In three previous posts, I have described the regression theorem, discussed its practical applications, and considered some misconceptions. In this post, I will consider the regression theorem in light of bitcoin. The discussion around bitcoin and the regression theorem usually focuses on whether bitcoin has some intrinsic worth (read: non-monetary use). If bitcoin is intrinsically worthless, the regression theorem is invalid: an object might become money despite lacking a non-monetary use at the outset. If bitcoin had some non-monetary use at the outset, the regression theorem remains intact. In a new working paper, I argue that bitcoin calls into question the practical relevance of the regression theorem regardless of what one thinks about its intrinsic worth. Recall from my earlier post that the practical relevance of the regression theorem is in distinguishing which items might emerge as money without government support and offering suggestions as to how the government might launch a money that could not emerge naturally. Here’s my argument in brief:
- If bitcoin is intrinsically worthless, the regression theorem is invalid. If the regression theorem is invalid, it has no practical relevance.
- If bitcoin has some non-monetary use, that use must be pretty trivial. If trivial uses suffice, the regression theorem has little if any practical relevance.