Bitcoin and positive vs. normative economics • Hacker News Board

Re: Bitcoin and positive vs. normative economics

#331

Post by natrius » Sun, Dec 29, 2013, 1:52 AM UTC

21echoes wrote: post #298

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…

> Getting dollars requires going to a physical place to get physical bills. My debit card/square/venmo might have something to say about that...

I'm taking about cash. For cards and digital services, the Bitcoin advantage is near zero transaction fees.

Re: Bitcoin and positive vs. normative economics

#332

Post by [deleted] » Sun, Dec 29, 2013, 1:52 AM UTC

21echoes wrote: post #298

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…

> Getting dollars requires going to a physical place to get physical bills. My debit card/square/venmo might have something to say about that...

[deleted]

Re: Bitcoin and positive vs. normative economics

#333

Post by aestra » Sun, Dec 29, 2013, 1:53 AM UTC

azernik wrote: post #275

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…

I don't think you're understanding Krugman's point. If the gold price collapses, you can sell it to jewelry and electronics manufacturers at some (low) price point. Gold has a weakness as a store of value because this price point is a lot lower than its market price during good times - and this is why Krugman is also not in favor of it as a store of value. If the price of the dollar collapses, you can sell it to the…

Yeah right. If the gold market collapsed then nobody would be making selling or wearing gold jewelry. The reason it is popular now is because it is expensive.

Re: Bitcoin and positive vs. normative economics

#334

Post by james1071 » Sun, Dec 29, 2013, 1:56 AM UTC

azernik wrote: post #270

forgottenpaswrd wrote: post #218

" I try to get them to explain to me why BitCoin is a reliable store of value" I don't believe that BitCoin is a reliable store of value like the dollar is not a reliable store of value. I went to the US after a year to visit family(I live in Europe) and was surprised how much prices had gone up. Probably you don't see that when it is incremental, but you get to see after some time out. The same happens with civil li…

For the last 30 years inflation (drop in buying power/value of the US dollar) has been between 0.1 and 4.6%; before that, during a period of record inflation, its value fell bye an eye-popping 10-13% a year. By comparison with Bitcoin's volatility, that is an astounding store of value.

I think you will see rather bigger falls than that with Bitcoin, once the early investors sell out.

Re: Bitcoin and positive vs. normative economics

#335

Post by A_COMPUTER » Sun, Dec 29, 2013, 1:59 AM UTC

username223 wrote: post #109

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.

Well, I disagree. He spelled out why he thinks Bitcoin is evil, he thinks it was cooked up in a lab by cyber-Libertarians to destroy the power of the State to tax, an activity which he thinks is a good and necessary thing. His only consolation is that he thinks it won't work, but that doesn't change the black, black intentions of Satoshi Nakamoto and his Crypto-anarchist crew. I'm serious that he's serious: he thinks Bitcoin is evil, in much the same way that some politicians think Tor is evil because child pornographers can use it.

Re: Bitcoin and positive vs. normative economics

#336

Post by tlrobinson » Sun, Dec 29, 2013, 2:00 AM UTC

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…

Regarding Bitcoin mining's carbon footprint:

Since miners will eventually only be able to compete based cost of their electricity mining will be driven to places with extremely cheap electricity. I don't know if that will always correlate with "clean" energy, but it seems like it would. For example, the recently announced Bitcoin mining operation in Iceland, where cheap geothermal and hydroelectric electricity and plenty of cold air for cooling is available: http://dealbook.nytimes.com/2013/12/23/morning-agenda-the-bi...

If the heat from mining can be reclaimed for other purposes (heating homes, etc), then the effective carbon footprint is reduced even further.

Re: Bitcoin and positive vs. normative economics

#337

Post by slurry » Sun, Dec 29, 2013, 2:02 AM UTC

natrius wrote: post #149

slurry wrote: post #125

Earlier quoted context omitted.

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.

Okay, sure. In your (imho wildly implausible) scenario, the transaction costs of doing business in dollars would rise and consumers would pay an increasingly steep premium for using them. Don't really have an argument with that logic.

Re: Bitcoin and positive vs. normative economics

#338

Post by furyofantares » Sun, Dec 29, 2013, 2:03 AM UTC

fm8892 wrote: post #215

shimon wrote: post #165

Earlier quoted context omitted.

