous processes on the market. In his work Grundsätze der Volkswirtschaftslehre, he describes how people gradually accept certain goods – such as gold or silver – as a medium of exchange because they are liquid, durable and generally valued. Bitcoin seems to transfer this process to the digital world. With no central authority, Bitcoin has evolved from a niche experiment to a globally recognized store of value since its introduction in 2009 by Satoshi Nakamoto. Its limited supply of 21 million coins and decentralized blockchain make it a candidate for Menger’s idea of “market-generated money”. But instead of physical coins, we have cryptographic keys – an evolution that would have fascinated Menger.
Stable money and the criticism of central banks: Mises’ influence
Ludwig von Mises, another titan of the Austrian school, emphasized the importance of stable money for a functioning economy. In Theory of Money and Circulation, he warned of the dangers of inflation caused by government monetary policy and central banks. For Mises, the manipulation of the money supply was the trigger of boom-and-bust cycles that destroy prosperity. Bitcoin, with its fixed supply and the impossibility of multiplying it at will, could be seen as a response to Mises’ critique. It is a money that is not controlled by a central bank, but by mathematical rules – a concept that perfectly complements Mises’ rejection of state intervention. Nevertheless, he might have criticized Bitcoin’s volatility, which in its early stages distanced it from being a stable medium of exchange.
Competing currencies: Hayek’s dream comes true
Friedrich Hayek went one step further than Mises. In his book Denationalization of Money, he proposed that private currencies should compete with each other to produce the best form of money. For Hayek, the state monopoly on money was an obstacle to innovation and efficiency. Bitcoin is the living realization of this idea: a currency that exists without state support and competes with fiat money such as the euro or dollar. Anyone can use it, no one has to – just as Hayek envisioned. What’s more, Bitcoin’s success shows that people are willing to trust alternatives if they appear more stable or free. Hayek would probably have followed the development of Bitcoin with enthusiasm, perhaps even bought a few Satoshis himself.
Freedom and skepticism: Rothbard and Hoppe
Murray Rothbard and Hans-Hermann Hoppe, both radical representatives of the Austrian school, would also view Bitcoin with interest – albeit with different nuances. Rothbard, an advocate of the free market and the gold standard, would have appreciated the freedom of Bitcoin, which allows individuals to detach themselves from state financial systems. But his preference for physical, tangible money may have made him skeptical of a purely digital currency. Hoppe, known for his libertarian philosophy, sees decentralized systems like Bitcoin as a tool against government encroachment. However, he has argued that Bitcoin is not “real money” as it has no intrinsic value – a point that has sparked debate among Austrians.
Bitcoin as a bridge to modernity
Bitcoin can therefore be seen as a bridge between the classic ideas of the Austrian school and the challenges of the 21st century. It is an experiment that puts the theories of Menger, Mises and Hayek into practice: a money that originates from free markets, bypasses state control and promises stability through scarcity. At the same time, it poses new questions for Austrians – such as whether a purely digital, deflationary money can work in the long term. It is no coincidence that modern Bitcoin proponents such as Saifedean Ammous (The Bitcoin Standard) or Roman Reher (Blocktrainer) often refer to the Austrian school. They see Bitcoin as the realization of an old dream: a monetary system that belongs to the people, not the states.
Conclusion: A paradigm shift with roots in the past
From the perspective of the Austrian School, Bitcoin is a paradigm shift that is deeply rooted in its principles. It is the perfect system – only the current high volatility and technical complexity are probably weaknesses that Mises or Hayek would have criticized. But it is proof that their ideas are not just theoretical, but can take shape in the real world. Bitcoin is neither gold nor paper money, but something new – a digital echo of the past that will help shape and fundamentally reform the future of the economy. How would Austrians classify Bitcoin? As a step towards freedom!
