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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

#231

Post by haberman »

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…

> It's not simply throwing energy away into solving useless math problems; it's spending energy to create infrastructure.

But it is also an arms race of energy spent. And the more valuable BTC becomes, the more energy a rational agent will use to mine it. Unlike mining gold, BTC mining does not have a fixed cost.

Re: Bitcoin and positive vs. normative economics

#232

Post by djur »

anoncowherd wrote: post #158
mapgrep wrote: post #33

Earlier quoted context omitted.

>Hyperinflation would make it impossible for the Federal Reserve to buy up enough dollars to stabilize the value of the currency Even if this is true, where is the evidence that we're in imminent danger of hyperinflation? Despite mounting public debt, U.S. inflation has remained incredibly low since the start of the financial crisis four years ago, as has the interest rate that must be paid by the government to issue…

>> we have on the one side a dollar that has endured as a value store and medium of exchange for hundreds of years, and which has proven remarkably resilient (valuable) by any objective measure throughout the worst economic implosion since the Great Depression (which the dollar also survived) There's something you're overlooking though: the dollar was backed by gold until 1971, and that's where our problems really st…

What problems?

Re: Bitcoin and positive vs. normative economics

#233

Post by gnaritas »

etjossem wrote: post #174
username223 wrote: post #157

Earlier quoted context omitted.

"...making exploiting the poor trivially easy.... you already support redistributionist taxation and the welfare state." Judging by the clichés you use, exploiting the poor is probably a good thing in your Libertarian utopia.

I'm not a libertarian. I am using the correct terms that apply to those policies. I don't think of the phrase "welfare state" as pejorative, nor was it originally intended to be so. A combination of redistributionist tax code and generous healthcare/education/benefits are working out really well for Scandinavia right now, and in my opinion we could learn quite a bit from what we're seeing in those countries. In my ex…

> I don't think of the phrase "welfare state" as pejorative

But since many others do, then it is. It is not the speaker which decides whether insult was intended, but the listener.

Re: Bitcoin and positive vs. normative economics

#234

Post by onebaddude »

natrius wrote: post #51
mapgrep wrote: post #33

Earlier quoted context omitted.

>Hyperinflation would make it impossible for the Federal Reserve to buy up enough dollars to stabilize the value of the currency Even if this is true, where is the evidence that we're in imminent danger of hyperinflation? Despite mounting public debt, U.S. inflation has remained incredibly low since the start of the financial crisis four years ago, as has the interest rate that must be paid by the government to issue…

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…

>If every merchant you patronize today accepted Bitcoin, would you rather have Bitcoin in your bank account or dollars?

At this point, and in the foreseeable future? Dollars. I'm not sure where people find all this friction relating to using dollars in the real world. I have no problems whatsoever. Besides, it's all virtual currency.

As far as your theory of widespread adoption of bitcoin leading to hyperinflation of the dollar, I'm don't even begin to understand how you see that working.

Re: Bitcoin and positive vs. normative economics

#235

Post by carbocation »

dnautics wrote: post #188
chipsy wrote: post #89

Earlier quoted context omitted.

I think Bitcoin does have a soft floor because that cost would form the natural price target for a miner trying to trade, but the cost is avoidable by switching to proof of stake as done in PeerCoin and Nxt. The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal; you could make a better argument for something like PrimeCoin, which attacks a major computation problem, having this ki…

"The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal." So gold was used extensively 2000-3000 years ago. Exactly what was its intrinsic utility then? Plating astronaut helmets and high-conductivity, corrosion-resistant electronics? The intrinsic utility of gold was that it was eminently verifable. It's got a characteristic ductility and it was a yellow metal. You could easily ve…

Your comments across multiple domains of knowledge have been on fire lately. Fantastic work!

While I don't think this analogy works without flaw, I do think that it draws a powerful connection between something that is widely regarded as a store of wealth, and something that is vying to compete in the same space.

