Some misplaced explanations of bitcoins as tradable units

This is an excerpt from Chapter 8, “Some illusions of enlightened explanations,” in my book, Are Bitcoins Ownable: Property Rights, IP Wrongs, and Legal-Theory Implications.

As important as it is to gain at least a basic technical understanding of Bitcoin, attempts to describe what its tradable units “really” are, as elaborated from some allegedly more enlightened perch, can sometimes distract more than aid when applying economic and legal concepts. For example, pundits discussing whether bitcoin falls under what they each consider to be “money” or not sometimes explain that bitcoin is really just a “ledger entry” or a “protocol token,” a harmless technical artifact of a promising new “blockchain technology.”

Whatever the root of or strategy behind such discourse, however, a bitcoin buyer does not in fact seek a share in a distributed ledger or any other such tortured monstrosity. He wants to buy a bitcoin in the same sense that he might want to buy a grapefruit. He in no way sets out toward the market to buy a share of a global orchard cooperative that also happens to entitle him to one grapefruit that day.

Molecular diagram of grapefruit mercaptan. Tasty.Nor is it relevant that a grapefruit is “really” organic molecules, water, and some other substances. For that matter, a physicist might go further and insist that a grapefruit is “really” nothing but some occasional quarks suspended in vast stretches of empty space. All such misused reductionism is irrelevant to understanding the buying and selling of grapefruit. It likewise has no bearing on whether grapefruits can be eaten without being paid for and how or if people ought to react if they are.

Really just quarks and empty space (Wikimedia Commons, Aleph)Economic theory and legal theory are fields concerned with human acts, such as acquiring, holding, trading, and stealing. Action is marked by verbs. If one is interested in understanding the grapefruit market, one does not seek first to master grapefruit-tree cellular biology, let alone quantum mechanics. It is sufficient for economics to view those grapefruits actually being traded as the relevant goods, the production, pricing, and distribution of which are to be examined using economics methods.

This implies the importance of taking care in selecting which fields of knowledge, aspects of the phenomenon, and “layers” of reality are the most relevant to consider in understanding what bitcoin “really” is, including with regard to whether it is ownable.

One must also proceed with caution in applying analogies. For example, it is easy to view bitcoin as just like other digital blips buzzing around the internet. However, it should be emphasized that buying a bitcoin is not like buying other digital goods, such as a copy of a song file. One does not buy a copy of a bitcoin, but a bitcoin itself. A bitcoin seller no longer possesses the bitcoin in question after the sale (and contextually sufficient confirmations). When one buys (a copy of) a song file, in contrast, the possessor retains copies from which to make more copies.

Most digital goods, such as documents and song files, are nonrival. They can be copied. Multiple people can use multiple copies simultaneously. “Stealing a copy” leaves the original as it was. It is not gone after being “stolen.”

Likewise, not only can a whole blockchain be copied, but some key part of its value derives from its actually being so copied and distributed with redundancy to numerous independently operated locations. A signed bitcoin transaction is also a short digit string that can be copied, sent, and resent around the globe in fractions of seconds. These are nonrival goods, as are cryptographic signing keys. With nonrival goods, one person can have one copy and another person can have another copy and each person can control these respective copies independently and simultaneously.

However, this is not the case with bitcoins. A bitcoin cannot be copied in any such way. It is rival in the same sense as a physical object or spatial location. In addition, a bitcoin cannot be sufficiently described as “just a ledger entry” because a ledger entry records something. This formulation alone does not yet explain what it is that is recorded.

From a unit perspective, bitcoins function as a digital monetary commodity according to strict economic-theory definitions. From an integral perspective, the units are inseparable aspects of the Bitcoin blockchain. They cannot exist without it and it does not exist without them. There is a nondualistic relationship between bitcoin units and the Bitcoin blockchain; while they are distinguishable conceptually, they are not separable in reality.

Announcing new book on bitcoin and legal theory

The first of several concurrent research and writing projects has just hatched: Are Bitcoins Ownable? Property Rights, IP Wrongs, and Legal-Theory Implications.

This is a study in the foundations and implications of action-based jurisprudence, forged through applying it to bitcoin. This brings together for the first time the two major fields on which I have been writing over the past five years.

