Bitcoin Is Not Democratic Part Three: The Separation Of Economy And Politics

Part three of the “Bitcoin Is Not Democratic” series explores the building blocks necessary to construct a civilization that transcends politics.

If you still happen to think Bitcoin and democracy are somehow related, then you’re either wilfully ignorant or you’ve missed parts one and two of this series, in which case, please read them here and here first.

You will understand exactly why tyranny prevails in the democratic state of Canada, led by its once again and recently democratically elected Prime Minister Justin Trudeau (who is supported by an entire swathe of people incapable of critical thinking; see #StandWithTrudeau).

Image source

But, if you’ve been following and have come to your own internal dismantling of the idea of democracy, and viscerally severed its relationship to Bitcoin, let’s explore what a world beyond political order, on a Bitcoin standard may look like.

By no means do I have any idea how any of it will play out long term, but I’ll do my best to inspire thought experiments across topics such as the law, autonomy, values, virtues, capital creation, violence, methods of organization and their scalability.

The Separation Of Economy And Politics

Much has been discussed on Bitcoin’s “separation of money and state.” I’ve personally done so in detail in my 2019 article “Rise Of The Individual, Fall Of The State.

Today, I posit a potentially greater separation: The Separation of economics and politics.

Bitcoin Magazine hosted a debate between Alex Gladstein from the Human Rights Foundation and myself almost two months ago when the first part of this series came out.

During the discussion, we built some common ground on the historical connection between economic and political power. Attaining one opens doors to obtaining the other, and in a self-reinforcing cycle, concentrates each. We agreed that Bitcoin fixes this, but I’m not sure the gravity of that truth is appreciated deeply enough.

Separating economics and politics may just be the most important socio-evolutionary step our species has made in millennia.

In a world where economic primitives can be influenced by politics, both economics and politics will be corrupted. Their corruption will last until reality catches up, forcing both both economy and politics to collapse, resulting in the emergence of a new order,, closer once again to truth.

The cycle then repeats.

Now … in a world where politics is subject to economic primitives that CANNOT by any means be changed, altered or manipulated by one player, for their own advantage (and subsequent disadvantage of others), we have accountability. And not the kind of long-term-cycle accountability experienced by the fall of corrupt institutions such as The Roman Empire, The Catholic Church or the modern State.

I mean fast, direct, clear accountability due to high fidelity feedback loops which occur as a result of there being no means by which to socialize mistakes, losses or poor economic behavior (such as taxation, unhinged debt, monetary inflation).

This sort of rapid adaptation has profound long-term implications for the very fitness of our species.

When we lie to ourselves, and have no link between economic reality and political method, we structure societal incentives in a way that morphs us into unfit, slow, weak, cheap, pathetic, sinful and immoral subhumans. These errors catch up with us on a long enough timescale, but because time preference is so high, nobody actually gives a shit when it matters.

This is why Bitcoin is so important. By reintroducing economic consequence, it makes it so that no amount of politics can ever again make us all blind men without a purpose.

Note that none of this means we do away with politics, or economics for that matter (some people are delusional enough to think that we’ll one day “transcend economics,” as if the product of one’s labor and inter-subjective value will disappear. Those same people also believe in leprechauns and the metaverse as “progress”).

What I’m talking about is something far more practical. The separation of economics and politics means the placing of politics on a short economic leash. People and the groups they form will ALWAYS have their own politics. What matters is whether or not they pay for their own mistakes and reap their own rewards.

By fusing economics and physics, Bitcoin orients the train tracks themselves (economics) in such a way that we do not fly off the edge of a cliff, no matter the train (politics) or conductor (leader).

Power, Work And Morality

The concentration of power is not necessarily a bad thing. It’s agnostic and often useful. It’s only when power is combined with hubris or stupidity that it becomes evil, and when evil can concentrate, we quickly discover hell.

This hybrid of power, stupidity and hubris runs naturally rampant in politics, because it lives in the vacuum of economic feedback. How can accurate (intelligent) value judgements be made when you’re ignorant to the feedback of your environment?

You’re like a blind, deaf man flying a plane.

This is why the concentration of political power and its use in attaining economic power always devolves into coercive means or transgressions on private property. By definition, it has to. The more rights that emerge as a function of ever-expanding politics (this is in fact what politics boils down to), the more plunder of the responsible party’s time, energy and resources must occur in order to balance the equation.

Hence Aleksandar Svetski’s “first maxim of political order”:

You cannot escape reality, but you can obfuscate it long enough to pick someone’s pocket.

