This is the Cato Daily Podcast for Tuesday, February 27th, 2018.

I'm Caleb Brown.

The claims that fly back and forth about Bitcoin from defenders and detractors need to contend with some basic economics.

Will Luther is an adjunct scholar at the Cato Institute. He's written a great deal about

crypto currencies. We talked about the false and true claims about

crypto earlier this month. Why is Bitcoin not valuable? Yeah, it's a funny place to

start but a lot of Bitcoin proponents argue that it's valuable

because it's costly to produce, and it is costly to produce, but that isn't why it's valuable so if you think about you know you know so you might say

that going to a doctor right like a doctor is expensive because they spend so much time in school.

And so it's costly to produce.

But in fact, that gets the logic exactly the wrong way around.

Doctors spend all that time in school. They incur those costs because the

services they're going to be able to provide are highly valuable. And so it's generally

the case that, you know, the cost of producing something on the margin equals its value, but we shouldn't

confuse that with the cost causing its value, right? Rather, it's that people are incurring

costs, and in the case of Bitcoin they're

incurring the cost of process transactions to engage in this mining that

generates new Bitcoin because those Bitcoin's are valuable.

Yeah so it's that's one bad argument. because those

that's one bad argument from proponents of

never reason from cost to value always from value to cost

right because you can pay me a lot to dig a ditch. Yeah and that doesn't make the ditch

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