How does the volatility of BTC make it desirable for merchants to accept it? Either they hold BTC and are exposed to the volatility, or they convert to a fiat currency and are exposed to some transaction fees. Perhaps the transaction fees turn out to be lower than those for credit cards, in which case BitCoin maybe becomes an alternative payment network.

Its not the volatility they're after--they want to hold a deflationary currency (which, at the moment, happens to be volatile).

Aqueous was speaking about BTC right now, in this growth period. But BTC is currently inflationary.

Re: Bitcoin and positive vs. normative economics

#339

Post by brownbat » Sun, Dec 29, 2013, 2:04 AM UTC

Krugman and Stross base their critique on Bitcoin's libertarian appeal, as if they took the promises of a few cypherpunks as reliable predictions.

Those in Krugman and Stross's "libertarianism is evil" camp should take heart that some people out there think Bitcoin is a huge win for developing economies, and will cause only incremental disruption for places like the EU or US.

For the rich countries: Governments have many tools in their belt before they just lie down and accept, say, universal tax fraud, or the end of monetary policy. People interested in tax policy (sometimes very) slowly come up with good ideas to reduce fraud, like putting down the SSN of all claimed dependents (which made a lot of children disappear one year, but jumped revenues), or double reporting of W-2s. They likely wouldn't just roll over if we moved to BTC.

For the poor countries: A better medium of exchange, allowing cheaper remittances, easier cross border trade, or a relatively more reliable store of value than local currency is an enormous win.

There are lots of options going forward. Bitcoin could be a passing fad. Bitcoin could liberate the economically oppressed while providing little more than a nice toy for those in wealthy countries. Bitcoin could destroy monetary policy and lead to barricades of wealth while destroying the capacity of governments to benefit their most vulnerable citizens.

But it's not safe to make moral approbations based on picking one of these uncertain results and assuming it is inevitable (especially, IMHO, by picking the most outlandish of the three).

Re: Bitcoin and positive vs. normative economics

#340

Post by icambron » Sun, Dec 29, 2013, 2:06 AM UTC

mortenjorck wrote: post #295

icambron wrote: post #258

Earlier quoted context omitted.

The positive part of Krugman's argument that discusses floors is saying that external forces have ensured that dollars and gold are useful even in the event that people stop wanting them as a value store. Your infrastructure argument seems to say that, all of that spent electricity has second order effects that make it a net positive for society. Not sure I agree, but fine. But that does not provide a floor of Bitcoi…

I appreciate your putting the distinction between Krugman's arguments into greater relief – I believe I have conflated them somewhat in talking about second order effects. For the time being, let's ignore those and concentrate on the primary purpose of Bitcoin's infrastructure, to facilitate decentralized value transactions between arbitrary parties. It is the infrastructure's fitness for this purpose that I see as g…

Krugman actually takes that on directly in the article:

> 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. Even if I buy this (which I don’t, entirely), it doesn’t solve my problem. And I haven’t been able to get my correspondents to recognize that these are different questions.

In other words, "to facilitate decentralized value transactions between arbitrary parties" does not actually provide a floor and thus give the coin intrinsic [1] value. Being useful is different from being valuable, at least insomuch as storage is concerned. I think Krugman has this one right.

One point made elsewhere in this discussion is that while Krugman might be right about the floor, he may be wrong about the floor being necessary to make BTC a stable, suitable store of value. Specifically, he might be overestimating the degree to which the dollar has a meaningful price floor, and the degree to which such a floor is actually the reason the dollar is stable and dependable. In other words, perhaps it maintains its value through adequately shared fiction, and perhaps BTC could do that too. I don't really know enough to have a strong opinion on that issue, but I think that's the structure of it. It's also worth pointing out the Krugman has the conventional view here.

Another question to ask of Krugman is why being a store of value is even a goal; what does the "success" in "successful currency" mean? Does it mean that BTC will be the unit of account, with prices and salaries denominated in it? That's certainly the case Krugman is taking on (hence the normative claims about central banks), and the case many here on HN arguing for. Or can it succeed as just a medium of exchange? I can trade my dollars for bitcoins and send them to someone, who will convert them to euros on receipt. Then who cares how much they're worth?

[1] For certain values of "intrinsic". The semantics aren't very clean here.