Legal questions must be met with legal approaches and ethical ones with ethical approaches. Clear differentiation and healthy division of labor between law and ethics are part of the bedrock of civilization and are neglected at such civilization’s peril.
Read MoreAs 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.
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)
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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.
Well before getting “distracted” by the theoretical interpretation of Bitcoin for most of 2013 and probably well beyond, one of my central projects, still ongoing, has been to explicitly apply the action-based methodology of Ludwig von Mises and Hans-Hermann Hoppe to the philosophy of law. This is a project that had already been greatly advanced by the work of Stephan Kinsella, in my view, and I have tried to make this approach even more explicit and systematic, naming it action-based jurisprudence. This has led to some additional clarifications, foremost, what I consider a clearer differentiation between the respective natures and roles of legal theory and ethics, as well as clearer divisions between legal theory, legal practice, and (forthcoming) criminology.
I recently came across some interesting comments that reminded me of how this background influenced the way I approached understanding Bitcoin right from the beginning. Jorge Casanova in a thread in Spanish, referenced my 2011 paper, “Action-Based Jurisprudence” (links to that and related work here) and makes some good points, tying this to larger themes. The key insight is that phenomena under investigation are wholes and it is our own methods that illuminate different aspects of them (rather than the aspects being as separable as they might casually appear from attempting to reference only one field). He also cites, as I did, the example of money, which cannot be understood well without applying both economic and legal concepts (whether done explicitly or unconsciously):
[Google translated]: “There is a nature of money as a whole, with economic and legal implications, but inseparable from each other since the phenomenon (the money, or the bank if any) is absolutely inseparable from its legal and economic nature as a whole.”
A couple of years after writing that first action-based jurisprudence paper, I have just recently used legal status as the basis for proposing a new approach to monetary typology that can account for Bitcoin, which appeared for the first time in the video “Bitcoin Decrypted” Part III (December 2013). In this model, the most relevant thing about the category of “commodity money” is that it is a market good that requires no particular legal status that differs from that of any other good. Other types of monetary objects often rely on some form of legal status to prop them up, and this usually entails some degree of artificial legal privilege.
Another important factor in “commodity” is that a commodity good is one that is interchangeable with other units and is basically as easy to either buy or sell at the going market price. This is distinguished from other items, foremost specialty items, for which the relative positions of buyers and sellers differs widely. For most—non-commodity—goods, it is easy to go to a store and buy something, but much harder to turn around and sell it again. New cars, for example, famously take on a substantial price discount as soon as they are “driven off the lot.” On a commodity market, however, the relative positions of buyers and sellers are much closer in terms of the relationship between price spreads and relative ability to have transactions executed in a timely way.
In contrast to these two factors (a legal one and an economic one), it seems to have become more typically understood that the important thing about “commodity” in monetary thought is its apparent reference to the tangibility or materiality of historical commodity monies. However, I argue that this is turning out to be an incidental historical characteristic, rather than a theoretically fundamental one (See On the origins of Bitcoin: Stages of monetary evolution” (PDF, 3 November 2013 revised edition).
It is interesting to note in this connection that tangibility is a type of physical characteristic. As such, it requires neither economic theory nor legal theory to define it. It can be defined in terms of the natural sciences, referencing certain physically measurable properties, or their absence.
Legal status, in contrast, must be understood on the back of some kind of legal theory, while degree of liquidity/marketability/saleability is an economic-theory conception. In sum, these two factors, legal status and liquidity, both properly belong to the (“praxeological” or action-based) social sciences, whereas questions of tangibility or materiality (or the identification of one metal as contrasted with another) are first of all natural-science questions. In the same sense, the identification of cryptographic properties such as those of cryptocurrencies is first of all a mathematical and cryptographic issue, likewise not a social-science issue, per se (only secondarily, in that acting people are reflecting such elements in their actions and value scales).
What follows is the original comment in Spanish for those who can read it or run it through an online translation widget, which seems to create something at least vaguely comprehensible in the case of Spanish to English (as opposed to the hilarity that ensues from Japanese to English machine translation):
No hay tal cosa como la economía por un lado y el derecho (o en un sentido más amplio el entorno institucional) por el otro. De hecho, resulta muy ilustrativo el sensacional trabajo de Konrad S Graf titulado “Action-Based Jurisprudence: Praxeological Legal Theory in Relation to Economic Theory, Ethics and Legal Practice” publicado en Libertarian Papers (Vol. 3, 2011)… y cuya primera parte me parece uno de los más brillantes razonamientos sobre teoría legal praxeológica que he leído hasta la fecha. En resumidas cuentas, Graf señala que la praxeología se divide en tres “niveles” (raíz, tronco y ramas, usando la metáfora de un árbol) y que las dos ramas fundamentales (cada una con varios elementos) son la teoría económica y la teoría legal, y señala además que hay determinados fenómenos (el primero de los cuales es el dinero y banca) que no pueden entenderse sin aplicar simultáneamente las implicaciones de ambas ramas, la económica y la legal. No es posible, al tratar el fenómeno monetario hablar de una naturaleza económica del dinero y de una naturaleza legal (o institucional) del mismo, ni tan siquiera en términos analíticos y teóricos. Existe una naturaleza del dinero como un todo, con implicaciones económicas y legales, pero indisociables entre sí pues el fenómeno (el dinero, o la banca en su caso) es absolutamente inseparable de su naturaleza jurídico-económica como un todo. Desde el momento mismo en que la praxeología no es solamente ciencia económica, sino que es ciencia de la acción humana en general (y a partir de los trabajos que venimos desarrollando personas como Josema C España y un servidor, estamos cada vez más cerca de hablar de todo un paradigma de filosofía primera incluso, lo que va aún más allá del método de una serie de ciencias en particular) no es posible disociar un elemento puramente económico del más general elemento de acción humana.
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.
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?
"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):
"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."
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.
Research and writing portal for the work of Konrad S. Graf. Focus areas include monetary theory and bitcoin, legal philosophy, evolutionary health, Japanese translation, and Spacial Dynamics.