As Frédéric Bastiat pointed out, labor requires an expense of energy and time. If I can acquire wealth or resources without work, i.e., a lottery, or through confiscation, whether direct or through some elaborate scheme (democracy, proof-of-stake in cryptocurrencies, etc.) then it’s relatively clear which I will generally choose (show me the incentive, I’ll show you the outcome).

Trust me I get it. We all want free things. Work is hard. Why work when it’s so easy to just take? The answer is simple:

Morality.

  1. Morality is work-infused, anti-entropic behavior.
  2. Morality and time preference are fundamentally linked.

Morality aligns with natural order (reap what you sow, Pareto distribution, property/territory, etc.) and moral behavior results in a higher probability of long-term prosperity.

It’s not just about what you can get now, but about what you can together produce over the long term. This is why collaboration and the economic means always trump coercion and the political means on a longer timescale. Morality is more robust and wins out over stupidity, gluttony and unhinged greed.

I’ve studied how philosophies, constitutions and entire religions have formed not because God told them morality was better, but because their founders and prophets sought the best meta to live by.

When the principles of the moral meta (the way) are skewed or discarded, which occurs in the process of its institutionalization, short-termism sets in, and we fool ourselves into thinking we can be immoral because “God is not watching.” Little do we realize that God is in the outcome, God is in the behavior, God is in the labor, God is in the meta.

We are so comfortable eating the fruits of labor that came from adherence to prior morality, that we only realize we fucked up when it’s too late.

Hence why continual “taking” is possible on a short enough timescale in a sufficiently wealthy and complex society. Entropy always catches up and forces the system to either correct (adopt morality) or fail.

Therefore my “second maxim of political order”:

Whilst you can obfuscate reality long enough to pick someone’s pocket, soon enough there are no more pockets left to pick, and we all suffer.

This is why Bitcoin’s relationship to work is such a significant part of its constitution.

If energy is the “universal currency,” then “work” is one of the “universal laws of economics.” It cannot be simulated, counterfeit or faked and because its existence (or lack thereof) results in immediate feedback on a Bitcoin standard, the incentive is to adopt morality as a means to wealth, power and prosperity (innate human drives we should never seek to remove lest we want to end the human race).

Work is economic.
Stake is political.

One is reality oriented.
The other is opinion oriented.

One adapts the map to reality.
The other is attempting to mold reality to the map.

The long-term liberty and prosperity of the human race depends on the separation of economy and politics

This is why we Bitcoin.

Enlightenment Values

The Age of Enlightenment (aka the Age of Reason) was an intellectual and philosophical movement spawned in the 15th and 16th centuries with the Renaissance and went on to dominate Europe during the 17th and 18th centuries.

The ideas and values that emerged during that period transformed the world and laid the foundation for the preeminence and greatness of the original “West.”

Some of the ideas, values and virtues included:

  • Sovereignty of the individual
  • Freedom of speech
  • Freedom of association
  • Private property rights
  • Pursuit of knowledge
  • Separation of church and state
  • Reason and science
  • Right to defend oneself
  • Freedom of belief/of and from religion

The great thinkers of the west came to realize that the atomic constituent of a society was the individual, and that he and his private property must be held sacred above all.

They realized that in order for truth to be discovered, these sovereign individuals must be free to speak, free to explore ideas, free to challenge each other and as such either correct their errors or build upon the principles and ideas found to be true.

They sought the development of a responsible and robust society, whose members had the capacity to defend themselves, and to voluntarily organize around causes, ideas, beliefs or philosophies they personally valued.

The founding fathers made significant attempts to encode these values into what has been the greatest political Constitution to date, in particular the First and Second Amendments, and from that emerged the greatest economic and political power since the dawn of time.

Unfortunately, the values the West was built upon, and the constitutions designed to uphold them have all but vanished under the banners of collectivism, politics, rights, dependencies, entitlements, compliance and dogmatic obedience to representative government overlords.

The heroes whose shoulders we stand on are rolling in their graves right about now.

As a result, and for the sake of our future generations, the time has come for a new constitution: one that is not rooted in politics or paper, but in economics and energy.

Bitcoin is a voluntary digital constitution which operates in accordance with natural laws, has no rewind button, cannot be simulated, is beyond the reach of any organization, group or institution and treats everyone the same much like gravity, the speed of light or any other physical law does.