The context includes relationships among crypto-anarchist thought (such as contract assurance through software code), conventional legal administration (bureaucratic classificationism and rule through law), and ideal legal practice (actual promotion of justice), as well as related philosophical issues such as the combined use of multiple knowledge fields and the ethics of legal practice. Among the book’s central themes is whether and how the same principles that both support property rights in measurable objects and locations and argue against IP claims in copiable ideas and abstractions may apply to the unique new case of bitcoin.

Here is the back-cover description:

Bitcoin has fresh implications for economics and law at many levels. This book addresses whether bitcoins ought to be considered ownable under an action-based approach to property theory, which—like bitcoin itself—transcends the boundaries of existing positive law jurisdictions. Beyond instinctive answers is a rich opportunity to examine the many technical facts and legal-theory issues involved. Bitcoin has a unique new place among types of economic goods, between the physically and spatially defined goods of property theory and the copiable, abstract ideas, patterns, and methods associated with IP rights. It does not fall so easily into existing categories.

The author brings together here for the first time his work in an approach to legal philosophy grounded directly in the analysis of human action, which he has termed action-based jurisprudence, with his several years of writing about bitcoin from a monetary theory perspective and contributing through articles, presentations, and video productions to raising general public understanding of how Bitcoin works on a technical level.

This content (22,000 words) is licensed under Creative Commons and has been made available in commercial paperback and Kindle versions on Amazon as well as other ebook store versions, and a free PDF of the paper version to facilitate quick and full access to the text, previewing, sharing, text searching (beats an index), quoting, and citation by page number.

Ways to support this work and encourage future work like it include spreading the word and sharing, writing reviews on Amazon and elsewhere, posting quotations, and buying a commercial edition.

Most of all, enjoy. Hopefully, no reader’s views on the topics addressed will remain entirely unaffected. Mine were not.

Paperback edition at Amazon ($6.99)

Ebook stores ($2.99): Kindle edition (free under Kindle MatchBook program for buyers of paper version), iBooks, Kobo, Nook, Oyster, Page Foundry, andScribd.

PDF of paperback edition (Free supplement to commercial editions or consider sending an optional bitcoin tip)

Watch the five-minute video introducing the book on my Amazon author page, which can also be followed for future releases.

The paperback version is available at least on US, UK, and EU area Amazon sites, but not sure about elsewhere. The Kindle version is available on most national Amazon sites worldwide.

Action-Based Jurisprudence II: Down under (and back again)

I gave a presentation at the wonderfully principle-centered 2nd annual Mises Seminar Australia in Sydney's central business district (CBD) on 2 December 2012. Here is a document version of my presentation, a close transcript arranged with selected content from the slides and rounded out with a list of readings.

Key themes included clarifying the difference between the ethical and the legal and differentiating "law" into five sub-disciplines, each with its own distinct domains and methods, conflating which (as is usually done) leads to serious problems (which we see all around us). It discusses who wins and who loses from contemporary complexity in legal definitions, and argues that the emerging action-based jurisprudence approach offers a better way of addressing the many contingent complexities of real life and culture without undermining fundamental principles of civilization in the process.

With Mises Seminar co-organizer and Liberty Australia co-founder and director Michael ConaghanDeveloping this for me started out as an attempt at a simpler restatement of the arguments in my August 2011 paper, Action-Based Jurisprudence: Praxeological Legal Theory in Relation to Economic Theory, Ethics, and Legal Practice," one that would be more accessible to people less versed in the background literature. As it developed, new territory and reformulations emerged. This included the three theory modules designed to help people grasp some difficult but crucial concepts without having to delve into stacks of academic books and articles to glimpse a solid initial understanding (after which, those stacks of books and articles can more profitably follow, and a strictly select list of them does, on the last two pages).

A substantially expanded and elaborated academic journal version, with more detailed references and footnotes and some additional new angles, especially on the relationship with action-grounded criminology (our understanding of what crime and criminality actually are), is also in the works.

