Bitcoin and positive vs. normative economics • Hacker News Board

Re: Bitcoin and positive vs. normative economics

#141

Post by paul » Sat, Dec 28, 2013, 9:14 PM UTC

dbla wrote: post #17

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…

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.

I wish someone would tell me what all these loopholes are so I could stop paying taxes too...

Re: Bitcoin and positive vs. normative economics

#142

Post by prutschman » Sat, Dec 28, 2013, 9:14 PM UTC

slurry wrote: post #125

natrius wrote: post #51

Earlier quoted context omitted.

We weren't in imminent danger of hyperinflation. I think mass adoption of Bitcoin will cause hyperinflation. If every merchant you patronize today accepted Bitcoin, would you rather have Bitcoin in your bank account or dollars? I'd rather have Bitcoin. They're easier to transfer, they can't be counterfeited, and their supply can't be manipulated. If every merchant accepts Bitcoin and every consumer agrees with my log…

Inflation is a function of money supply and velocity. If everyone adopted bitcoin, the velocity of the dollar would approach zero. Which means that inflation would go down, not up. And yes, I would rather have my [savings] account in a hard, non-inflationary currency. On the other hand, I can only earn interest when someone is willing to take a loan in the currency and pay interest on it. And I am not about to take o…

> I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand.

Assuming the interest rates are the same, I'd agree. Would they be?

Re: Bitcoin and positive vs. normative economics

#143

Post by jokoon » Sat, Dec 28, 2013, 9:14 PM UTC

Finally Krugman talks about it...

Re: Bitcoin and positive vs. normative economics

#144

Post by hindsightbias » Sat, Dec 28, 2013, 9:15 PM UTC

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…

It's a blog. Krugman has always been snarky, and I've seen him reference the blog titles within the text on occassion, so he probably titles them.

Editorials/opinion pieces, the editors typically put there stamp there.

Re: Bitcoin and positive vs. normative economics

#145

Post by greyman » Sat, Dec 28, 2013, 9:15 PM UTC

dimitar wrote: post #112

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…

I have had and am continuing to have a dialogue with smart technologists who are very high on BitCoin — but when I try to get them to explain to me why BitCoin is a reliable store of value, they always seem to come back with explanations about how it’s a terrific medium of exchange. My friend, you fall under this critique. While the middle-class can make transactions if it chooses using Bitcoin, it has to deal with i…

The Krugman's problem is, that he is used to certain definition of "money", and then when something else comes, he compares it to that definition. For example, the original paper from Satoshi didn't mention the term "store of value". Given the ambiguity of the word "reliable", we can say nowadays that bitcoin is not "reliable store of value". But who said it is? It must not necessarily have the same attributes as fiat money does.

Anyway, I think the root of the problem with those mainstream journalists is that they do not distinguish between Bitcoin as an unit of account (like, I have 0.5 BTC, or this item cost 0.1 BTC), and a Bitcoin as a technology (peer-to-peer trustless network with all the wonderful attributes it has). Their mind mangles those two things into one, and they then see Bitcoins as only some virtual numbers, which are moving from one wallet to another. Starting from this perspective, they can't conclude anything useful, and can't see the intrinsic value of Bitcoin the technology.

Re: Bitcoin and positive vs. normative economics

#146

Post by burntsushi » Sat, Dec 28, 2013, 9:16 PM UTC

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…

> 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?

When was the last time you saw a Keynesian taking Hayek's work on business cycle theory seriously? (For which, in part, he won the Nobel prize for!)

Ironically, to more directly address your point, Hayek had this to say in his Nobel Prize acceptance speech:[1]

    In his speech at the 1974 Nobel Prize banquet Friedrich Hayek
    stated that had he been consulted on the establishment of a
    Nobel Prize in economics, he would "have decidedly advised
    against it" primarily because "the Nobel Prize confers
    on an individual an authority which in economics no man ought to
    possess.... This does not matter in the natural sciences. Here
    the influence exercised by an individual is chiefly an influence
    on his fellow experts; and they will soon cut him down to size
    if he exceeds his competence. But the influence of the economist
    that mainly matters is an influence over laymen: politicians,
    journalists, civil servants and the public generally."

Stated differently, the comparison between a hard science (like Chemistry) and economics is rather unfair.

