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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

#291

Post by Canada »

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'm not disagreeing with everything you're saying, but your point about Bitmessage is wrong.

Bitmessage doesn't use the same blockchain as bitcoin. The work of bitcoin miners does nothing at all to help bitmessage.

Only inherited protocol design or reused code can be said to contribute, and that's not relevant to this discussion.

Re: Bitcoin and positive vs. normative economics

#292

Post by patrickg_zill »

undoware wrote: post #199
natrius wrote: post #11

Ignore the flamebait headline. The distinction Krugman makes between positive and normative economics is a useful one. On the positive side, I think Krugman and DeLong are overestimating the strength of the floor for the value of a dollar. Hyperinflation would make it impossible for the Federal Reserve to buy up enough dollars to stabilize the value of the currency. Sure, you can pay taxes with them, but the governme…

> 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. Good luck with that. You've just said something along the lines of, "we'll just have to figure out how to live with terminal cancer." Now, I'm no economist, but deflation is standardly seen as really, really bad, and for good reason. It's not just 'the opposi…

Could you maybe point to some examples?

I think you haven't really looked into deflation in detail, quite frankly.

Re: Bitcoin and positive vs. normative economics

#293

Post by patrickg_zill »

MarkMc wrote: post #220

> Underpinning the value of gold is that if all else fails you can use it to make pretty things. But this 'floor' only accounts for, say, 3% of the price of gold. Whatever makes the remaining 97% a reliable store of value could also provide Bitcoin with 100% of its store of value. A similar point comes from Tim Harford's fascinating description of the currency used on the Pacific island of Yap: ----------------------…

3% of the price of gold? Where did you get that figure from?

Re: Bitcoin and positive vs. normative economics

#294

Post by kordless »

rokhayakebe wrote: post #272
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…

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…

Bitcoin has a funnel, just like any other business or technology platform. Branding is a form of marketing, and it's marketing's job to raise interest. This is the first tier of the funnel. Interest gives way to being able to understand how a given technology is important to us. This is the second tier. Next, those of us that fully understand how Bitcoin works begin to spread the word about how it's reliable and how it could possibly change the world. This is the third tier. As implied trust comes online for Bitcoin for the general population, it will move to wide-spread adoption. That's the fourth and final tier.

We're still in the second tier, which means people are still asking "why should we care?" and vocalizing their fears about something they don't understand. With technology adoption rates increasing over the last year (due to the greater interconnects we have via the Internet) I'd suspect we'll see the start of the third tier in 3-6 months, tops. As fears give way to trust, we'll all settle into a routine with the technology by the end of the year.

Re: Bitcoin and positive vs. normative economics

#295

Post by mortenjorck »

icambron wrote: post #258
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…

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 giving it its floor; this may seem a slightly circular argument, but by enabling what it does it will always have the value of accomplishing that goal, even if it's trading for vast fractions of a cent (like Dogecoin).

Adding the network effects of its installed base, this probably places its floor somewhere well above Dogecoin's current value, but certainly far below what it's currently trading at. And indeed, it could very well undergo further corrections until it reaches a level of stability appropriate for a value store.

Re: Bitcoin and positive vs. normative economics

#296

Post by pjbrunet »

RoboTeddy wrote: post #269
pjbrunet wrote: post #261

Earlier quoted context omitted.

Seems it's only decentralized to a degree. Go to the Bitcoin Foundation website, they say they want to keep Bitcoin decentralized. So how much influence does this Bitcoin Foundation have over the future of Bitcoin? No idea. There's only one (unpaid) Bitcoin developer responsible for the whole thing? Sounds like a tremendous responsibility for one person, considering what's potentially at risk. How are changes rolled…

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…

How many of the miners know how to evaluate updates? Most of these miners I read about, they bought some expensive hardware and just plugged it in. Is there some evaluation period before updates go live? Also, what if a seemingly innocuous change has unforeseen consequences? Nothing like Bitcoin has ever existed.

Re: Bitcoin and positive vs. normative economics

#298

Post by 21echoes »

natrius wrote: post #92
mapgrep wrote: post #70

Earlier quoted context omitted.

Bitcoin went up more than tenfold in less than six months. Then if fell by more than half in less than one month. So I strongly disagree that most people would want to use that for their checking account, paycheck, etc. I am also baffled by "they're easier to transfer" than dollars. Yes you can email BTC. But I can literally hand you dollars. No smartphone needed! And large amounts are trivially easier - I squiggle s…

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...

Re: Bitcoin and positive vs. normative economics

#299

Post by DennisP »

lutorm wrote: post #196
MarkPNeyer wrote: post #104

Earlier quoted context omitted.

Yes. This is already happening to a small extent, and the use of bitcoin as a money transfer mechanism is where the value comes from. People who wish to transfer money using bitcoin do not care about the market price; if they have $1000 USD to send, they buy $1000 USD worth of bitcoins at market price, send them over the network in seconds, and then that value is converted into cash locally. They don't care about the…

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.

Re: Bitcoin and positive vs. normative economics

#300

Post by ubernostrum »

fragsworth wrote: post #238
loceng wrote: post #221

Earlier quoted context omitted.

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 o…

Addressing inequalities of opportunity created as a result of historical factors which predate the adoption of a libertarian system is one of the problems with adopting a libertarian system (aka, the "Libertarianism, starting right now" problem). As Bitcoin is generally promoted from a libertarian orientation, Bitcoin must also face this issue.

Replacing one system of "I or my ancestors were smart enough to do this a long time ago" with another one does not particularly improve matters.

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