With Professor Walter Block at 2nd Mises Seminar Australia (visiting Yanks!)There and back again

This was my first trip south of the equator. I had a wonderful time in Sydney and got to meet a number of people I had previously encountered only online, including among many others, organizing team members Michael Conaghan, Benjamin Marks, Washington Sanchez, Samuel Marks, and Anthony Coralluzzo. Before this weekend, I had only briefly met the legendary libertarian teacher/promoter and enthusiastic intellectual trouble-maker Professor Walter Block, but this time had the opportunity to speak with him at greater length. My presentation also came just after one of his (now in his 70s, he did five segments in two days and looked ready to do 12 more). I was stepping up right after someone who has been presenting at conferences since I was learning to walk, and I was touched afterwards that he referred back to content from my talk several times in his later segments.

I also got to talk at length with Michael Conaghan, co-founder and director of Liberty Australia, who is quickly becoming legendary himself in online discussion circles for regularly coming up with spot-on quotations from the relevant literature (even with occasional video clips of old Q&A sessions with Rothbard personally addressing the question at hand) and dropping them out of thin air into active discussion threads.

My last day was a solo trip by city bus to Bondi Beach and MacKenzies Bay. I told the waiter at the amazing Hurricane's Grill Bondi Beach that I didn't feel like leaving Sydney to return to the frozen German winter, but would rather send for my family to come down and join me. He just smiled and said this is the kind of feeling a great many people who visit Sydney seem to report. I could believe it. Maybe Hurricane's delivers to Germany?

Download the free PDF of the document version of the presentation.

BOOK COMMENT | The Constitution was already perfectly clear to begin with

"I do solemnly swear (or affirm) that I will... protect and defend the Constitution of the United States."

No, not the piece of paper; what it SAYS. Regarding what it says, my paper "Action-Based Jurisprudence" (2011) included the following one-footnote book review (p. 35, fn 31):

"[Randy E. Barnett, in Restoring the Lost Constitution: The Presumption of Liberty (Princeton: Princeton University Press, 2004)] argues that the US constitution’s actual conception of rights is essentially a libertarian one. He forwards an “original meaning” standard, which uses documentary evidence to establish what the language of the final enacted text meant in view of linguistic usage at the time. He contrasts this with “original intent” attempts to speculate as to what “the Framers” may have wanted to accomplish with the text. He argues that the restrictions and limitations in the document are placed on the powers of the federal government and not on the rights of the people and states it was designated to serve. The entire structure creates a “presumption of liberty” for the people in any area of dispute with the federal government.

"While he makes a compelling case for respecting what the Constitution says so long as it remains notionally in force, I find this line of argument weak if it is be viewed as a reform pathway. This is because, precisely as Barnett shows, the original document already made its own meaning perfectly clear. Yet despite this clarity, post-enactment history has still been a story of powers expanding and rights being limited in direct contravention of the unmistakable meaning of the enacted text. We should not expect the underlying factors behind this process to change based on another, even clearer presentation of the plain meaning of the enacted text, such as Barnett’s. The problem is that any state placed in charge of judging the extent of its own powers will surely manage to wear down, redirect and overcome such efforts at limiting itself, as the American experiment in substantive constitutional limitation so dramatically attests."

Barnett's own previous book, The Structure of Liberty: Justice and the Rule of Law (Oxford: Oxford University Press, 1998), makes substantial contributions toward understanding why a written constitution should in all cases fail to actually limit the activities of a monopolistic government indefinitely. Both books are insightful and worth reading, and the latter effort makes the original-meaning case well. However, the earlier book seems to be the more realistic one—by being the more radical one.

The problem with shouting “Tyranny!” in a crowded theater

This is a brief excerpt from my “Action-Based Jurisprudence: Praxeological Legal Theory in Relation to Economic Theory, Ethics, and Legal Practice.” Libertarian Papers 3, 19 (2011), pp. 36–37.

It is popularly repeated in “civics” type discussions of fundamental rights and responsibilities that one may not shout “Fire!” in a crowded theater. Merely intoning the name of this famous example is thought to be enough to remind or instruct those present that “rights” are not “absolute” and must be “limited.”

Before delving into the problems with this reasoning, it may be instructive to understand the shady history of the example. The original statement was: “The most stringent protection of free speech would not protect a man falsely shouting fire in a theater and causing a panic” (Schenk vs. United States 1919).

