Dr. Rettler is an Assistant Professor of Philosophy at the University of Wyoming.
In this essay, I want to clarify and respond to a prevalent claim regarding bitcoin: that “bitcoin has no intrinsic value. “Two preliminary things to note. First, this is not used merely as a normatively neutral descriptive statement; it is stated as a criticism. It usually appears in the following type of argument, often without premises: it is bad to lack intrinsic value. Bitcoin lacks intrinsic value. So bitcoin is bad. Or maybe: it is not worth investing in things that lack intrinsic value. Bitcoin lacks intrinsic value. So bitcoins are not worth investing in.
Second, “intrinsic value” has a particular meaning here, one that is used for investing. Owning bitcoins is often contrasted with owning shares in a company that produces a good or service. By virtue of the fact that the company produces a good or service and receives money for the good or service, the shares of that company are said to have intrinsic value. Methods of calculating the intrinsic value of a stock generally involve calculating the value of the assets the company has and / or expected future earnings. Bitcoin is not a company and it does not produce goods or services, so it has no intrinsic value. So goes the criticism.
I don’t want to argue that bitcoin has intrinsic value. And I don’t want to argue that this use of “intrinsic value” is illegitimate. People can use the terms however they want, as long as they explain what they mean when they use them.
Instead, I want to offer a different way of thinking about intrinsic value, one that we have inherited from Aristotle, Kant, and Mill. This way of thinking about intrinsic value will guide us as we consider what kind of value bitcoin has and what it gives it. that value.
In the traditional way of thinking about intrinsic value, the intrinsic value of a thing is the value it has in itself – that is, not in relation to anything else. That is, after all, what the word “intrinsic” half. The contrast is extrinsic value, which is the value that a thing has by virtue of its relation to other things. It is easy to think about the extrinsic value that a thing has, because you can think about the value that it has for you. For example, a bicycle has an extrinsic value because it takes me from one place to another. Wine has an extrinsic value because it tastes good. Money has extrinsic value because we can use it to buy other things. Extrinsic value is easy. It is much more difficult to determine if something has intrinsic value.
Perhaps bitcoin has no intrinsic value in the sense that investors use the term. But could it have intrinsic value in this understanding of intrinsic value? And if not, does it differ in this respect from stocks and precious metals? We can begin to address this question by asking ourselves: In this classic understanding of intrinsic value, do company stocks have value in and of themselves? No. They are valuable only to the extent that the company and the workers are valuable. So we can ask ourselves: do companies have value in themselves? Even here the answer is no. All are valuable by virtue of their relationships with other things: money, customers, employees, products, etc. Let’s go even one step further: does everything a company produces have value in itself? An iPhone, a watch, an airplane, a massage, a tax return, a database, a baseball card …
One way to answer this question of anything is to ask, why is it that thing valuable? If you consider that there is a sensible answer to that question, then that means that you believe that there is something else by virtue of which the original is valuable. And then you think that the thing is not intrinsically valuable. For example, we may wonder why an iPhone is valuable. An iPhone is valuable perhaps in part because it connects us with information and loved ones. Therefore, it is valuable because it brings something of value: connection with information and connection with loved ones. If you didn’t do that, it wouldn’t be valuable. So it is valuable, but not intrinsically valuable. But even being connected to information and loved ones seems not inherently valuable, because we can answer “why is it good to be connected to information?” with “gives us knowledge” and “helps us navigate the world” and we can answer “why is it good to be connected with loved ones?” with “it makes them happy and it makes me happy.” If that is correct, then being connected to information and loved ones is not intrinsically valuable, it is valuable by virtue of making us happy.
In fact, many philosophers think that the only thing that has intrinsic value is happiness. There are a few reasons for this. One reason is that if you ask “why is happiness valuable?” it is difficult or even impossible to answer. You might even assume that the person who asked did not know what happiness was. I would be tempted to say, “It just is. It is valuable on its own. “Another reason is that” It makes me happy “is (when true) always a good answer to” Why is X valuable? “- and we don’t feel the need to go on with” why is it? worth being happy? “A third reason is that it seems plausible that everything else in the world (Apple stocks, iPhones, bitcoin, friendship, love, etc.) is pursued insofar as it can bring happiness (or bring something that bring happiness, or bring something that brings something that brings happiness, or …).
Of course, there is the additional question of what happiness it is. That is much more difficult to say. Some say pleasure, some say a flourishing life, some say the life of a mind according to reason … We will not go into that further. There are also people who think that there are other things that have intrinsic value, maybe friendship, maybe people, maybe God… There are many candidates. I do not intend to resolve the issue here; What is important to note is that neither bitcoin nor any other investment would have intrinsic value in any of these theories. I’ll continue to assume it’s just happiness, but you can add to the list anything else that you think has value regardless of everything outside of it that is self-pursuing.
So happiness and maybe some other things have intrinsic value, and everything else is pursued insofar as it brings happiness, either directly or indirectly.
Bitcoin, then, is not inherently valuable. But that doesn’t mean it’s not valuable. In fact, bitcoin shares these characteristics with each concrete material object, and also with many immaterial things; if the above is correct, everything except happiness. Therefore, it is not a criticism of Bitcoin to say that it has no intrinsic value, as only happiness does.
But is Bitcoin valuable? That is a different question than whether bitcoin is intrinsically valuable, but it is no less important. If bitcoin is valuable, since it is not intrinsically valuable, it is valuable relative to other things. In particular, it is valuable by virtue of its relationship to happiness. So does Bitcoin bring happiness to people, either directly or indirectly?
To determine that, we must consider the reasons why people buy bitcoins. Some people buy it because their local currency is hyper-inflatable and they don’t have access to other stores of value, but they do have access to bitcoins. (I wrote about this here.) Some people buy bitcoins because their local government censors their transactions and they cannot buy the things they want with their local currency. Some people buy bitcoins because they want to pay for things digitally, but they are wary of PayPal, Visa, and other large corporations and do not want to give those companies their personal financial information. Some people buy it because they believe other people will find it valuable and will be able to sell it for more fiat currency than they bought it. For all these people, if you ask them why they are exchanging other things for bitcoin, these people are likely to give a series of answers that end up saying that they believe that having bitcoin is more likely to make them happy than having the other. things. And these people number in the millions.
Clearly, many people think that Bitcoin is valuable. They reveal this by exchanging things like their government-backed currencies for bitcoin. Some people think that index funds and Apple stocks are valuable. They reveal this by trading things like government-backed currencies for index funds and Apple stocks. But like bitcoin, index funds and Apple have no intrinsic value. Rather, their value depends solely on what people are willing to pay for them, which is based on their characteristics. In that sense, they are like * gasp * bitcoin!
So bitcoin, like everything except happiness, has no intrinsic value. The value of Bitcoin is determined by the way it generates happiness for the people who use it. Like almost everything else.
This is a guest post by Dr. Bradley Ritter. The opinions expressed are entirely my own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.