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Bitcoin and the Tyranny of Time Scarcity (Part 3)
Economics is the art of cooperation and competition aimed at conquering scarcity.
Game Time
To understand gold’s ascent, we must realize the actions of people in free markets are driven by game theory. In game-theoretic terms, a “game” is any situation in which people can win or lose — as is the case in markets. A “strategy” is just process for making decisions. Game theory is applicable in any domain where people must decide whether to cooperate or compete. For instance, if you and I are being chased by a bear, my decision to run or fight is not based on how fast I am, but rather how fast I think you are. Game-theoretically, I only need to be faster than you, not the bear, to ensure my survival. Such assessments of interpersonal dynamics are also closely related to economics and monetary evolution.
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In the context of monetary evolution’s relationship with time: free market participants choose hard money over all other monetary technologies because its resistance to supply increases most closely reflects the immutable flow of time. No matter how much time was allocated to gold production, its supply resisted inflation more than any other monetary metal, causing people to coalesce around its use as a superiorly sound store of value. In game theory terms, gold production became the “Nash Equilibrium”, a game state in which everyone follows the same strategy because there is no advantage to be gained by switching to any other strategy. So long as people sought to maximize their freedom from time scarcity by accumulating capital, collectively produced more than they consumed, and accomplished these goals through trade, gold remained the best proxy for the scarcest economic resource — time.
Unicity of Time and Money
Time is the only irreversible element in existence. Its directionality is imparted by the ever-growing entropy of the universe — as defined by the 2nd Law of Thermodynamics. This “Thermodynamic Arrow of Time” which points us into an increasingly chaotic universe is, in fact, the only irreversible aspect of reality; every other natural process is symmetrical, making it impossible to discern whether an event is unfolding forward or backward in time. As such, this universally objective and unidirectional flow of time provides our purest reference point for all values (of the seven key metrics maintained by the Systeme Internationale of Units and Measures, six are rooted in the time it takes light to move through a vacuum). Gold, then, as the most difficult commodity to produce no matter how much time was allocated towards its extraction, served as the best market proxy for the objective purity of ever-flowing time. It is commonly said that time is money, but few realize that the reciprocal is also true — money is time.
Beyond relative irreproducibility, hard money exhibits other properties akin to the natural flow of time. Markets naturally optimize for a hard money that is as impersonal, irreversible, and unstoppable as the flow of time to which it is anchored, and which it is intended to epitomize in the marketplace. As hard money arises naturally as the result of countless market interactions in which individuals seek to trade their goods for steadily more exchangeable goods, it is inherently beyond the control of any single individual, nation, or central bank. This makes hard money apolitical and impersonal; it cannot be used to benefit any one group over another. In other words, hard money tends to be politically neutral, like time.
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Hard money is also equity-based, meaning that physically possessing gold as an asset, for instance, is 100% equity and 0% debt (a bearer asset). This makes payments in gold immune to reversal, unlike those made with monopolistically imposed debt-based monies, called fiat currencies, which are liable to the whims of bureaucrats, who can choose to confiscate, censor, or deauthorize fiat currencies at any time, for any reason. Finally, hard money is unstoppable, in the sense that if I flip you a gold coin, there is no single authority on Earth that can block or devalue that transaction. Hard money, like gold, derives its value from freely acting individuals choosing the best monetary technology available to them.
In Part 4, we will explore the nature of sovereignty and its connection to money…
Thank you for reading Bitcoin and the Tyranny of Time Scarcity (Part 3).
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“A man who dares to waste one hour of time has not discovered the value of life.”
― Charles Darwin, The Life & Letters of Charles Darwin