Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics | Lex Fridman Podcast #284

You can't have permanent war without fiat. And I also think there's a case to be made that you can't really have fiat without war.

The following is a conversation with Saifedean Ammous, one of the central and most impactful economists, philosophers, and educators in the world of Bitcoin. He's an Austrian economist, an anarchist, and the author of The Bitcoin Standard and the new book, The Fiat Standard. Saifedean does not mince words in his criticism of economists and humans in general with whom he disagrees. For example, Paul Krugman, who is a neo-Keynesian economist and a previous guest at this podcast. Saifedean's opinions are strong and often controversial. I do push back in this conversation, playing devil's advocate or trying to steel man each side. But as always, I do so in the service of exploring the rich space of ideas that Saifedean has about human nature and human civilization. I trust the intelligence of you, the listener, to come to your own conclusions. That is the burden of being a free-thinking human. It is on each of us individually to dive into this chaos of ideas, and from that chaos, discover long-lasting universal wisdom to live by. This is the Lex Fridman Podcast. To support it, please check out our sponsors in the description and now, dear friends, here's Saifedean Ammous. Let's start with the big question. What is money and what is the role of money in the history of human civilization?

Money is a medium of exchange. The thing that defines money is that it is a good that you don't buy for its own sake because you want to consume it itself or because you want to employ it in the production of other goods, which is what capital goods are. So we have consumption goods. We have capital goods. Money is distinct from those two because it is a good that is acquired purely to be exchanged later on for other goods. So, you just not something that you acquire for its own sake, you a- you acquire it so that you can then later on exchange it and that's a market good. That's a market good like all other goods. You know, it's a, you, you acquire food because you eat it. You acquire a car to move you around. You acquire money so that you can exchange it for other goods. And that's something that, um, many people have a hard time grasping, of the concept of money as a market good, but it is a market good, just like all others. And the importance of it is that it allows us to trade. It allows us to develop, um, to develop the division of labor, which would not be possible at any kind of sophisticated level without money. So if, um, you know, if we live in a small society of 10 people, then, uh, think about all the things that we can make, all the things that we can produce. Uh, i- if we're only 10 people isolated from the world, there's only very few things that we can make, and therefore, um, we can exchange those things directly with one another. But as, you know, if we get in contact with other societies that have more people, then the opportunities for specialization increase. You know, if there's 10 people, the only thing that you can make is, uh, the very basics you need for your survival. But if you're part of an economy of 10 million people, there's much more room for specialization. You can make a car. You can make a house that's very mo- sophisticated and that relies on the division of labor. That relies on you specializing in doing one tiny little thing which is not what you consume. You know, you, you con- and you trade that thing for all the things that you consume. So, as the economy becomes more sophisticated and involves more people, and currently we're all part of a, of an economy of almost eight billion people, um, each one of us produces one tiny little thing. And they exchange that thing for all the things that they want. And so because we specialize, we become more productive in doing the thing that we're good at. So, you know, there's people out there who are engineers who are designing windshields in cars. It's a very specialized thing. They sell windshield design to Mercedes-Benz and then from that, you know, th- that windshield design is, um, added onto millions of cars around the world. And from that, they're able to get enough money to meet all of their needs. So the division of labor is enhanced enormously with money because without money, it's very difficult to be able to exchange, um, a large number of goods. It's very difficult to have a sophisticated economy with its large degree of specialization because, um, it's, it's very difficult to find people who want the thing that you have and have the thing that you want. We call this the coincidence of wants, and that's really the problem that money solves. So you make apples and I make oranges. I'd like to have some of your apples, but you don't want my oranges. And that's, we have a problem of coincidence of wants. So what do I do? You want bananas. I need to find somebody who has bananas, give them my oranges, take their bananas, give you their bananas, and then I take the apples. In that case, bananas are a medium of exchange. So it's natural that a medium of exchange will evolve and will emerge in an economy as an economy becomes more sophisticated. As we move beyond 10 people and 10 goods, it's inevitable that we're going to come to a situation where we have the problem of coincidence of wants, and the way to solve that is to use a medium of exchange. And it can be anything. It can be a banana. It can be, um, food stuff. It can be any kind of good. As long as I acquire the good with the purpose of it, passing it on to you, not for the purpose of me consuming it or using it, then that's a medium of exchange.