Bitcoin and blockchain technologies have big visions of changing the macroeconomics of the financial system. Less investigated, the microeconomics of Bitcoin could supply us with unique insights into how the Bitcoin digital financial complex might evolve.
Microeconomics examines decision-making by economic actors, like firms and consumers, in their myriad organizational possibilities, from unions to entire industries to other defined organizations. Microeconomists are concerned first and foremost with decisions by people and organizations, and thus, in a bigger sense, the decision-making mechanisms in a market setting.
Systematic study of blockchain systems such as Bitcoin has depended upon understanding the phenomenon of distributed digital currency in the context of centuries long financial traditions, not as open systems comprised of agents with emotions, rationality, irrationalities and self-interest. In microeconomics, these participants are often represented within mathematical models in the context of production, distribution, goods and services. In microeconomics, the prediction of future human action, and the evidence to support the claim, is important.
A problematic axiom of many academic microeconomic theory is the presupposition of rationality. If humans are not rational, then their behavior is not predictable, and thus a main goal of modern microeconomics goes challenged. What should, in fact, be standard academic fare – the questioning of a discipline’s axioms – is a sign of a healthy academic approach to a question. Occam’s Razor has traditionally been a technique of microeconomic theories.
Just how rational economic agents are has come under contention. John Wolpert, a lead on IBM’s blockchain research, evokes ISIS in explaining away the myth that all economic actors are rational, something which Austrian economists – perhaps the most vocal contingent of the Bitcoin creation community – also assume in the context of free-market theory. Bitcoiners like to pre-suppose that all participants in cryptocurrency and blockchain systems will act rationality based […]
