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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

#431

Post by generalseven »

I'm a founder of PikaPay, bringing Bitcoins to Twitter since 2011, so here's my take:

One of the most interesting social & tech experiments since the Internet itself. We are witnessing a revolution.

The number of nodes in the Bitcoin network makes it the most secure system of its kind. If it were used as currency, you could say technically that it was one of the most (if not the most) counterfeit-secure currencies in the world.

If it were used as a medium of exchange, due to network effects alone it would be extremely valuable.

I appreciate Krugman's raising the discourse even slightly above the level of "evil hackers." I don't think he realizes that the Bitcoin movement transcends politics and economics. With Bitcoin (as technology) you can actually even create a system that Krugman himself would like to use.

Re: Bitcoin and positive vs. normative economics

#432

Post by lmm »

baddox wrote: post #393
XorNot wrote: post #342

Earlier quoted context omitted.

Or you know, just get rid of the diebold machines and do a hand count?

Whose hands?

People from several parties, in a public, observed location. It's not hard; it works here in the UK, and it worked in the US before all this voting machine nonsense started.

Re: Bitcoin and positive vs. normative economics

#433

Post by lmm »

dnautics wrote: post #282
thaumasiotes wrote: post #250

Earlier quoted context omitted.

Yes it is. The intrinsic value of food is that you can eat it; the intrinsic value of art objects is that you like them. All "intrinsic" value refers to is the use you can make of something without exchanging it for something else. If you were the only person in the world, and you appreciated the appearance of gold, than gold would be intrinsically valuable to you.

I will accept this. How then is it not the case that "if you were the only person in the world, and you appreciated bitcoin, then bitcoin would be intrinsically valuable to you."

The logical implication is sound, I just don't think the premise holds. If you were the only person in the world, a bitcoin would just be a random-looking sequence of numbers and letters, which really would be worthless.

Re: Bitcoin and positive vs. normative economics

#434

Post by lmm »

itchitawa wrote: post #391
teddyh wrote: post #354

Earlier quoted context omitted.

The usefulness of gold as jewelry is not only its value; it also does not tarnish or rust , which is a very useful property for jewelry.

Nor does glass or plastic-coated aluminium. There are lots of shiny things that people don't want in their jewelry. If diamond were as common and cheap as glass, we'd probably see just as much diamond jewelry as glass. They're not massively "better" at being shiney. Even artificial gems are worth less in than natural ones even if they have fewer defects!

> Nor does glass or plastic-coated aluminium.

Glass is not easy to work into jewelry on its own (or at least wasn't 2000-3000 years ago). Plastic-coated aluminium didn't exist 2000-3000 years ago.

Re: Bitcoin and positive vs. normative economics

#435

Post by lmm »

Canada wrote: post #341
roblev wrote: post #321

Earlier quoted context omitted.

>I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. Sadly it is not so easy to make money this way, the forward exchange rates will cancel out any gain from the interest earned in the inflationary currency. Otherwise everyone would do this. You can make money doing this but really you are just taking a bet on exchange rates, you can easily lose money a…

If you plan to spend your investment on rent, food, or fuel then Treasuries are a losing investment for sure. At best they reduce the amount of loss compared to holding cash.

30-year government bonds grow faster than inflation, at least over here. (This is possible because economic growth is a thing)

Re: Bitcoin and positive vs. normative economics

#436

Post by lmm »

dnautics wrote: post #392
notahacker wrote: post #319

Earlier quoted context omitted.

If you're going to call me "crazy", I'd appreciate it if you had the courtesy to address their arguments I actually made, rather than ones I didn't... Obviously if I thought wealthy people actually did hoard their wealth in dollars I wouldn't have made the point about inflation inducing people not to hold their wealth in dollars. Wealthy people could, would, and probably should hoard large portions of their wealth in…

> the poor generally benefit a lot more from the rich investing in job creation than the rich buying nice little cabinets full of gold. Sounds suspiciously like "trickle down economics". And that's not the appropriate comparison. The appropriate comparison is, do the poor benefit more from the rich "investing in job creation" or by themselves having easy access to a mechanism by which their wages and savings are not…

> Sounds suspiciously like "trickle down economics".

