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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

#511

Post by [deleted] »

icambron wrote: post #502
yohanatan wrote: post #501

Earlier quoted context omitted.

I'm using the standard definition of 'store of value' (see: http://en.wikipedia.org/wiki/Store_of_value ). The only requirement to have a store of value (aside from ability to store and retrieve) is that there exist a floor; i.e., that an entity 'merely have economic value that is not known to disappear even in the worst situation' or in other words 'be predictably useful when retrieved'. Of course, we can easily ima…

I take back what I said about the definitional problem. But I don't see where you've established that Bitcoin has such a floor, as I said above. I don't think we're getting anywhere, though, so I'm going to break off.

[deleted]

Re: Bitcoin and positive vs. normative economics

#512

Post by MarkPNeyer »

lmm wrote: post #437
DennisP wrote: post #299

Earlier quoted context omitted.

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 acceptin…

The rates at which bitcoin holders sell them won't be 'exorbitant' because they'll be irrelevant for peopel using them as a transfer mechanism. if you want to send a thousand bucks, and there are many bitcoin holders just sittign on them, the market rate of btc won't matter and you'll be able to quickly sell them whenever you've sent the btc where you wanted to.

those 'unproductive' people holding incredibly valuable bitcoins will enable bitcoin to work as a dirt cheap payment processing system.

Re: Bitcoin and positive vs. normative economics

#513

Post by RoboTeddy »

tlrobinson wrote: post #328
RoboTeddy wrote: post #269

Earlier quoted context omitted.

Whoever who convinces 50+% of the miners to adopt their version of the software wins. The core developers can commit code and make releases that do whatever they want, but if they e.g. tried to pay all transaction fees to themselves, miners wouldn't install the new version and someone would fork the project. How much control does any open source developer have over the projects they work on? Linus seems to have prett…

Note that (in theory) it's the "economic majority", not the "miner majority" that matter: https://en.bitcoin.it/wiki/Economic_majority If a bunch of miners decide to change the protocol but the majority of users stayed on the old protocol then those miners would be mining a worthless (or at least less valuable) fork of the blockchain.

My post is mistaken -- thank you for correcting it.

Re: Bitcoin and positive vs. normative economics

#514

Post by yohanatan »

icambron wrote: post #502
yohanatan wrote: post #501

Earlier quoted context omitted.

I'm using the standard definition of 'store of value' (see: http://en.wikipedia.org/wiki/Store_of_value ). The only requirement to have a store of value (aside from ability to store and retrieve) is that there exist a floor; i.e., that an entity 'merely have economic value that is not known to disappear even in the worst situation' or in other words 'be predictably useful when retrieved'. Of course, we can easily ima…

I take back what I said about the definitional problem. But I don't see where you've established that Bitcoin has such a floor, as I said above. I don't think we're getting anywhere, though, so I'm going to break off.

I didn't establish that it has a floor. Did you read and comprehend the entire response I sent last? I think it's pretty clear but I'll repeat it again for you-- my point is that Bitcoin has as legitimate a floor as any of the other entities commonly considered 'stores of value' and thus, from consistency, Bitcoin should be considered a store of value as well.

I understand that you do not think that those other entities have floors either (and I, having a sufficient imagination, tend to agree with that). However, in that case, the term 'store of value' is non-sensical since, given a sufficient imagination, no entities can ever satisfy the 'floor' requirement.

Re: Bitcoin and positive vs. normative economics

#515

Post by yummyfajitas »

atmosx wrote: post #510
yummyfajitas wrote: post #504

Earlier quoted context omitted.

Say you have 2 credit cards: 1 from BoA with USD and one issued by a third party linked to your BTC account. You enter in a grocery store and you need to pay, which one you think most people choose? The rational choice is to use the USD because it's an inflationary currency, while BTC is not. It doesn't matter. Say you want to maintain a portfolio of 90% bitcoins, 10% dollars. You have $100 USD and $900 worth of bitc…

> Your post still doesn't explain why a deflationary currency will cause a person to stop consuming. I never said will stop consuming. It will consume less . It makes sense, a consumer will spend whatever has bigger Y% of having LESS value in X time, not more! Secondly: Have you tried buying/selling bitcoins? If you use a bank it's a pretty straight forward process but has huge costs. Thirdly: Do you buy products usi…

I'm not arguing with your distinctions between currencies and assets. I don't care what label you choose to apply to BTC or SPY. I'm asking why a positive real rate of return on BTC will cause consumption to drop in a manner that a positive rate of return on Gold or SPY would not.

