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Bitcoin and positive vs. normative economics
411–420 of 520 posts
Re: Bitcoin and positive vs. normative economics
#412Earlier 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…
> If BTC starts collapsing, perhaps all that infrastructure will go on to do great things for society, but how does that help Bitcoin? If the infrastructure goes on to do great things for society then it has (and has always had) intrinsic value and thus the price of BTC rebounds (or more likely never collapses in the first place).
No, it doesn't. BTC isn't a good value store (or have intrinsic value) just because the infrastructure that processes it is--in a different sense of the word--valuable. If a bitcoin conferred a fraction of ownership of that infrastructure to the coin's holder, you'd have a point, but it doesn't; the holder just has the coin. The parts of the infrastructure you might actually sell are owned by someone else, and the open source parts of it are owned--in the sense relevant here--by everyone, so it doesn't provide the coin any value. It's like saying gold is a good value store because mining and ore extraction equipment are useful. Doesn't make any sense.
Of course, you can say the infrastructure makes the coin more useful as a medium of exchange, but that's a totally separate point, as Krugman points out.
My personal view is that none of these things--gold, dollars, or bitcoin--has enough intrinsic value to make a useful value floor, and that as value stores they all just rely on a shared convention. So I'm not sure Krugman is right, and perhaps bitcoins will work out without that floor feature, and perhaps without ever really being used as a store of value. But this argument about infrastructure just doesn't work.
Re: Bitcoin and positive vs. normative economics
#413Earlier 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!
Neither of those things were around or refined enough like gold was when gold became the traditional metal for jewelry. Gold has a large first-mover advantage here that is being propped up by human psychology.
Re: Bitcoin and positive vs. normative economics
#414Earlier quoted context omitted.
Unfortunately the squiggle trick doesn't work to send $0.20 to that friend in Angola who runs the water and sanitation project? It also doesn't convert to Mpesa in Kenya [1] (Bitcoin now does). And wiring $500k to China for that shipment on a Sunday doesn't work either with squiggles or e-payments. [1]: http://www.economist.com/blogs/economist-explains/2013/05/ec...
Do you know anyone in China that will accept $500k in BTC for real goods and services, or is your Bitcoin example just as hypothetical as the squiggle?
The manufacturer of goods I export from there has taken small six-figure USD transfers solely in BTC, so, yes.
Re: Bitcoin and positive vs. normative economics
#415Earlier quoted context omitted.
"I'm most bullish on bitcoin when I read articles such as this one .... it reveals how little anyone really understands money or economics." That is an incredibly arrogant statement, considering the article is from a Nobel prize winning economist and you did nothing to refute or undermine his actual points or references.
I could name at least one Nobel winning economist who has completely opposite views from Krugman. Economics is far from a hard science unfortunately.
The point is about dismissing a Nobel winning economist with a two paragraph comment on HN concluding "how little anyone really understands money or economics". If you are going to play judge of economic expertise, a little more analysis is in order.
Re: Bitcoin and positive vs. normative economics
#416I'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…
"BC is nothing like Money" - care to explain this?
What does it mean to be money? I like the definition that money is what we value not for its usefulness in itself - but because we speculate that we'll be able to exchange it for something useful. And bitcoin fits this definition perfectly.
Re: Bitcoin and positive vs. normative economics
#417Earlier quoted context omitted.
"I'm most bullish on bitcoin when I read articles such as this one .... it reveals how little anyone really understands money or economics." That is an incredibly arrogant statement, considering the article is from a Nobel prize winning economist and you did nothing to refute or undermine his actual points or references.
lol this this thisssss! bitcoin culture in a nutshell. the major economists & finance analysts say stuff like "explain how this is not a speculative bubble", for example, because they outright see it as one & the bitcoiners dismiss them as hacks because they didn't use a bunch of crypto buzzwords
Which is more likely, that economists don't understand cryptography, or cryptologists don't understand economics?
Re: Bitcoin and positive vs. normative economics
#418Krugman 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…
You don't need this amount of computing power to send messages. All that these processors do is guarding against 'double spending' - but 'double spending' is a peculiar problem of distributed cash - a centralized currency could be secure against 'double spending' without burning so much electricity.
Re: Bitcoin and positive vs. normative economics
#419Can't understand how it going to work. In my opinion the banks will kill the Bitcoin before it will really start working, I don't see how they are going to let it succeed.
Re: Bitcoin and positive vs. normative economics
#420Earlier quoted context omitted.
I'm taking about cash. For cards and digital services, the Bitcoin advantage is near zero transaction fees.
Zero transaction fees? The bitcoin network costs something like $3.5 million per day to run, and optimistically handles tens of millions in transactions. That's a transaction fee of 10%. You just don't notice it because they pay the miners by printing money. I'll be really interested to see what happens when they stop that and start relying on up front transaction fees to fund the network.
This is an excellent point. I'm curious to see how that pans out. My guess is that since Bitcoin transaction fees are supposed to be set by the market, they'll stay competitive. If mining is unprofitable at the rates credit cards are offering, fewer people will mine, which makes mining cost less energy, leaving more profit. Eventually an equilibrium will be reached.