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Bitcoin and positive vs. normative economics

krugman.blogs.nytimes.com

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Re: Bitcoin and positive vs. normative economics

#41

Post by theboywho »

ubernostrum wrote: post #8
wcummings wrote: post #4

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…

>> If a Nobel-winning physicist was writing about physics, you wouldn't dismiss it because the physicist's politics don't agree with yours.

First of all, Physics and Economics are two different things.

Physics tends to be about facts, Economics is more about opinions, views and theories. It's not because we're not Nobel Prize winners that we shouldn't disagree with the author, and I'm sure there are many well-known economists out there who won't agree with him.

>> Also, his point about BitCoin enthusiasts being unable to distinguish between what makes a good currency and what pushes their ideological buttons may apply to you.

Bitcoin enthusiasts are not the only users of Bitcoin. I use Bitcoin and it's for no ideological reason. It's helping me better than any other payment system right now and that's all I care about.

Re: Bitcoin and positive vs. normative economics

#42

Post by mikeryan »

smtddr wrote: 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…

The state monitors financial transactions primarily for tax purposes. I'm guessing a very substantial amount of data they collect is around payroll and sales.

Re: Bitcoin and positive vs. normative economics

#43

Post by ubernostrum »

wcummings wrote: post #40
ubernostrum wrote: post #30

Earlier quoted context omitted.

He poses a question: To be successful, money must be both a medium of exchange and a reasonably stable store of value. And it remains completely unclear why BitCoin should be a stable store of value. And then says he hasn't been able to get an answer to this question, that the BitCoin enthusiasts he's talked to have mostly avoided trying to answer the question, and that he has reason to suspect that BitCoin gets prom…

The answer I've heard is that Bitcoin has utility as a payment network somewhat independent of its usefulness as a value store. This is most of how Bitcoin is used currently (save speculation)

And yet, Krugman is probably right to suggest that, as a currency, BitCoin will need to also be a store of value. Which it currently does not seem to be, and I don't see how it will become one.

Re: Bitcoin and positive vs. normative economics

#44

Post by smokeyj »

username223 wrote: post #29
smtddr wrote: 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…

"why do the states need to monitor financial transactions?" I hate the "terrorism" BS as much as you, but money laundering and large-scale scamming ( https://news.ycombinator.com/item?id=6972139 ) are actual threats.

> but money laundering and large-scale scamming are actual threats.

Yes, banks launder drug money for cartels. Without the state, who would slap their wrists?

Re: Bitcoin and positive vs. normative economics

#45

Post by atmosx »

Aqueous wrote: post #21

I'm a liberal, a Keynesian, but my interest in BitCoin is completely non-ideological. And I resent being painted with an ideological brush by Krugman because I can see the elegance in BitCoin, and I can see the possibility that one day, in spite of my ideological beliefs that unregulated markets are susceptible to bubbles and destructive volatility, BitCoin or something like it might still be able to function as a st…

You seem pretty accustomed to economics. Can you explain how exactly or why would anyone buy any items (that's what currencies are for after all) using a deflationary currency?

Then again, it's not a design a flaw - as I once thought - it's a clear choice: Why would anyone would want to own a non-deflationary asset? :-)

So actually, in my view, BTC as a currency is already failed. No one will be eager to buy online (perform an actual exchange) when he can buy the same items using USD, because BTC will possibly have a higher value tomorrow. While the USD almost certainly will not.

Best Regards,

ps. FIAT currency is regulated by the FED and you know who runs the FED. BTC market is run by those who have huge amounts of BTC and you don't have a clue about who they are. Not sure which one is more secure for a society.

Re: Bitcoin and positive vs. normative economics

#46

Post by defen »

ubernostrum wrote: post #30
ahomescu1 wrote: post #22

Earlier quoted context omitted.

Actually, I think that if a physicist/chemist came out with unproven theories or opinions (the original article is nothing more than an opinion), the community would react pretty much the same. Physics and chemistry (and economics as well) have proofs and experiments, and this post doesn't offer either of those. It makes perfect sense to dismiss it if you disagree with him, since he doesn't really say anything concre…

He poses a question: To be successful, money must be both a medium of exchange and a reasonably stable store of value. And it remains completely unclear why BitCoin should be a stable store of value. And then says he hasn't been able to get an answer to this question, that the BitCoin enthusiasts he's talked to have mostly avoided trying to answer the question, and that he has reason to suspect that BitCoin gets prom…

> To be successful, money must be both a medium of exchange and a reasonably stable store of value. And it remains completely unclear why BitCoin should be a stable store of value.

So maybe BitCoin isn't money? We already have something that is a reasonably stable store of value but is not a medium of exchange (gold), so why can't we have something that is a medium of exchange but not a reasonably stable store of value?

Re: Bitcoin and positive vs. normative economics

#47

Post by seiji »

hendzen wrote: post #35
bdcravens wrote: post #6

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…

Actually, for your first point, you have to compare the carbon footprint of bitcoin to the carbon footprint of the alternative. What is the carbon footprint of all the different transaction processing systems run by Mastercard, Visa, Amex, etc? What about if you add in the cost of the massive mainframes that handle ACH transfers? The cost of printing millions of archaic paper checks? I'm not saying bitcoin replaces a…

The other systems aren't based around grinding CPUs at 100% power utilization for days/weeks/months doing worthless busy work. Unless your power comes from a zero-carbon-footprint renewable resource, it's pretty ugly.

Re: Bitcoin and positive vs. normative economics

#48

Post by jamroom »

mortenjorck wrote: post #31

Krugman is to Bitcoin as Ebert was to video games. The central failure of Krugman's understanding of cryptocurrencies is in the value of mining. It's not simply throwing energy away into solving useless math problems; it's spending energy to create infrastructure. That infrastructure is the part that does have intrinsic value, that can be used for something else in the same way gold can be made into useful things. Lo…

But does Bitcoin really have a floor related to the energy put into the mining? Since the energy cost is paid for by the miners, do other players in Bitcoin "respect" that floor? I don't see that - there's nothing keeping a Bitcoin from going all the way to zero - regardless of the energy consumed in it's production, and Krugman argues that gold (and the feds) have a bottom that is greater than zero.

My understanding could be wrong, as my understanding of Bitcoin would definitely be at the "noob" level :)

Re: Bitcoin and positive vs. normative economics

#49

Post by seiji »

j2labs wrote: post #39

This is an easy one to understand. Krugman was a proponent of mass inflation, aka. helicopters of money, as a solution to the credit crisis. Bitcoin makes it basically impossible to manipulate the money supply the way the Fed has done to navigate the 2008 crisis. Krugman sees Bitcoin as a threat to the central banks ability to stabilize the economy.

Also see: the euro crisis.

It isn't a "threat" so much as just foolish.

Re: Bitcoin and positive vs. normative economics

#50

Post by pixelcort »

One capability of bitcoin not often addressed is the ability for the majority of its users to change the rules.

If you can get the majority of users to agree to a change in the rules, then they will fork off the block chain in a direction that follows those new rules. Of course, you will have some percentage of users who like the old rules, and could theoretically continue on the old block chain.

One rule change, for example, is to have miners vote on the reward for new blocks found. Then, every so often take the medium or a random vote and award that amount for new blocks mined. This would allow miners to regulate the amount of new coin being mined, which could level off the exchange rates between bitcoin and the world currencies.

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