Re: Bitcoin and positive vs. normative economics

#236

Post by jellicle »

ReidZB wrote: post #214
greyman wrote: post #181

Earlier quoted context omitted.

I am not a libertarian and do not have a political agenda, but it is imaginable that certain parts of the government could be replaced with the structure like this one. I don't know how the transition could happen, but at the end, the mining in the network will be done by citizens, bitcoins will be named "bitvotes", and every citizen will mine those bitvotes, or they could be distributed fairy (one bitvote to each ci…

Such a scheme has a huge flaw: it allows extortion/coercion. Suppose I am a mob boss and I wish to become (insert position here). I send my goons to inform you that voting for me is a wise decision because I can offer you protection from the vicious thugs in the area. It would be a shame if the vicious thugs burned your house down, wouldn't it? So, you'd be forced to reveal your bitvote address to me under threat of…

It's not a huge flaw, since our current voting system (in any country you care to name) allows exactly that, and your scenario is not observed in the wild, since it is illegal.

Re: Bitcoin and positive vs. normative economics

#237

Post by notahacker »

pdonis wrote: post #57
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…

What's the point of a store of value if ultimately it cannot be exchanged for something else? One can also turn this point around: what requires the store of value to be the same thing as the medium of exchange? The store of value must be convertible into the medium of exchange, but that doesn't mean they have to be the same thing. Yet Krugman blithely assumes that they must be: "To be successful, money must be both…

If Bitcoin isn't a relatively stable store of value then there is no sane reason to use it purely for exchange. If you're able to send dollars to Coinbase or MtGox and the end user is able to receive dollars from Coinbase or MtGox, chances are you can cut out the middleman and the liquidity risk by sending them direct, at similar or lower transaction costs. The equation looks a bit different if you're holding non-trivial Bitcoin balances, but you won't do that if it doesn't reliably store your value.

Re: Bitcoin and positive vs. normative economics

#238

Post by fragsworth »

loceng wrote: post #221
paul wrote: post #159

I'm most bullish on bitcoin when I read articles such as this one, and most skeptical when I read the thoughts of the bitcoin believers. It's truly the most interesting technological development in years, if only because it reveals how little anyone really understands money or economics. Here's another interesting (though imperfect) way of thinking about bitcoin: it's a decentralized corporation, where bitcoins are o…

The problem that I have heard being stated before is that Bitcoin is associated with real money. This basically leads to the value of each Bitcoin increasing, and then early adopters making gains that they shouldn't really be making. I don't know how a system would look, where everyone starts off with X Bitcoin, though the current system feels wrong where some people now have $100s millions of Bitcoins and didn't do…

> people now have $100s millions of Bitcoins and didn't do anything for them. This value should be re-distributed somehow.

That is ridiculous. Those people invested early, which drove the price and popularity up, which adds legitimacy and publicity to the system. This is a perfectly fair reward for being on top of technological advances and understanding them enough to want to invest, I see no reason to rescind any of it.

Re: Bitcoin and positive vs. normative economics

#240

Post by gnaritas »

eropple wrote: post #224
gnaritas wrote: post #192

Earlier quoted context omitted.

> Hyperinflation would make it impossible for So would another planet colliding into the earth, fortunately we're in danger of neither. > 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. No. Deflation is a part of bitcoin, not of crypto currencies in general. When deflation shows itself to be the problem it l…

And Bitcoin speculators are pricing in the frictional impact of changing to another arbitrary, fragmentary currency "when we need it"...where, exactly?

Who's better positioned to move to the next better currency than Bitcoin than Bitcoin speculators? And it won't be changing, there can, are, and will likely continue to be multiple working crypto currencies each attracting a following from those who believe in its core principles. As long as they're easily exchanged for the others as they are now, they can all win and one will just be considered the reserve currency because it's the biggest most stable one, just as in the real world with real currencies. Gold bugs will always like Bitcoin, but not everyone's a gold bug.
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