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"It's very possible that I could be the first presidential candidate to run and make money on it."

— Donald Trump (2000)

The memecoin theory of democracy

The "folk theory of democracy" posits that elections are a contest of ideas in which candidates offer policy proposals and voters vote for the candidates whose proposals they most agree with.

Most of us implicitly believe this is how elections work (everyone cites some policy for how they vote) — and when the policy outcomes inevitably fail to meet our expectations, we attribute it to politicians being bad people.

(This might also explain why Congress always has an approval rating in the mid-teens — we seem to disapprove of the people we keep voting for.)

The "institutionalist" view of political science, however, eschews moral judgments and instead studies how the rules and structures of a political system determine the behavior of our elected officials. This steers even well-intentioned politicians toward partisan, short-sighted or ill-considered policies.

The academic authors of the SAGE Handbook of Political Science explain that "the emphasis on the atomistic individual [gives] insufficient attention to the mechanisms through which structures influence the behavior of those individuals, both normatively and through incentives and disincentives, for behavior."

Or, as another study found, "incentives matter, even for politicians."

This emphasis on incentives feels more explanatory to me: Rather than wondering why politicians always seem to be bad people, we should instead wonder what kind of incentives they are understandably responding to. 

Structural factors — like who votes in primaries, the arcane rules of campaign finance, gerrymandered congressional districts, and the winner-takes-all Electoral College — incentivize political behavior that appears self-serving and partisan.

It logically then follows that all politicians appear self-serving and partisan because those who don’t respond to these incentives are soon voted out of office.

Political science departments have been studying these structural incentives since the ancient Greeks: "For many ancient political philosophers such as Aristotle," the SAGE Handbook writes, "the assumption was that constructing institutions was the way in which to control human behavior and shape the outputs of governance."

To understand the behavior and outputs of President Trump’s government, however, polisci departments will have to update their textbooks with a new course of study: memecoins.

Show me the incentives and I’ll show you the outcome

President Trump’s decision to launch a memecoin has of course raised concerns about foreign actors buying influence with the commander in chief, corporations making unlimited and unregulated political donations, and outright bribery by anyone seeking favors from the federal government. 

I’m hopeful nothing as blatantly corrupt as that will happen.

But you only have to believe in the subtle power of incentives to be gravely concerned — the TRUMP token is a $40 billion incentive that seems sure to influence the president’s behavior. 

To realize his paper profit, the president will have to do whatever it takes to ensure that the TRUMP token holds its value over his three-year vesting period (assuming it’s binding).

I expect he’ll manage it because he is uniquely suited to the task — memecoins tokenize attention and who has ever been better at generating attention than President Trump?

In 2016, he won his first term in office in large part by making the most of the Web2 attention economy we live in.

Saying outrageous things that would have disqualified any previous presidential candidate generated the constant media attention that kept him front of mind for voters — a successful strategy that definitively proved the aphorism "all PR is good PR."

Now, in his second term in office, Trump’s monetizing the Web3 attention economy with the launch of his memecoin.

Assuming that President Trump is not superhumanly immune to the $40 billion incentive the crypto industry has created for him, here’s what that might mean: The next four years of history will be shaped by whatever actions help President Trump best attract attention to himself.

More specifically, it will be shaped by whatever actions attract attention from people who are likely to buy a memecoin.

This will have real consequences.

The economist Alex Tabarrok noted in a blog post this morning that "voting in a democracy mirrors spending in a market. Both systems empower individuals — consumers or voters — to shape outcomes."

To whatever extent that is correct, the launch of TRUMP means that memecoin traders will be shaping outcomes over the next four years.

If you’re at all familiar with the type of people who buy memecoins, you’ll share my dismay over this development.

(Full disclosure: I sometimes buy memecoins.)

What this means in practice is anybody’s guess because Aristotle didn’t seem to cover memecoins in his foundational treatise, Politics (I checked the index).

But my first guess is that the memecoin incentive will mean we get even more identity politics than we’re already plagued with (because they so effectively attract attention).

My second guess is that we’ll get a steady stream of wacky but somewhat plausible policy proposals such as, I don’t know, renaming the Gulf of Mexico, for example, or threatening to seize the Panama Canal — or, if Trump still has some tokens to sell in 2029, maybe even running for a third term.

(Not to mention some obvious things like a bitcoin strategic reserve, an America-first strategic reserve, memecoin ETFs…)

If either voters or political scientists attempt to explain these happenings with their existing mental models, I expect they will spend much of the next four years being confused.

The only way to make sense of what’s to come will be to understand what kind of presidential statements, behaviors and policy proposals might make memecoins go up. 

Because whatever those are, that’s what's going to happen.

— Byron Gilliam

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