Robert J. Shiller, an influential economist who predicted the financial crisis of 2008, has explained in an article that in his opinion cryptocurrency is one in a long line of attempts to revolutionise currency, all of which have failed because they represent “deep yearning for some kind of revolution in society”, a drive which may be powerful but does not a viable currency make.

Who is Shiller

Shiller is a professor of economics at Yale University. He has taught there since 1982, and he has a CV as long as your arm.

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His book “Irrational Exuberance”, published in 2000, in which he analysed the speculative manias that drive financial bubbles, became a New York Times bestseller. He was awarded the Deutsche Bank Prize in Financial Economics in 2009 for his research into the financial market, and in 2011 he made it onto Bloomberg’s list of the 50 most influential people in global finance, under the category of ‘thinkers’.

Most notably, he was a co-recipient of the Nobel Prize for Economics in 2012, won for his “empirical analysis of asset prices”. And most relevantly to our purposes here, he predicted the 2008 financial crisis with a fair degree of accuracy exactly a year before it happened.

His new article, published in Project Syndicate, reveals his opinion of cryptocurrency.

The article

He argues that money is more than a simply an exchange of value; it can be seen as “a community’s avowal of faith in an idea”, and he gives some examples of new curencies. To make a list:

The Cincinnati Time Store. This was a shop established by anarchist Josiah Warren in May 1827 which operated until May 1830. It was the first experiment in mutualism, an idea which describes a society in which all individuals own their own means of production and trade is denominated in fungible labour units. In this shop the price of goods was defined by the amount of time invested in creating them, and no more. They were purchased using ‘labor notes’. For example, 12 pounds of corn were equal to one hour’s labour.

The goods in Warren’s shop were cheaper than those in nearby businesses, which led to one taking on the model. One problem that Warren was not able to reconcile was that some forms of labour are more difficult than others, and so the time spent in each labour is not strictly equal.

He closed the shop to move on to other projects, and considered it a successful experiment because it paid its way without making a financial loss.

In 1832 Welshman Robert Owen attempted a similar experiment in London called the National Equitable Labour Exchange system. This experiment folded the following year.

In the 1930s, in response to the Great Depression, two other ideas were proposed – the erg, a dollar based on energy, and the electric dollar, in which the dollar would be backed by electricity. Neither gained any traction or advanced beyond the theoretical stage.

In more recent times, the euro helped the EU become a unified entity in the minds of Europeans. This was not a new form of currency, but it does illustrate that money can serve a purpose as much ideological/psychological than economic.


To Shiller, Bitcoin is another pretender. He does not talk about the technicalities of it, not does he directly comment on its feasibility.

What he says is that Bitcoin, like the listed examples, represents a statement of faith; in this case, “a new community of entrepreneurial cosmopolitans who hold themselves above national governments, which are viewed as the drivers of a long train of inequality and war.”

The “public’s fascination with cryptocurrencies”, as he puts it, comes down to “mystery” – that of the technology behind it (which “Practically no one, outside of computer science departments, can explain”), that of “the value of money itself”.

Far be it from me to even attempt to criticise a Nobel prize-winning author and economist, but I will say that his critique of cryptocurrency as evidenced in this article is a far cry from the past analyses of financial markets that have brought him success.

Firstly, past experiments in new forms of currency may have failed, but it does not logically follow that all future experiments with new forms of currency will, as appears to be his insinuation.

Furthermore, I would point out one comment he makes is mistaken on at least two levels – that issuers of initial coin offerings claim to be exempt from securities regulation. He may be referring to Ripple and its current lawsuits, in which case he would be correct, but his assumption that tokens are undoubtedly securities is at least debatable, US law notwithstanding. In addition to this, cryptocurrency companies are increasingly asking to be regulated, perhaps not under securities laws specifically, but this does demonstrate that they could possibly be more than a mere experiment/protest at this point.

In an interview with Quartz in September 2017, Shiller said that the excitement that he saw amongst his students at Yale when they discuss Bitcoin reminds him of behaviour which has driven speculative bubbles in the past. Given the price explosion that was going on at the time, one can see how the similarity jumped out at him.

But at the time of that interview he did not know what an ICO is, and both then and now he has not even attempted to prove that this similarity is any more than circumstantial.

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