Oliver Wendell Holmes, Jr. was penning an opinion of the Supreme Court of the United States. Even though specific speech acts were under discussion, the (constitutional) “right” of free speech was considered. However, what is less widely known is that the actual speech in the case involved neither fires nor theaters. At issue were statements opposing involuntary military servitude (the “draft”) in World War I. Among the examples were leaflets that included such statements as, “Do not submit to intimidation” and “Assert your rights.”

It turns out, then, that a supreme agent of the state introduced this example to rationalize an opinion that obfuscated an otherwise clear issue in favor of that same state. The court, in effect, upheld the punishment of legitimate acts of opposition to an exercise of tyranny that was both unjust on general principles and explicitly illegal under the constitution that established the court’s own existence (“Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.” US Const, Amend XIII, § 1). It is no wonder that confused thinking might follow from such an example.

The rights/actions distinction shows how some of the general notions usually assumed to derive from the theater example are confused (see Murray Rothbard, The Ethics of Liberty, 113–18). First, a person has a right to be the one—as opposed to someone else—who controls his own voice. Yet shouting “Fire!” in the theater is an action. What is the means/ends structure? The means is to shout the word. It may be fair to assume, prima facie, that the end is to needlessly panic the crowd and disrupt the theater experience. This vocal act endangers and inconveniences other patrons and violates the explicit or implied rules set by the theater owner.

However, this need imply no “limitation” on the right of the shouter to be the one in charge of his voice. All that is needed is to say that he, as the absolute and undisputed user of that voice, is responsible for the actions that he takes with it, just as an “absolute and undisputed” motorcycle owner is responsible for the results that follow from how he rides his—or any other—motorcycle.

A simpler example more directly linked to the ownership model of rights further illustrates the importance and usefulness of the rights/actions distinction. The reason attacking another with a baseball bat is a non-aggression principle infringement has nothing to do with who owns the bat (maybe the attacker stole it) or whether ownership of bats can be “absolute” or not, or whether rights to own bats are “limited” by coming up against the rights of others not to be hit by them. Nor would it clarify matters if an archivist were to present a tattered parchment bearing a long lost, secretly ratified amendment establishing a “Constitutional Right to Own a Baseball Bat” (…which, especially for Americans, must not be denied or disparaged!).

What is relevant to praxeological legal analysis is the action of using a baseball bat to hit someone, regardless of who owns it or to which degree of alleged “absoluteness” it is owned. The bat is the means. The end is the result sought from the action of attacking—hurting the person and perhaps also stealing their property. The question of who owns the means—the bat—is not directly relevant to the injustice of the action—the hitting. It does not matter, unless there is some specific reason to argue otherwise (for example, ownership might function as one line of evidence showing what was done and by whom), whose bat is used.

On more robust theoretical foundations for legal philosophy

My article, “Action-Based Jurisprudence: Praxeological Legal Theory in Relation to Economic Theory, Ethics, and Legal Practice” was published in Libertarian Papers 3, 19 (2011).

"An interesting, provocative analysis...” —Stephan Kinsella, legal theorist, editor of Libertarian Papers, Senior Scholar at the Mises Institute, and director for the Center for the Study of Innovative Freedom

"This piece is striking...” —Allen Mendenhall, editor of the The Literary Lawyer

REVIEW | Law and Revolution II: Religion, law, and economic transformation

I just finished Law and Revolution II: The Impact of the Protestant Reformations on the Western Legal Tradition by Harold J. Berman (Harvard, 2003), published 20 years after Law and Revolution: The Formation of the Western Legal Tradition (Harvard, 1983).

The two Law and Revolution books are indispensable to the list of must-reads for becoming truly educated, taking oneself beyond the usual state-supportive propaganda found in textbooks and standard-issue academic output.

Berman is no ideologue, but he has great respect for the power of ideas. His agenda is to provide us with his best take on legal history based on a tremendous grasp of the historical and theoretical material. He also wants us to ask questions about where the Western Legal Tradition has come from and where it is going.

The level of depth, detail, clarity, and organization of this book is high. The author was a true teacher and clear researcher and thinker, and his deep knowledge of and reference to the original sources are both impressive and easy to follow. His conclusions are not merely things he wanted to say anyway; they are thoroughly informed by the patterns documented. He does not merely state his case; in good legal form, he makes his case.