That's not an argument. When rich people (or any people) get wealthier that really does benefit everyone; the problem with classical "trickle down economics" was the idea that this meant it was ok to exempt them from taxes, as if tax money was just wasted.

> And that's not the appropriate comparison. The appropriate comparison is, do the poor benefit more from the rich "investing in job creation" or by themselves having easy access to a mechanism by which their wages and savings are not eroded (in a compounding fashion) by fiat?

Policies that increase the value of cash savings (at least, to the point where it's more profitable than investing in stocks or the like) benefit the rich, and policies that decrease the value of cash savings benefit the poor, because the rich are much more able to save than the poor, and cash really is a zero-sum game. If the dollar ever became deflationary, rich people would sell their stocks and buy up ~all the dollars and capture almost all of the increasing value (businesses would probably stop paying wages out in dollars); meanwhile startups would find it much harder to attract investment, which would be bad for everyone.

Re: Bitcoin and positive vs. normative economics

#437

Post by lmm »

DennisP wrote: post #299
lutorm wrote: post #196

Earlier quoted context omitted.

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 This sounds backwards to me. If I think the value will increase, I'm not going to transfer them to you at tod…

By the same argument, if you think the value of bitcoins will increase, you shouldn't spend your dollars either. You should convert them to bitcoins and hold them. If you do spend dollars, you don't lose anything by converting them to bitcoins just before spending them.

So there'll be a deflationary spiral where the value of bitcoins goes up and up, until the only people who have bitcoins are the idle rich who won't sell them at anything less than extortionate prices. Which is not a situation I see as sustainable; at some point the actually productive people making economically valuable things will realize that rather than funding this bunch of freeloaders, they should stop accepting bitcoins as payment.

Re: Bitcoin and positive vs. normative economics

#438

Post by mahdavi »

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…

If the gold price collapses, all the energy spent mining it and transporting it will be gone too. and that energy is much much higher than the energy bitcoin network is consuming.

Re: Bitcoin and positive vs. normative economics

#439

Post by brazzy »

lukifer wrote: post #314
ReidZB wrote: post #214

Earlier quoted context omitted.

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…

I think there is a simple way to counter-act vote buying/coercion: if the voter has a mechanism to cheat the cheater. If I can accept a hundred bucks to vote A, then walk around the corner and change my vote to B in secret, it creates sufficient disincentive to buy or coerce votes.

You mean, exactly like the system we use in the real world?

Re: Bitcoin and positive vs. normative economics

#440

Post by mattm »

ahquresh wrote: post #426
rokhayakebe wrote: post #272

Earlier quoted context omitted.

It is amazing how one word "COIN" added to this word has shaped everyone's thinking. Would we treat it the same if the guys behind it named it "Bitcard" or "Bitpoint?" That one word is what set apparently most people to speak of it, and treat it as money. BC is nothing like Money. BC is a card trading game where the players make the cards, the difficulty to make cards increases , and the value of the cards is decided…

The fact that your comment is correct and wrong at the same time is what really raises red flags for me with regards to bitcoin. Let's look at what you find if you were somebody searching up bitcoin for the first time. You would eventually land on http://bitcoin.org/en/ . bitcoing.org describes bitcoin as open source P2P Money. It says "Bitcoin is an innovative payment network and a new kind of money". You go on Wiki…

> I feel that when money in the form of paper bills was first introduced, there had bound to be people wondering the same thing. After all, taking a step back, who would consider putting such value to pieces of paper that we do in today's day and age?

The thing with paper money, at least recently, was that it originally started out as being tied to gold. Instead of having to carry around gold for exchange, you would exchange these pieces of papers which were the equivalent amount in gold. However, once the idea of paper money became so entrenched governments realised they could remove the actual backing without many people saying "Hey wait a minute. These pieces of paper are now worthless."

If people had tried to introduce paper money originally without the gold backing, there's no way it would have caught on in the same way.

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