“Finally, Bitcoin doesn’t care what you think. It doesn’t care about anything. What you think doesn’t matter; that is the ultimate power of Bitcoin. Bitcoin is like a force of nature. You must conform to ethical standards of behavior in the Bitcoin-mediated world, or starve, since the option of violence is taken off of the table.” — Beautyon, “Bitcoin is not Democratic,” 2014

Upon this substrate, society can be rebuilt and the Enlightenment values we’ve lost in the maelstrom of the modern state can once again guide us toward a life of meaning, a life of progress, and a life of prosperity.

With that in mind, what about the walls and structures we build atop it?

Let’s now turn our attention toward a series of factors that need to be addressed if we’re to establish a more robust, truthful and sound world.

Incentives Matter

One of the simplest and most basic axioms of economics is that you will get more of that which is subsidized or incentivised, and less of that which is disincentivised.

Democracy is bound by its own aspirations to cushion everyone and create a safety net. In doing so, society must cater for the lowest common denominator of human, across almost every dimension.

On the surface, it’s a noble-sounding idea. Give everyone the same rights, give everyone a voice, give everyone a say. Remove variable risks, consequences or danger by cushioning or covering it up.

But in practice it’s a completely different thing.
It creates ALL the wrong incentives:

  • Democracy ignores relative economic value or input, giving the same voice to everyone
  • Democracy gives lazy people and parasites a legal mechanism (an environment) via which to feed on more productive people
  • Democracy makes politicking the primary survival strategy, not productivity
  • Democracy gives everyone the dangerous idea that they have a say in another’s private affairs
  • places private property second to public property

In short, democracy caters for the lowest common denominator in society and thus incentivises people to continue to lower their standards in a perpetual downward spiral. A true tragedy of the commons.

Socialism and communism are similar, except instead of just creating the environment for parasitic behavior and incentivising the lowering of standards, they actually enforce equality by making sure everyone becomes the lowest, worst version of themselves.

They’re just more extreme, brutal and violent ways to get to the exact same end – obviously worse, but in some senses better because people can more quickly see it and revolt. Democracy is far more insidious.

Nevertheless, we have hope.

On a Bitcoin standard, productivity, competition, savings, accurate decision-making, efficiency, efficacy, economisation, quality, prudence, patience, profit, responsibility, work, cooperation and longer time horizons are incentivised.

Wastage, spending, consumption, mistakes, losses, sin, theft, violence, risk, dependence and high time preferences are disincentivised.

This happens at the individual and local level now, despite how early we are, and despite all of the madness, noise, scams, ransoms, theft and the like in and around the broader “Bitcoin industry.” The strength of the incentives and disincentives will only increase as we transition beyond the interregnum.

In the meantime, as I’ve discussed in “Fire, Bitcoin, Teleportation,” The Great Transition will not be a walk in the park; it will not be pretty and the incentives will be skewed toward doing everything and anything to survive as the systems of old dissolve, dismantle and destroy themselves.

None of the fallout will be a function of, or a flaw in Bitcoin, but will occur by virtue of its incompatibility with the legacy financial system, the legacy internet and legacy legislative law.

Unfortunately, this is the cold-turkey withdrawal we as a species must endure in order to detoxify our corrupt and dysfunctional civilisation. This is our rite of passage, and while it will be painful, the sooner we’re done with it, the better. The alternative is to remain on our current course and slowly construct our own gulags: an unwise option.

The question then follows, what sort of incentives do we want for society, once on a Bitcoin standard, especially if Bitcoin already naturally incentivises behavior we deem desirable?

The answer is simple … but perhaps not “easy.”

Don’t touch or play with the incentives too much. Let nature run its course, and people learn for themselves.

I believe the world must fragment into city-states because (a) local-scale governance seems to be where optimal economic performance will lie, and (b) it’s more probable for 100,000 people to have similar values than it is for 100 million.

This implies a patchwork of territories with a unique and varied set of values, principles, customs, norms, cultures and therefore incentives.

To the question that then follows, what should they incentivize?
My answer is “I have no idea. Each to their own.”

One of the many advantages (and beauties) of a fragmented, decentralized patchwork of city-states spread across the globe is that multiple “living” experiments can operate.

Some territories may want to incentivise commercial real estate and become hubs for logistics, offices, industry, etc. Others may want to incentivize leisure, and the pristine, untouched natural environment in their territory, and thus instead disincentivize “industry.”

