Cryptocurrencies and All That: Two Ideas from Monetary Economics
The monetary arrangements of societies are the result of the interplay of technology and ideas. Technology determines, for example, which coins can be minted and at what cost. For centuries, minting small-denomination coinage was too costly to induce Western European governments to supply enough small change (Sargent and Velde, 2002). Only the arrival of steam-driven presses fixed this problem (Doty, 1998). Simultaneously, ideas about private property and the scope of government determined whether private entrepreneurs were allowed to compete with governments in the supply of small change (Selgin, 2008). Technology and ideas about money engage dialectically. Technological advances shape our ideas about money by making new monetary arrangements feasible. Ideas about desirable outcomes direct innovators to develop new technologies.