Throughout history, people have tried to reinvent money, and while new inventions have created a buzz for some time, none of them have succeeded. Bitcoin and other cryptos are just the latest in a long line of such inventions, according to renowned American economist and crypto critic Robert Shiller. In a blog post appropriately titled “The Old Allure of New Money”, Shiller recounted various instances in which new forms of currency have been invented, including the Cincinnati Time Store of 1827, all of which have faded away after the initial excitement died off.
Among the examples Shiller referenced was the invention of the ‘erg’, a measure of energy which was proposed to replace the gold-backed dollar during the Great Depression of the 1930’s. The proponents of the ‘erg’ proposed that the economy be run on the basis of energy in order to overcome the burden of unemployment. The ‘erg’ was short-lived and died off after some of the top scientists of the day disproved its technical foundations.
What cryptos and all the previous inventions have in common is “a yearning for some kind of revolution in the society”, Shiller points out in the blog post, which was published on Monday.
The cryptocurrencies are a statement of faith in a new community of entrepreneurial cosmopolitans who hold themselves above national governments, which are viewed as the drivers of a long train of inequality and war.
The allure of cryptos lies in their exclusivity, with most people not being able to explain how they work. This creates an aspect of mystery which is related to the cryptos’ connection to advanced science.
Practically no one outside of computer science departments can explain how cryptocurrencies work. That mystery creates an aura of exclusivity, gives the new money glamour, and fills devotees with revolutionary zeal. None of this is new, and, as with past monetary innovations, a compelling story may not be enough.
Quoting The Social Meaning of Money by Viviana Zelizer, Shiller writes that despite the “commonsense idea” that a dollar is a dollar, there have been innumerable efforts to create different kinds of money. The recipient of the 2013 Nobel Prize in Economics, Shiller went into detail about how impossible it is to eliminate money.
Shiller has previously expressed cynicism toward cryptos, calling them a bubble in an interview with CNBC last month. However, he pointed out that while it is a bubble, it may not burst anytime soon and might be with us for a while, even for 100 years. While admitting to being mystified by cryptos, he likened them to Tulip mania, attributing their popularity to the fact that they aren’t issued by the government.
But it’s a story that I think goes way beyond the merit of the idea. … It is more psychological than something that could be explained by the computer science department.
Shiller is one of the most highly-regarded economists in the world and often appears on lists of the most influential people in global finance. A professor of economics at Yale University, Shiller is most famous for having predicted the housing and dot-com bubbles.
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