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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

#471

Post by aninhumer »

ubernostrum wrote: post #423
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…

Given how often Bitcoin is advertised, by its genuine proponents, specifically as a currency , this feels like an attempt to move the goalposts when someone points out that it doesn't do so hot at being a currency.

It's almost as if there are different proponents with different reasons for supporting of Bitcoin...

Re: Bitcoin and positive vs. normative economics

#472

Post by wpietri »

nandemo wrote: post #444
azernik wrote: post #275

Earlier quoted context omitted.

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 price of the dollar collapses, you can sell it to the Fed I think this is a dubious argument. It describes what happens most of the time, when the value of the dollar fluctuates. But what if the collapse of the dollar is accompanied by a downfall of the Fed? Hyperinflation has happened in many, many countries that used fiat currencies, and even the US has had high inflation: http://en.wikipedia.org/wiki/Hype…

It may be a dubious argument in theory, but it's not a dubious argument in practice. You have to store value somewhere. If you look at how most people deal with that, they use fiat currencies backed by organizations they trust. There are alternatives, but they have risks as well.

Re: Bitcoin and positive vs. normative economics

#473

Post by wpietri »

aestra wrote: post #333
azernik wrote: post #275

Earlier quoted context omitted.

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…

Yeah right. If the gold market collapsed then nobody would be making selling or wearing gold jewelry. The reason it is popular now is because it is expensive.

People have been making and wearing gold jewelry for thousands of years despite wide fluctuation in price. Gold doesn't tarnish and is easy to work, so it is uniquely suited for jewelry. (That also gives it a lot of industrial applications, which set another price floor.)

Re: Bitcoin and positive vs. normative economics

#474

Post by my_username_is_ »

EGreg wrote: post #470
brownbat wrote: post #329

Earlier quoted context omitted.

> It is amazing how one word "COIN" added to this word has shaped everyone's thinking. Yeah, Bit-distributed-public-ledger doesn't have the same ring, but I feel like there are a million problems that can be solved with this technology that are barely being explored. Namecoin is one example, a distributed DNS system, but it feels like that's just scratching the surface of problems that require allocating sparse contr…

Why is namecoin even useful?

Because you can circumvent the centralized authority of DNS registrars. Look at the Pirate Bay, who keeps having its domain names revoked by central authorities. Namecoin's ledger allows people to agree on who has what domain name without using a standard registrar

Re: Bitcoin and positive vs. normative economics

#475

Post by azernik »

nandemo wrote: post #444
azernik wrote: post #275

Earlier quoted context omitted.

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 price of the dollar collapses, you can sell it to the Fed I think this is a dubious argument. It describes what happens most of the time, when the value of the dollar fluctuates. But what if the collapse of the dollar is accompanied by a downfall of the Fed? Hyperinflation has happened in many, many countries that used fiat currencies, and even the US has had high inflation: http://en.wikipedia.org/wiki/Hype…

Given the strong guarantees of Fed independence and inflation-targeting written into its establishing laws, I think the hyperinflation case you're worried about boils down to a collapse of the American political system or its defeat in a much more major war than it's been involved in for many decades. This is a risk to think about and plan for, but not at the cost of exposing yourself to the risks of storing your wealth in such a volatile commodity as bitcoin. Stock up on living needs and stable commodities if that possibility seems realistic to you, and be ready to use bitcoin as a medium of exchange.

Re: Bitcoin and positive vs. normative economics

#476

Post by wpietri »

tlrobinson wrote: post #206

I was not disappointed to find this as the top comment (at the time I viewed the article): 1998 - Another "evil" prediction from Mr. Krugman: --- The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law"--which states that the number of potential connections in a network is proportional to the square of the number of participants--becomes apparent: most people have nothing to say to each other…

Somebody took a careful look at that set of predictions. It's a reasonably good record: http://marginalrevolution.com/marginalrevolution/2010/12/pau...

Your apparent heuristic of "they said one wrong thing so we can ignore them" is faulty. It just encourages the typical pundit's trick of never saying anything. I'd much rather hear from people who state things clearly and are sometimes wrong.

Re: Bitcoin and positive vs. normative economics

#477

Post by aestra »

wpietri wrote: post #473
aestra wrote: post #333

Earlier quoted context omitted.

Yeah right. If the gold market collapsed then nobody would be making selling or wearing gold jewelry. The reason it is popular now is because it is expensive.

People have been making and wearing gold jewelry for thousands of years despite wide fluctuation in price. Gold doesn't tarnish and is easy to work, so it is uniquely suited for jewelry. (That also gives it a lot of industrial applications, which set another price floor.)

My original post was somewhat negative (as I have a personal issue with the jewelry industry) however

Gold originally was the only metal colored like that (shiny) so it stood out, coupled with its scarcity it became a status symbol. It was the stuff of royality. It has some properties that make it useful in jewelry but pure gold is actually too soft for jewelry and is used mostly as alloys.

I am not saying gold (like other metals) doesn’t have its industrial applications, it does!

You can not convince me however that gold is inherently a better metal for jewelry than alternatives. It is only there to give jewelry that golden shine, which has been considered a status symbol. Now, if gold somehow became a "cheap" metal I don't think people would be keen on displays of their gold.

Re: Bitcoin and positive vs. normative economics

#478

Post by EGreg »

my_username_is_ wrote: post #474
EGreg wrote: post #470

Earlier quoted context omitted.

Why is namecoin even useful?

Because you can circumvent the centralized authority of DNS registrars. Look at the Pirate Bay, who keeps having its domain names revoked by central authorities. Namecoin's ledger allows people to agree on who has what domain name without using a standard registrar

But why do you need to sell a name like akqbajauwbzjxu7163jebej? Can't people simply claim names the same way they claim bitcoin wallets?

Re: Bitcoin and positive vs. normative economics

#479

Post by maxerickson »

EGreg wrote: post #478
my_username_is_ wrote: post #474

Earlier quoted context omitted.

Because you can circumvent the centralized authority of DNS registrars. Look at the Pirate Bay, who keeps having its domain names revoked by central authorities. Namecoin's ledger allows people to agree on who has what domain name without using a standard registrar

But why do you need to sell a name like akqbajauwbzjxu7163jebej? Can't people simply claim names the same way they claim bitcoin wallets?

The goal of Namecoin is to manage meaningful names.

I guess a service that provided free names like the one you made there might be an interesting addition.

Re: Bitcoin and positive vs. normative economics

#480

Post by natrius »

saalweachter wrote: post #461
natrius wrote: post #420

Earlier quoted context omitted.

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.

The mining network shedding capacity is a bad thing for Bitcoin. If 90% of the network is powered down to reduce transaction fees, that gives someone the opportunity to buy up 20% of it on the cheap and corrupt the network. Bitcoin has to use as many resources as possible to stay secure.

This is the biggest practical flaw I've understood so far, but it still seems fixable. If Bitcoin becomes uncompetitive with traditional payment systems and mining activity decreases, miners could collectively decide to alter the mining reward.
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