Bitcoin Standard Ch. 5

 The key concept to understand from this chapter is "time preference". You can understand time preference if you think of the classic experiment with kids and marshmallows. Here's a marshmallow. You can eat it now, but if you wait fifteen minutes, I'll give you another one. Children with high time preferences eat the marshmallow immediately. Children with low time preferences wait for the double reward. In economic terms, when you are confident that your money will retain or increase its value, you have a low time preference, you are willing to be patient as you collect interest or invest in order to have more money in the future. If your money is rapidly losing value, you are better off spending it now, as you will not have enough to buy the same things in the future; you have a high time preference. 

Societies with sound money have low time preferences. This allows them to invest in innovation and future growth. This is essential for the growth of civilization not just in terms of size, but in quality of life. Low time preference allows for the accumulation of wealth (since it will still be valuable in the future), and accumulation of wealth frees people from working only on immediate needs. It allows for delayed gratification. 

"The security of their basic needs assured, and the dangers of the environment averted, people turn their attention toward more profound aspects of life than material well-being and the drudgery of work. They cultivate families and social ties; undertake cultural, artistic, and literary projects; and seek to offer lasting contributions to their community and the world. Civilization is not about more capital accumulation per se; rather, it is about what capital accumulation allows humans to achieve, the flourishing and freedom to seek higher meaning in life when their base needs are met and most pressing dangers averted."

Keynes would have said that saving money is bad for the economy, because the more money I have sitting in my bank account, the more money is not out circulating, being used to improve people's lives. That's simply untrue. Even just sitting in my bank account, the bank loans it out to people, people use it to buy homes, build things, start businesses. And people who save enough money use it to invest in promising things, things that will improve people's lives enough to turn a profit. 

The author also argues that a low economic time preference affects other aspects of our lives than just economic. It is the author's assertion that, as sound money inspires low economic time preference, a low time preference in moral and family life follows. So as money trains a person to look to the future, that person is more likely to be future minded about his family, his spiritual welfare, etc. He learns delayed gratification in money and applies it in other areas of his life, to his benefit and to the benefit of society as a whole. The author also asserts, slightly less convincingly, that a higher time preference which has come with modern monetary theory is to blame for the decay of the arts. It's the reason that we have Jackson Pollocks instead of Michelangelo. Now, having been to the Sistine Chapel, I can say unequivocally that it moved and awed me in ways that Pollock never could, but I can't claim to share the author's total disdain for modern art. In any case, the author did convince me that, in some degree or another, low time preference due to sound money lifts a society in many ways beyond just further out of poverty. 

Perhaps the most convincing evidence given of this phenomenon was the difference between "zero to one" and "one to many". The innovation from zero to one (zero telephones to the first telephone) is much more impressive than the one to many (one telephone to many brands with different features). Innovating from zero to one requires a lower time preference, because there are so many unknowns. It's much less sure that the telephone will actually work and that people will actually want to use it than it is sure that people will be interested in your new and improved version of something they already rely on. It's a riskier investment. The author points out that, "while the total number of innovations rose in the twentieth century, the number of innovations per capita peaked in the nineteenth century." In other words, under the gold standard, under sound money, per capita innovations peaked. They then declined as we got off the gold standard and onto less stable economic ground. 

And there you have it. Another chapter about what money is, what makes good money, and what happens to societies that have good v bad money. And not one word about Bitcoin. Spoiler alert, so far Ch 6 doesn't talk about Bitcoin either. On another note, El Salvador adopted Bitcoin as official currency, and Elon Must participated in a Bitcoin conference where he stated that he owns Bitcoin and wants it to succeed. Me, too, Elon. Me, too.