Blockchain and investment: An Austrian approach


Investment is a function of expected profit, which involves calculation of the cost of trust. Blockchain technology is a new institutional technology (Davidson et al. 2018) that industrialises trust (Berg et al. 2020). We therefore expect that the adoption of blockchain technology into the economy will affect investment and capital structure. Using a broad Austrian economic approach, we examine how blockchain technology will affect the cost of trust, patterns of investment, and economic institutions.

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  1. 1.

    See, e.g.

  2. 2.

    What Menger called ‘higher-order goods’, Böhm-Bawerk (1889) called ‘roundaboutness’, Hayek (1931) called ‘stages of production’, and Lachmann (1956) called ‘heterogenous capital’.

  3. 3.

    “Hayek greatly simplified the Austrian vision of a capital-using economy by modelling the economy’s production activities as a sequence of inputs and a point of output.” (Garrison 2001, p. 2).

  4. 4.

    Obviously, this prediction depends upon factor elasticities and bargaining outcomes as to where rents are captured, i.e. whether by consumers through lower prices (income effects dominate) or by other factors as increased rents (substitution effects dominate).

  5. 5.

    This accords with Adam Smith’s (1776) idea of the origin of wealth arising from the market process of an increased division of labour and division of knowledge.

  6. 6.

    Sustainable economic growth in long run consumption is only possible through an exogenous increase in technology (e.g. real business cycle theory, Nelson and Plosser 1982) or change in intertemporal preference that induces longer capital structure.

  7. 7.

    viz. “The early bird gets the worm, but the second mouse gets the cheese.”

  8. 8.

    Equilibrium theorising arrived mid-century with the formal turn in economic analysis ushered in by Paul Samuelson, Arrow-Debreu, et al. (see Mirowski 1989). This provided the context for generalised theoretical and empirical analysis of departures from equilibrium in terms of bounded rationality, imperfect information, competitive frictions, etc.

  9. 9.

    And some Post-Keynesian analysis, building on Keynes (1936: ch 12) (e.g. Shackle 1978, Loasby 1999).

  10. 10.

    This was the analytic direction Austrian economics was heading before its mid-century defeat pulled focus away from analysis of decentralised orders.


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Allen, D.W.E., Berg, C., Davidson, S. et al. Blockchain and investment: An Austrian approach. Rev Austrian Econ 34, 149–162 (2021).

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  • Blockchain technology
  • Austrian capital theory
  • Institutional cryptoeconomics
  • Cost of trust