The Regression Theorem Is Neither A Priori Nor True

The regression theorem is one of the most celebrated contributions of the Austrian School of Economics. This is not surprising given what the theorem achieved in the eyes of many of its proponents:

1. The theorem showed for the first time how to use marginal utility analysis to explain the determination of the price of money. This integrated monetary economics with general economic theory, which in turn paved the way for some of the most important future contributions by the Austrian School, particularly in the area of business cycle theory.
2. The theorem showed that indirect exchange and money could only have originated out of market exchange and could not have been the creation of the state.
3. The theorem is a part of praxeology, which means 1) that it is an priori claim that is deduced from undeniably true axioms, and 2) that it is not possible to imagine, let alone observe, situations or events that contradict the theorem.

In this article I argue, however, that there are two main problems with the regression theorem: It is neither a priori nor true.

Podcast #1: Bitcoin and the Origins and Nature of Money

This week I had a conversation with Vijay Boyapati about how the emergence of Bitcoin has revealed some serious problems in the traditional Austrian account of the origins and nature of money.

Topics include: how Menger and the Austrians failed to understand the bubbliness of money; how speculation rather than use as a medium of exchange is what bootstraps bitcoin; what bitcoin can or cannot tell us about the origins of money; how money is actually better off without 'intrinsic value'; how the success of gold shows that bitcoin can have a future; how bitcoin isn't quite money yet and what this means; and much much more.