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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

#121

Post by etjossem »

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.

It's still a totally inaccurate bait and switch title, which annoys me and makes me like his column a little less.

If I click through to an article called "Bitcoin is Evil", maybe I actually want to read about how a Bitcoin-dominated world is going to making exploiting the poor trivially easy. I'm not convinced yet, but it's a plausible (if normative) argument someone could make, so there's no sense in making a joke out of it. Especially if - like Krugman - you already support redistributionist taxation and the welfare state.

Re: Bitcoin and positive vs. normative economics

#123

Post by chipsy »

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…

What I think is important about cryptographic assets isn't exactly in the economic properties they have now, but in the potential for reforming governance.

That is, if people are successfully using a crypto asset for their business, AND they are able to use a power and network infrastructure for this that is difficult enough(not perfect) that government authorities aren't successfully applying their "monopoly on force," then government is now pushed into competition with the crypto-anarchic principles and must find a way to become a "better product," enough so that people will prefer government money over crypto.

How will government come up with a product that is better - in a positive way - than a crypto asset? Government has the authority to issue new centralized currencies. This means that if it truly embraced computing - which it never has to date, having never faced a challenge of that nature - it could program a form of currency that is "smart" and bakes in the policy decisions and taxation currently executed by bureaucracy. It would be made attractive to citizens by building in basic income, as well as the service provisions. The result would be more powerful and more efficient than anything we currently know as government. Cash would still exist as a backup, but the government could discourage its use except in emergency situations.

Re: Bitcoin and positive vs. normative economics

#124

Post by kordless »

sans-serif wrote: post #78
jamroom wrote: post #48

Earlier quoted context omitted.

But does Bitcoin really have a floor related to the energy put into the mining? Since the energy cost is paid for by the miners, do other players in Bitcoin "respect" that floor? I don't see that - there's nothing keeping a Bitcoin from going all the way to zero - regardless of the energy consumed in it's production, and Krugman argues that gold (and the feds) have a bottom that is greater than zero. My understanding…

No, the floor is unrelated to the energy put into mining. The intrinsic value of Bitcoin is the ability to facilitate financial transactions. Brinks' entire CIT vehicle business is based upon just a subset of this function, and we can agree their value is not zero.

Bitcoin is able to facilitate transactions because of the power put into the computers running the Bitcoin network. Mining Bitcoin provides the functionality for validating the block chain. So, power into the network provides the value of security.

Re: Bitcoin and positive vs. normative economics

#125

Post by slurry »

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…

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 out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. So, you're going to have a hard time finding a bank that pays interest on bitcoins. This is why "bad money drives out good", aka Gresham's law.

Re: Bitcoin and positive vs. normative economics

#126

Post by guscost »

steveklabnik wrote: post #117
guscost wrote: post #108

Bitcoins can only be as evil as cars, guns, LEDs, pin-and-tumbler locks, trusted computers, square-rigged ships, Jacquard looms, and enriched uranium. The point is that these are technologies, not people .

There's an assumption here which may or may not be true: technologies are ethically neutral. Some reasonable people disagree with this assumption.

But can technology be immoral? I'm a bit rusty on all that stuff but it sounds like we're talking about two (subtly) different questions. I would argue that technology can be used for evil, but technology just sitting there by itself is no more evil than rocks or sand.

If you can prove that a certain technology can not or will not be used for good, then that raises different questions.

Re: Bitcoin and positive vs. normative economics

#127

Post by hendzen »

bdcravens wrote: post #90
hendzen wrote: post #35

Earlier quoted context omitted.

Actually, for your first point, you have to compare the carbon footprint of bitcoin to the carbon footprint of the alternative. What is the carbon footprint of all the different transaction processing systems run by Mastercard, Visa, Amex, etc? What about if you add in the cost of the massive mainframes that handle ACH transfers? The cost of printing millions of archaic paper checks? I'm not saying bitcoin replaces a…

I'd argue that value / footprint (edit: had this backward) generated is higher for legacy systems than Bitcoin. (Unless you can totally eliminate CPU and GPU mining)

I see an assertion, but no actual argument.

Re: Bitcoin and positive vs. normative economics

#128

Post by richcollins »

username223 wrote: post #52
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…

Maybe some day Bitcoin will be a cheaper way to transfer money than EBT, credit cards, etc. (a few percent). If/when that happens, people will hold Bitcoins for just long enough to complete a transaction -- microseconds -- rather than for however long it takes them to cash out their speculative bets.

This would create a floor on price ... which would then make it useful as a store of value (since there is a high probability that you'd be able to sell them in the future).

Re: Bitcoin and positive vs. normative economics

#129

Post by hendzen »

hershel wrote: post #72
username223 wrote: post #29

Earlier quoted context omitted.

"why do the states need to monitor financial transactions?" I hate the "terrorism" BS as much as you, but money laundering and large-scale scamming ( https://news.ycombinator.com/item?id=6972139 ) are actual threats.

I wonder: with the power of the NSA and the right laws ,maybe it's really easier to track and control bitcoin transactions than control international banks?

That's actually a legitimate concern, which is why people are working on CoinJoin [0]. ZeroCoin and other cryptographic solutions are very interesting but will not be practical for a while due to blockchain bloat and extremely high verification time.

[0] - https://bitcointalk.org/index.php?topic=279249.0

Re: Bitcoin and positive vs. normative economics

#130

Post by EGreg »

I am an on again off again fan of Krugman in some respects. In this case he has managed to clarify the discussion, which is good!

The truth is that bitcoins derive most of their value from being a great medium of exchange and enabling things (smart contracts are ahead) that otherwise wouldn't be possible. Things like making no recourse payments online for the first time ever.

Bank of America did an analysis on the value of bitcoin and concluded that one of the components is the payment network. If PayPal's market cap is billions, why not bitcoin?

So I see this as giving a "floor" to the value of bitcoin via demand the same way as the US government's demand for dollars from its citizens (or the controversial petrodllar warfare theory and other shenanigans) boosts demand for the dollar. There is definitely a lot of demand boost in that.

And for now there is alsothe speculative bubbl. I don't know what the value of bitcoins should be, but it's certainly not zero - there will be demand for it by chinese millionaires trying to get their $ out of the country and bypass currency controls, and other things like that. And if the market cap is high enough, moving a few million dollars in bitcoins at a time won't move the market. Demand drives the price up.

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