Each method will have its own advantages and disadvantages. The difference is that on a Bitcoin standard, economic consequences cannot be escaped. Poor incentive structures will be punished, not by some “authority” but through losses and poverty (see the list of Bitcoin’s disincentives above). Good incentive structures will prosper economically and socially, for example; territories that ensure private property rights are upheld in exchange for a transparent membership fee, should in theory lead to more people wanting to participate and demand increasing, thus leading to a higher quality of member and if desired, quantity also.

This brings me to the next consideration; The Law.

The Law

“The law, then, is solely the organization of individual rights that existed before law.” — Frédéric Bastiat, “The Law,” 1850

If you’ve not yet read Frédéric Bastiat’s 1850 classic, “The Law,” then please make sure you do. It should be mandatory reading for every and any aspiring territory operator or governance provider on a future Bitcoin standard.

Bastiat makes a short, compelling and logically air-tight case for “The Law” being limited to nothing more than the preservation of private property rights. That is it. That is all.

Bastait defines “The Law” as “collective force” and as such, if it extends beyond its mandate to protect private property, then it by definition becomes the use of force for other means, which are ultimately infringements on private property rights; the very thing law exists to preserve.

“It is very evident that the proper aim of law is to oppose the fatal tendency to plunder with the powerful obstacle of collective force; that all its measures should be in favor of property, and against plunder.” — Frédéric Bastiat, “The Law,” 1850

The beautiful thing about Bitcoin is that private property rights can be protected by the immutable laws of mathematics, instead of depending on mutable laws of human agreement.

For the first time in history, we have wealth that nobody can take, assuming that one’s cryptographic keys are appropriately secured. This lowering in the cost of defense transforms the returns on violence to a degree never before possible.

With that foundation, we can then begin to think about contracts and contract law in meatspace.

A contract is a mutually agreed upon set of terms, or rules of a game, and these will definitely vary from territory to territory.

Contracts can be used as a way to establish certain incentives or disincentives, encode benefits, define limitations, and can in a sense act like modern legislative “laws” but remain consistent with the limitation of law to the preservation of private property rights.

When thinking about the contracts we want to establish, the question then becomes, which are most in line with that which is just?

Or another way to think about it, is commerciality. Contracts and relationships between entities and parties will tend toward more cooperative and mutually beneficial terms because of Bitcoin’s superior properties. You only get paid if you deliver the service. Forcefully taking everyone’s bitcoin is too expensive, and you may get away with it a few times, but it’s not a viable long-term strategy.

This is where reputation comes in, which I believe will play a large role in the future of contracts, their desirability and their enforceability.

Either way, these will all be underpinned by The Law’s restriction to the preservation of private property rights.

There’s very little I can add to this section that Bastiat had not covered in his incredible piece. As such, I will leave you with a final few paragraphs from Bastiat’s work, which are key to understanding how we should behave as we transition into a world of micro-states on a Bitcoin standard.

“What is law? What ought it to be? What is its domain? What are its limits? Where, in fact, does the prerogative of the legislator stop?

“I have no hesitation in answering, Law is common force organized to prevent injustice;—in short, Law is Justice.”

“It is not true that the legislator has absolute power over our persons and property, since they pre-exist, and his work is only to secure them from injury.

“It is not true that the mission of the law is to regulate our consciences, our ideas, our will, our education, our sentiments, our works, our exchanges, our gifts, our enjoyments. Its mission is to prevent the rights of one from interfering with those of another, in any one of these things.

“This is so true that, as a friend of mine once remarked to me, to say that the aim of the law is to cause justice to reign, is to use an expression that is not rigorously exact. It ought to be said, the aim of the law is to prevent injustice from reigning. In fact, it is not justice that has an existence of its own, it is injustice. The one results from the absence of the other.” — Frédéric Bastiat, “The Law,” 1850

Autonomy

Beyond the topic of law, we ask ourselves about autonomy and responsibility.

The disintegration of individual autonomy we’ve seen occur over the past two years has not only mired us in endless group identity politics, but it has eroded the very responsibility that makes individuals sovereign in their own right.

Autonomy is critical for this most central of enlightenment values.

This does not mean we do away with groups, associations, tribes or even nations (although I believe the latter’s days are somewhat numbered).

What it means is the autonomy of the individual comes first, foremost and before any form of fraternity. Once again, I quote Bastiat:

“We can assure them that what we repudiate is not natural organization, but forced organization.

“It is not free association, but the forms of association that they would impose upon us.

“It is not spontaneous fraternity, but legal fraternity.

“It is not providential solidarity, but artificial solidarity, which..