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Bitcoin and positive vs. normative economics

krugman.blogs.nytimes.com

11–20 of 520 posts

Re: Bitcoin and positive vs. normative economics

#11
Ignore the flamebait headline. The distinction Krugman makes between positive and normative economics is a useful one.

On the positive side, I think Krugman and DeLong are overestimating the strength of the floor for the value of a dollar. Hyperinflation would make it impossible for the Federal Reserve to buy up enough dollars to stabilize the value of the currency. Sure, you can pay taxes with them, but the government collects taxes to buy things, and if people no longer have faith in the dollar, the government won't be able to buy things with those tax dollars. There's no floor on the value of Bitcoin, but there's no floor on the value of the dollar either.

On the normative side, I don't think one's position on the utility of central banking matters when it comes to Bitcoin. If blockchain currencies are the future, central banking is over, and our society will have to figure out how to make the economy work with endemic deflation. I think central banking is useful, but I don't see a future for it.

Re: Bitcoin and positive vs. normative economics

#14

I have a really hard time taking a column called "The Conscience of a Liberal" seriously, even more so when he claims: "Stross doesn’t like that agenda, and neither do I; but I am trying not to let that tilt my positive analysis of BitCoin one way or the other." in a piece titled "Bitcoin is Evil".

On the contrary, I'd rather listen to an economist who is upfront about his political viewpoints and transparent about how he tries to keep them from influencing what he here terms the "positive economics" -- i.e. the practical economic impact -- of Bitcoin or any other problem.

As opposed to economists who conceal their political viewpoints to cover the fact that their supposedly scientific economic conclusions are intended to push a given agenda.

One of the best ways to fight your own political biases in areas where you want to try and be more objective is to be incredibly up front about them. That way, people can say, "I think you are indulging your bias in specific manner X." I wish you would do that (be specific about any complaint) instead of dismissing Krugman simply for being honest and up front.

Re: Bitcoin and positive vs. normative economics

#15

1) Bitcoin mining has a pretty horrible carbon footprint. ("but so does ..." doesn't eradicate this argument) 2) similar to the author's point that advocates can't tell the difference between "store" and "medium" of value, I can't tell you the number of arguments I've gotten in with people who equate a "store of value" to be the same thing as the "increase in value" 3) It's a 1% wet dream. Make money, potentially hid…

The only way you can make money off something like a currency is if demand > supply. What determines the supply? Solving problems with machines and energy only the 1% can afford. What determines the demand? The early bitcoin adopters hyping the "currency" so that they can later offload their bitcoins to bigger fools once they have made a good investment return.

Re: Bitcoin and positive vs. normative economics

#16

I have a really hard time taking a column called "The Conscience of a Liberal" seriously, even more so when he claims: "Stross doesn’t like that agenda, and neither do I; but I am trying not to let that tilt my positive analysis of BitCoin one way or the other." in a piece titled "Bitcoin is Evil".

How about taking seriously someone who is, you know, well-known (to the point of receiving a Nobel Prize for his work) for being good at this economics stuff? If a Nobel-winning physicist was writing about physics, you wouldn't dismiss it because the physicist's politics don't agree with yours. Ditto Nobel-winning chemist writing about chemistry, etc.; why should economics be different? Also, his point about BitCoin…

Krugman is more like Chomsky -- he did some academic work (including a good textbook in microecon), but then left that to do politics, almost entirely disconnected from his academic record.

The Econ "Nobel" is a little more rationally awarded than the Nobel Peace Prize, but neither is the same as Physics/Chem/Medicine.

I think it's fine to judge Krugman's political arguments on political merits; there isn't "nobel-caliber" economics behind them. They're usually about things which economics doesn't even address.

Re: Bitcoin and positive vs. normative economics

#17
post #9

>>BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. So basically it brings an ability to the middle-class that normally only the top 1% have. We know wealthy people use tax loopholes(and a few of them, laundering) and... why do…

This may be the end result, but it seems to me like the more direct (but not necessarily simple) solution to this problem is to close up those loopholes for the rich. The government does need to collect taxes after all, and if nobody is paying then we've created another problem.

Re: Bitcoin and positive vs. normative economics

#18
This title of this post does a disservice to its contents. "Bitcoin is evil' makes it sound like it's a propaganda piece. I went in expecting some of the usual poorly researched allegations that we've been seeing over the past few weeks. But surprisingly, the post does make a few good points.

> Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?

However, the analysis fails again because he wants to decouple bitcoin's role as a store of value from it being a medium of exchange. To which I would like to ask: What's the point of a store of value if ultimately it cannot be exchanged for something else ?

That's like saying that the energy inside an atom's nucleus has no value. (prior to the discovery of controlled nuclear fission) Of course it had value but we couldn't use it without accessing it and tapping into it somehow.

Bitcoin's value is closely coupled with its utility as a medium of exchange, which is based solely off some pretty excellent technology and principles.

Now, don't get me wrong, I don't think its current value in terms of USD/Euros/etc. is necessarily linked well to it's current utility. However, there is value in being able to transfer something (a bitcoin or parts of it..) that no one else can transfer to someone across the world securely and almost instantly with little to no centralized control.

This ability is what places a floor on its value, whatever that hypothetical floor may be.

This is what excites the 'technical people' he mentions in his article. I don't expect non-technical people to 'get it' immediately, but people will get it, eventually. No one understood why email was important in the beginning either.

Re: Bitcoin and positive vs. normative economics

#20
Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve’s role as actual dollar source, and its commitment not to allow deflation to happen.

Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?

Where's the floor on the value of the dollar?

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