Angry economists!

https://twitter.com/Nouriel/status/1331980212502978560v

@Nouriel can't figure it out bc looking at the list of what a money is, Bitcoin doesn't tick off the boxes.

What @Nouriel is missing is that… 1/9 https://twitter.com/Nouriel/status/1331980212502978560

…the list of what money _is_, is wrong. According to economists, it's

a) a medium of exchange,
b) a unit of account and
c) a store of value.

That's it. That’s what’s taught in grad school when they do the one lesson on money. ‘cept it’s wrong. 2/9

What's missing is that money is *also* an accounting machine.

d) an accounting machine.

3/9

That is, it is a machine to do the accounts of each individual in a (capitalist) society. Each amount of coin you hold relative to others shows your claims on society, it’s your "balance" in the machine.

(Which is why inflation doesn't matter much in a simple closed system) 4/9

So with this in mind, we can expand and include other assets as part of the "money accounting machine" by using the unit of account function to convert to one common value - which is to say, the accounting machine can absorb more information through other assets. 5/9

But, with an echo to Gresham's law, if some particular valuable thing doesn't have another better purpose, the thing can also serve as an accounting machine - pieces of paper with printing on them, gold (PMs) and now Bitcoin (++).

6/9

Cf Hayek who said that prices were messages that distribute information about relative demand and supply shifts in goods; money is a method of accounting to keep balance to provide a platform on which Hayek's messaging system can inform.

7/9

Having expanded (corrected) the simple 3 part list of what money is to 4 parts, it is now a lot easier to discuss the role of Bitcoin and friends - simply recognise where it’s best, and we can now see it’s role:

8/9

Bitcoin is a good accounting machines.

And there is apparently a significant untapped demand for accounting machines, especially one that mitigates the flaws of the other two primaries (cash and banks).

9/9

PS1 - in econ literature following Jevons, there is a fourth called a standard of value - not going there today :) but you can:

https://en.wikipedia.org/wiki/Money#Functions

PS2 - not sure what real economists say about all this … @lawrencehwhite1 @GeorgeSelgin @finhstamsterdam @jp_koning ?