Bitcoin: How economists dead for a century became the bible for bitcoiners

“All we can do is introduce, by a roundabout and crafty method, something that they will not be able to stop.” (Friedrich Hayek, filmed interview, 1984)

Head to a Bitcoin conference and listen for a couple of minutes. You’ll hear the same names echoed over and over: Menger, Mises, Hayek. Austrian economists, most of whom have been dead for over half a century. Now, walk into a university economics department and look for those same names in the syllabus. You’ll find almost nothing. How did a school of thought born in the coffee houses of Vienna 150 years ago—one thought to have been defeated—become the bible for bitcoiners? That is the story behind one of our latest videos on our YouTube channel. Here is a teaser to whet your appetite.

An umbrella, an insult, and a quarrel with the Germans: The history of the libertarians

Back to Vienna, 1871. People were still using candles for light. A professor named Carl Menger published a book that would change everything. Until then, it was widely believed that the value of a good came from the labor put into it—the thesis held by Marx and Ricardo. Menger, however, argued that value is in your head, at the exact moment you need the item.

Take his example: a simple umbrella. On a sunny day, nobody wants one, even for 2 euros. In a torrential downpour, with you in a suit and running late for a meeting, that same umbrella will sell for 20 bucks without a hint of negotiation. The object hasn't changed. Your need has. Value had just become subjective.

Around this idea, a school of thought took shape in Vienna. Its name, "Austrian"? Initially, it was an insult. The German professors, who dominated the discipline at the time, used it to mean "provincial"—the stuff of losers. The insult would soon come back to haunt them.

Mises, Hayek, and Keynes: lives worthy of a novel

This school wasn't just about ideas; it was about the characters. Eugen von Böhm-Bawerk, a Finance Minister who stood up to Emperor Franz Joseph in the middle of a cabinet meeting to defend a balanced budget. Ludwig von Mises, who spent his days fighting against the printing press and his nights rethinking the world in his office, before fleeing the Nazis and watching the Gestapo carry away his entire library. It would be rediscovered decades later… in Moscow.

And then there was Hayek, Mises' student, who arrived in London in the 1930s and became the great rival of John Maynard Keynes, the most influential economist of the century. Their disagreement was simple. When the economy collapsed, Keynes wanted the State to spend money to jump-start the engine. Hayek, on the other hand, swore that this downward spiral led straight to inflation. Yet, legend has it that one night during the war, the two rivals stood guard together on a Cambridge rooftop, armed with shovels to beat back incendiary bombs. An embellished story, surely. But it says something about their relationship.

In the end, Keynes won out. For decades, it was his recipes that governments followed. And the Austrian School fell into oblivion.

The revenge of the defeated, and its paradox

That was until a short book by Hayek in 1976 posed a wild question: what if we stripped the State of its monopoly on money? A quarter-century later, a few lines of code controlled by no one would answer that question. A supply capped at 21 million, no central bank, a currency born spontaneously in the market. Bitcoin ticks almost every box for the sound money the Austrians dreamed of. The ECB itself wrote it in black and white as early as 2012.

Almost every box. Because there is a catch, and it’s a big one. According to the rule Mises himself set for the birth of currencies, Bitcoin shouldn’t even be able to exist. It is a theory that Bitcoin both fulfills and defies at the same time.

We’ll let you find out why in the video below!

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