The biggest takeaway for me was the power of ideas in shaping institutions. He argues that the German and English revolutions included comprehensive changes to legal philosophies, legal science, and substantive and procedural law (though all ultimately staying within the broad Western Legal Tradition) and that many of these changes were not only in harmony with the theological doctrines of the major Protestant reformations of the period, but were in some cases literally authored by some of the Protestant leaders, especially in the German case.

In contrast to Marxian and Weberian perspectives, Berman shows religious changes bringing about legal changes, which then ultimately brought about economic development to the extent that the changes enabled greater predictability and security of property and investments. Thus, Protestant "ideology" was not merely an "apology" for economic changes, but was among their driving forces. Also, Berman argues that the impact of Protestantism on economic law came not primarily from an alleged "individualism," as in Weber, but rather from the communitarian elements of Calvinist belief. For example, wide participation in subscriptions to the new format of the joint stock company was understood by many of the people actually engaged in it as form of mass action for the betterment of the world. This illustrates one of Berman's wider and refreshing (in modern academia) approaches: to take seriously what the people who were involved actually stated they were doing and what their own objectives were.

Another key point that I derived as I read was the degree to which these legal changes in the 16th and 17th centuries in Germany and England constituted the establishment of theocracies. Berman's own thesis is that much more than a "secularization" of the formerly spiritual jurisdictions, as many historians would have it, these periods were characterized by a "spiritualization of the secular." Indeed, the "secular" authorities took on, through their new laws and administrations, the religious tasks of enforcing religious morality and forwarding their view of what was needed in the secular world for the greater promotion of salvation, according to their Lutheran or Calvinist belief systems.

In the event, the felt need to have one state religion or another led to a couple of centuries of horrific religious warfare, with genocides, massacres, terrorism, the whole package. The idea of "toleration" during this period of the idea's early development was to grudgingly refrain from burning at the stake the adherents of a few approved select denominations, even though they were not the state religion at the time.

As I read, I connected the theocratic character of the legal changes of this era with the genesis of what I call do-gooder government, which thrives to this day. The Reformations provided strong impulses in the direction of using the powers of the state to "do good" for people, to try to make them be better in a particular religious context, to explicitly reform society in a religiously inspired image. [Update: For a brilliant sci-fi film treatment of do-gooder government in action, don't miss Serenity.]

I would add that while these religious changes certainly inspired legal changes, there would also still have been a certain process of selection of viewpoints. In other words, not just any set of new religious ideas, at least in their relation to state power, could have had the same influence. The princes had to take up these changes to some extent. I would submit that only those religious belief systems that would serve certain power interests, particularly those powers positioned to help incubate the systems while using them to their own advantage, could have been taken up in this particular story. Other ideas would have been ignored or worse.

In other words, though these were revolutions, the parasitic apparatus of the proto-state was doing some evolutionary selection of the ideologies leading the revolution. I do not take this to mean that these religious/legal innovators did not believe what they were teaching (in the way that cynical Marxians inevitably discount people's own accounts of their own motivations). Indeed, one of the disturbing things as I read Berman's accounts of original sources was sometimes the realization that these figures actually did deeply believe in many of the things they were writing! My point is rather a metaphorical application of the anthropic principle: the religious traditions that grew and survived also had to do so in the given power context. To become part of a new state religion, for example, a religious opinion would certainly have to be supportive of...well...the state. Just think of all those anti-state religions that were adopted as official state religions! (Well, Christianity, perhaps, but it had to shed its initial anti-state character well before it could serve as state religion).

As was the case in the first Law and Revolution book, Berman again notes numerous instances throughout Volume II in which the presence of legal competition of various kinds in Europe tended to improve the quality of legal procedure and content over time. For example, the competition for cases among the various courts in England, each with different sets of both substantive and procedural law; or the competition of German princes to hire a limited pool of qualified civil officials and judges, each of whom was free to work for any of the various German states.

There is so much detailed richness from the past in this book. So many personalities, legal cases, stories, come to life. It just has to be read to get the full effect. Don't miss it.