[1] - http://en.wikipedia.org/wiki/Nobel_prize_economics#Controver...

Re: Bitcoin and positive vs. normative economics

#147

Post by natrius » Sat, Dec 28, 2013, 9:16 PM UTC

hfttrader wrote: post #139

natrius wrote: post #92

Earlier quoted context omitted.

You can hand me dollar bills, but how many dollar bills do you have? I just counted. I have $36 in bills in my possession. I should to go to the ATM today to get more in case I run out. Eventually, Bitcoin will be similar in that most of our wealth won't be stored in the actual currency, but in bank deposits. I could withdraw actual currency from a Bitcoin bank with the tap of a button and have it on my phone in 10 m…

But why does transferring large amounts of dollars take days? There is nothing physical preventing banks from supporting fast transfers. They can do fast transfers with BTC or USD. Transfers are slow because there is little need to transfer large amounts of money quickly, and slower transactions help address issues with fraud. If you are buying a car, or paying for a house there is little need for a fast transactions…

Good point. I think the debit card replacement angle is much more attractive than this one.

Re: Bitcoin and positive vs. normative economics

#148

Post by alphydan » Sat, Dec 28, 2013, 9:16 PM UTC

mapgrep wrote: post #70

natrius wrote: post #51

Earlier quoted context omitted.

We weren't in imminent danger of hyperinflation. I think mass adoption of Bitcoin will cause hyperinflation. If every merchant you patronize today accepted Bitcoin, would you rather have Bitcoin in your bank account or dollars? I'd rather have Bitcoin. They're easier to transfer, they can't be counterfeited, and their supply can't be manipulated. If every merchant accepts Bitcoin and every consumer agrees with my log…

Bitcoin went up more than tenfold in less than six months. Then if fell by more than half in less than one month. So I strongly disagree that most people would want to use that for their checking account, paycheck, etc. I am also baffled by "they're easier to transfer" than dollars. Yes you can email BTC. But I can literally hand you dollars. No smartphone needed! And large amounts are trivially easier - I squiggle s…

Unfortunately the squiggle trick doesn't work to send $0.20 to that friend in Angola who runs the water and sanitation project? It also doesn't convert to Mpesa in Kenya [1] (Bitcoin now does). And wiring $500k to China for that shipment on a Sunday doesn't work either with squiggles or e-payments.

[1]: http://www.economist.com/blogs/economist-explains/2013/05/ec...

Re: Bitcoin and positive vs. normative economics

#149

Post by natrius » Sat, Dec 28, 2013, 9:18 PM UTC

slurry wrote: post #125

natrius wrote: post #51

Earlier quoted context omitted.

We weren't in imminent danger of hyperinflation. I think mass adoption of Bitcoin will cause hyperinflation. If every merchant you patronize today accepted Bitcoin, would you rather have Bitcoin in your bank account or dollars? I'd rather have Bitcoin. They're easier to transfer, they can't be counterfeited, and their supply can't be manipulated. If every merchant accepts Bitcoin and every consumer agrees with my log…

Inflation is a function of money supply and velocity. If everyone adopted bitcoin, the velocity of the dollar would approach zero. Which means that inflation would go down, not up. And yes, I would rather have my [savings] account in a hard, non-inflationary currency. On the other hand, I can only earn interest when someone is willing to take a loan in the currency and pay interest on it. And I am not about to take o…

I'm referring to price inflation. You seem to be referring to monetary inflation. Less dollar use will lead to fewer dollar equivalents in circulation, but prices in dollars will go up because people will value them less.

Re: Bitcoin and positive vs. normative economics

#150

Post by prostoalex » Sat, Dec 28, 2013, 9:20 PM UTC

greyman wrote: post #116

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…

> He's entirely correct in saying Bitcoin has zero inherent value, as opposed to gold and USD. No, no, he is NOT correct on that. Bitcoin's inherent value is in the Bitcoin technology. Inherent value of USD is that government declared it has value (by fiat). You can actually create "pretty things" with bitcoin technology, the same way you can create pretty things with gold - those are just other things.

> Inherent value of USD is that government declared it has value (by fiat).

Wait, what? Definition of fiat currency is the one that has no intrinsic value.

USD's intrinsic value is the paper and the metal used to manufacture it.