I strongly suggest you go read an economics textbook that actually does the math. Working the models will help you avoid arguing with yourself about definitions (a pointless exercise even if you had a partner http://lesswrong.com/lw/np/disputing_definitions/ ).

Re: Bitcoin and positive vs. normative economics

#516

Post by ansible »

SectioAurea wrote: post #376
ansible wrote: post #135

Earlier quoted context omitted.

It's not simply throwing energy away into solving useless math problems; it's spending energy to create infrastructure. I don't see how it is not the case that mining Bitcoins is throwing away energy. If someone had made a crypto currency based on, say, protein folding [1], I could get behind that. We could just create a crypto currency where we just hand out 100 units to every person. That certainly wouldn't require…

This has actually been done. You can now do protein folding and SETI (and a bunch of GMO research) while mining. Gridcoin is working with the full cooperation of the UC Berkeley BOINC project and is compatible with your choice of dozens of research projects: http://gridcoin.us

That's an awesome idea. I looked into the implementation though... it uses the same software to mine litecoins, and you get a credit when running the BOINC program simultaneously. So I see that as easily abused, where you are running fake processing jobs instead.

Ideally, the BOINC processing would somehow be directly integrating into the mining itself. But again, I don't have any idea how that could actually be done. But it would be nice if that is possible.

Re: Bitcoin and positive vs. normative economics

#517

Post by randyrand »

mapgrep wrote: post #87
randyrand wrote: post #71

Earlier quoted context omitted.

You act like those are the only options. What about a moderate economist that actually considers both sides before creating an opinion?

Why do you assume you have to be moderate to consider both sides? Doesn't it seem like once you objectively consider both sides often enough you begin to develop informed opinions that could make it hard to remain a moderate? But that doesn't mean you stop considering both sides. (Also, this implication that moderates tend to be more reasonable is erroneous. Oftentimes the correct answer starts out as marginal aka "e…

Yes I agree. Should have been "a moderate and/or a person that considers both sides."

But you're getting it backwards - I was unclear. You don't have to be a moderate to consider both sides, but if you consider both sides in my experience you tend to come out more moderate than if you didn't.

Re: Bitcoin and positive vs. normative economics

#518

Post by XorNot »

EGreg wrote: post #468
XorNot wrote: post #372

Earlier quoted context omitted.

If you couldn't turn Bitcoins into USD, would you accept them as payment for something? That's your floor price. It's 0.

Yes, if I can trade them for something else I need. Cashing out is a hassle anyway. It's true that dollars are more liquid. Does that mean you wouldn't accept a ton of free stuff if you couldny trade it for dollars but only other services?

Then why am I getting it for free?

That's the point - it's not free. You don't need a currency for "free". You need a currency for things which have value.

Re: Bitcoin and positive vs. normative economics

#519

Post by loceng »

fat0wl wrote: post #505
tolmasky wrote: post #229

Earlier quoted context omitted.

... Why? It seems to me that it works the same as any system with early adopters willing to take on risk. People that got into twitter early make more than people who get in later, without any necessary correlation to how much work they've contributed. Early investors in a company often put in no work beyond their capital, should their shares be redistributed after it becomes a sure thing? If bitcoin fails, the losse…

Hah someone countered this quite elegantly once -- something like "You mean the risk of leaving their computer on overnight a few times 3 years ago?" No, that should not make you vastly wealthy...

Bitcoin as an ecosystem is extremely complex, and even after trying to learn actively its pieces for about 6 months now, I feel I'm not very far passed the surface. I imagine most people will only dedicate the time and mental energy to basic micro- and macro-economics. People in general, the brain, is very bad in general at understanding and seeing the exponential effects of systems. It's nice to see contributions like yours that help balance out and show another part of reality. :)

Re: Bitcoin and positive vs. normative economics

#520

Post by [deleted] »

XorNot wrote: post #374
prostoalex wrote: post #203

Earlier quoted context omitted.

Right, the trust in the future spending power makes a currency not only a medium of exchange, but a medium of store. It seems that as far as alternative currencies are concerned, altcoins have a better chance of being spread. What's to prevent Amazon from coming up with AmazonCoin, pre-mining an entire AmazonCoin set for themselves, and then offer this altcoin with a liquidity guarantee on largest retail site. Nothin…

Amazon gift cards are already this.

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