In a recent article on the Mises Institute’s Power and Market blog, Kyle Ward appealed to the subjective theory of value to castigate Peter Schiff for his notorious skepticism of Bitcoin:
Schiff is quick to point out that gold has uses outside of being money. It is used in electronics, dentistry, and jewelry, to name a few…This leads Schiff to claim that bitcoin is unlike gold in that it has no fundamental (or objective) value. His mistake is obvious: there is no such thing as objective value, whether we’re talking about gold or bitcoin. Value is subjective and determined internally by individuals…Yes, gold can be used to build electronics, but that only has value because consumers subjectively value electronics. (emphasis in the original)
I believe Ward errs in how he relates the subjective theory of value to Bitcoin, but his error stems both from an ambiguity in phrases like “objective value” and from an ambivalence in how the founding fathers of Austrian economics themselves considered the relationship between the human agent and the good being valued.
In this article I will argue that the “orthodox” Austrian school position regarding the emergence of sound money from commodities—first proposed by Carl Menger, subsequently developed by Ludwig von Mises, and presumably adopted by Peter Schiff—is the correct one. But I will appeal to a Scholastic notion of the good to defend that view. That notion of the good is also critical to secure the foundation of a sound economic science.Continue reading “The Subjective Theory of Bitcoin”