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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

#101

Post by pjbrunet »

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…

As far as making it illegal, I wonder if the blockchain gets to a certain size where it's easy to detect and delete, if that's not already the case. At that point I think the blockchain morphs into something harder to detect--maybe that technology already exists? I think the coin with the best developers will survive--maybe that's Bitcoin, maybe not.

Re: Bitcoin and positive vs. normative economics

#102

Post by natrius »

ubernostrum wrote: post #93
natrius wrote: post #83

Earlier quoted context omitted.

I'm not talking about a hypothetical doomsday scenario. Bitcoin is the crisis. The idea that holding Bitcoin is a better idea than holding dollars is spreading. The more it spreads, the higher the value of Bitcoin will be, and the lower the value of the dollar will be. Eventually, we will hit a tipping point. That's the crisis. That's the hyperinflation.

And aside from wishful thinking, what evidence do you have to back your hypothesis?

None, but it's important to remember that currency is wishful thinking. The value of a non-commodity currency is what people believe it's worth. Trends in the public's beliefs about currency are incredibly significant.

Re: Bitcoin and positive vs. normative economics

#103

Post by dimitar »

I think most commentators here missed the point of the article. Bitcoin is evil not because it fails at x, because the interest in it propagates bad (Krugman POV) economics. Krugman/Stross assume this type of economics is the 'Austrian school'/Goldbug economics.

Re: Bitcoin and positive vs. normative economics

#104

Post by MarkPNeyer »

username223 wrote: post #52
ashray wrote: post #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 m…

Maybe some day Bitcoin will be a cheaper way to transfer money than EBT, credit cards, etc. (a few percent). If/when that happens, people will hold Bitcoins for just long enough to complete a transaction -- microseconds -- rather than for however long it takes them to cash out their speculative bets.

Yes. This is already happening to a small extent, and the use of bitcoin as a money transfer mechanism is where the value comes from. People who wish to transfer money using bitcoin do not care about the market price; if they have $1000 USD to send, they buy $1000 USD worth of bitcoins at market price, send them over the network in seconds, and then that value is converted into cash locally. They don't care about the market price, as long as it isn't volatile over the short time it takes to move the value.

The market price of bitcoin is determined by the number of bitcoin holders who think they will go down in value; as coins gradually transfer to the hands of people who believe they hold long term promise, the market price of 'loose change' available for transfer will rise; that rise in price will actually _increase_ the use of btc as a transfer mechanism because it will attract more people seeing BTC as a store of value, which increases the store of bitcoins held for long term positions and thus the market price of BTC, etc. The increase of its usage as a medium of transfer ALSO increases the market price of BTC; that interplay between new value-minded long term investors and new users of btc as a transfer mechanism is what has been pushing the price up continually. the entrance and exit of speculators in the market is a short term distraction that has the benefit of spreading awareness but the drawback of adding to conception as a bubble.

after about the 6th or 7th one of these 'boom and bust' cycles that triples/quadruples the market price, people will stop seeing this as a 'maybe' thing, and my guess is that will drive a massive one-time spike in the value.

Re: Bitcoin and positive vs. normative economics

#105

Post by ubernostrum »

theboywho wrote: post #41
ubernostrum wrote: post #8

Earlier quoted context omitted.

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 e…

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.

There are plenty of economists who don't agree with Krugman. But they would disagree for actual reasons instead of "OH NOES THE WORD LIBERAL APPEARS IN THIS COLUMN".

Re: Bitcoin and positive vs. normative economics

#106

Post by olefoo »

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…

So you need to write that up in a format that Krugman can understand and get it in front of his eyes. But I think his main criticism is that all of that infrastructure falls under the medium of exchange function and doesn't serve as a store of value.

What I think you're saying is that the block chain and it's supporting infrastructure and the functions it enables ( decentralized notary, unrepudiable statements, etc. ) are creating value in the same way that making jewelry from gold creates value. And that's an interesting argument. Much more interesting than a bunch of people ranting incoherently about "fiat".

If I were in search of a dissertation topic as an economist/anthropologist; I would be looking at the current wave of cryptocurrencies as a fascinating natural experiment in the social construction of value.

Re: Bitcoin and positive vs. normative economics

#107

Post by ubernostrum »

defen wrote: post #65
ubernostrum wrote: post #54

Earlier quoted context omitted.

Gold is no longer widely used as money, but in the past it was, and was quite successful as a medium of exchange. His argument seems to be that if you want something to be genuinely useful as money, it has to do both reliably, and BitCoin only seems able to do one.

In the past yes, but I'm talking about today. Gold is a stable store of value that is not really used as money (at least in the U.S.)

And I don't think you're disagreeing with him. I think you're trying to say "well, this other thing that doesn't get used as money anymore also doesn't fit his definition of money" and then implying that this somehow disproves his argument.

When, in fact, it lends support to his argument.

Re: Bitcoin and positive vs. normative economics

#109

Post by username223 »

etjossem wrote: post #67

It's great that Krugman is trying to to make a purely positive analysis of the potential impacts of Bitcoin. He's entirely correct in saying Bitcoin has zero inherent value, as opposed to gold and USD. But that's missing the point. Most of us don't think about owning gold in terms of how readily we can make pretty things out of it, or dollars in terms of how easily we can pay our taxes. We hold onto them because both…

Krugman is smart and a bit condescending, with a sarcastic bent. "Is evil" was not prima facie humorous, but the way certain people in this thread have responded to the title without reading the article may have been part of the joke.

Re: Bitcoin and positive vs. normative economics

#110

Post by ubernostrum »

wcummings wrote: post #79
ubernostrum wrote: post #43

Earlier quoted context omitted.

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.

He could be right, he'd just be missing the point. He's trying to jam a square peg into a circular hole and calling it "evil" for not fitting. What I'd actually be interested in reading is a proposal from Krugman (or someone else) for a hashcash/cryptocoin/digital money scheme that addresses their concerns. It would be hugely more interesting to hear economists discuss how new technology can advance antiquated, feder…

Perhaps he doesn't see a need for a cryptocurrency, and so does not feel obligated to propose one.
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