24 June 2015

Wildcat Currency: How the Virtual Money Revolution is Transforming the Economy

Edward Castronova
2014, Yale University Press, 320 pages, £17.99
ISBN 9780300186130

Reviewer: Nigel Dodd, Professor of Sociology, London School of Economics

Edward Castronova’s Wildcat Currency can be added to a growing list of new books that chart radical changes in our monetary landscape: from the demise of cash, through the emergence of new monetary forms such as local and time-based currencies, to new payments systems and digital currencies such as Bitcoin. These books pose varied questions, for example about what the end of cash means for privacy, the impact of new monies on financial inclusion and social justice, and the implications of cryptocurrency for banks and states. Castronova’s book seems to have started out as a discussion of gaming currencies (“There are a lot of funny currencies out there”, he states on page 1) before expanding into a more general exploration of private money, i.e. money that has been issued by private actors rather than by states – this is the wildcat currency referred to in the title. “We will soon live in a world in which anybody can issue her own currency and create her own payments system,” he argues (p. 127).

In saying this, Castronova seems to be working with an image of conventional money as created by states. If so, he misrepresents the reality of most monetary systems in advanced capitalist economies where the majority of money in circulation is created by commercial banks. All he says on this issue, somewhat vaguely, is that at some point in its history money “became tangled up in the banking system” (p. 65). But the real point of Castronova’s analysis is to analyse the myriad possibilities for transforming money that gaming currencies have created, and on this level the book is certainly an enjoyable and fascinating read.

Along the way, he resorts to some surprising arguments, which I found unusual in a book about money. He suggests, for example, that although a world in which there are multiple currencies may be less efficient and riskier – i.e. states may find it harder to raise taxes, and therefore may not be able to insure us against poverty, accidents, old age and so on – we are more likely to feel able to engage with money emotionally in such a world, because virtual money can offer a range of “counting experiences” (p. 143) that are more satisfying, motivating and fun. While Castronova concedes that monetary diversity per se is not especially new (see pp. 174-5), he characterizes its return in terms of leakage from the virtual economy of games, social media and online markets into the real economy of “brick-and-mortar economic actors” (p. 198). This leakage will be a result of the simple fact that most of us participate in both worlds.

Beyond this, however, Castronova is reluctant to make concrete predictions: changes to money may come slowly, or they may erupt, he suggests on p. 199. What might make the difference are government policies, so Castronova spends the last chapter considering how the state’s tactics for dealing with financial crime, the response of central banks to the emergence of digital currencies, and the state’s response to the association between virtual currencies and tax evasion, may all have an impact on the future of so-called wildcat currencies. His conclusion is that governments should be able to distinguish instances where virtual currencies are used “seriously” from instances where they are just fun. Or in other words, don’t tax play.

Overall, I think the book tries to do too much, veering from a far-reaching analysis of the future of money to a more focused exploration of gaming currencies. I also find the underlying premise of the book – that “state money” can be opposed to “private money” – rather problematic and misleading. But that aside, there are lots of interesting ideas here and it is refreshing (and, ultimately, rewarding) to see a scholar with Castronova’s background (in media and cognitive science) engaging with money in this way.