Bottlecaps, are they as good as any other form of currency? Does it even matter if the currency is considered intrinsically valuable, or is it enough that people think that their bottlecaps are worth food and services?
W.I. Thomas and D.S. Thomas, two famous yet equally dead sociologists, said “If men define situations as real, they are real in their consequences1”
The designer of Bitcoin, Satoshi Nakamoto2, seems to think the same thing when he says “[Bitcoin is] very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though.”
Wait. That’s actually a horrible quote, let’s try Peter Šurda instead. He says “According to my opinion, the rational expectations of the potential utility of Bitcoin for the potential buyers exceeded the price demanded by the producers, and trade emerged”.3 Put another way, when the people making Bitcoin started selling Bitcoin and people started buying Bitcoin because they saw value, Bitcoin became a tradable commodity. That’s it, no magic, no eureka moment where someone shouted “I’ve struck gold!” Just people trading something until it became ubiquitous enough to be equally valuable to any other given person. Suddenly my Bottlecap collection doesn’t sound so dumb, huh?
What is a bottlecap by any other name?
So now us bottlecappers are freak’n rich, right? But wait, it’s not quite as easy as that! See, someone has to actually think the bottlecaps are valuable in order for them to be traded for in the first place. Sure, you could hoodwink some people into thinking Bottlecaps were a legitimate currency, but once someone finds out what you are up to, you’ll be the literal toast of the town. Implication being that they’d burn you alive in front of city hall.
See, this is what is known as the subjective theory of value4 which means that a good is only as valuable as what any given person thinks the good is worth. So, a bottlecap can be a real currency if people really believe in it. But the core value of a currency is that everyone else believe the bottlecap is valuable too. This is where the Regression Theorem comes in.
The Regression Theorem5 is basically a long winded theory by an even longer winded libertarian known as Ludwig von Mises that says currency can all be traced back to a point in time where the currency was considered valuable without being an actual usable resource, IE gold. Overtime, the currency takes on a position of value based on its representation of other goods and services that have been traded for the currency in the past. So, if we want our bottlecaps to be worth a darn, we need to make bottlecaps valuable without melting it down to make cans for tuna.
… What if we used the bottlecaps to represent something else which is not as easy to transport or handle, like a lot of water? Hmmm… That could work, at least until the water was used up and the bottlecaps became worthless, right? Wrong.Old Mises actually had a pretty good idea with his theory because people will keep using a system of currency even after the value of an item is lost or made unusable.
Spaghetti Monster Money
Money doesn’t even need to be real or valuable for people to think it’s worth something. There were these huge stones called Rai stones6, which some tribes started using as currency. The stones were too big to carry and no one wanted to cut them up, so people just owned percentages of the stones. The crazy thing is, when the stones sank into the ocean, everyone just said “The stones are still there, so I still own two portions of the Rai stone at the bottom of the sea.” So, while a currency needs to be valuable in the beginning, it can lose that quality later on and still be used as a currency.
So there you have it, if you want to make bottlecaps a currency all you need to do is stockpile something valuable enough that people want it and then you can start passing out the bottlecaps as tokens for your commodity and then finally your hoarding obsession will be validated! All it took was a worldwide apocalypse to destabilize all other economic systems enough for your rusted caps to seem like a good idea. Well worth it if you ask me!