Topic: 2013-04-17 mises.org: The Bitcoin Money Myth (Read 1335 times)

Now that the praxeology argument is settled, can I point the discussion of this article in a little different direction?


When I read this part, my first thought was, what about dollars? They have no exchange value based on some other use. That question was subsequently answered:


That, however, raises a new question. What about Euros? They never had anything other than exchange value. I suppose it could be argued that at the commencement of the Euro experiment, citizens were allowed to trade in their old currencies for the new currency, at some exchange rate. To my mind, however, that is not empirically different than people getting their first bitcoins by exchanging other currencies for bitcoins, at some exchange rate.

Any thoughts on this?

This interesting ... so you are saying that praxeology now hinges on bitcoin being proven to have been value before it was traded on an exchange?

Praxeology is now based on the empirical evidence that two 5,000 btc pizzas were traded by laszlo?

Maybe praxgirl can sort all this out she was onto bitcoin in the very early days ...   http://www.youtube.com/user/praxgirl

i think 2 thumbs up sufficiently demonstrated that bitcoin does not violate the regression theorum.

People dedicated valuable resources to mining bitcoin before bitcoins had ever been used in exchange. This proves that bitcoin had value before it had exchange value. Thus no violation of the regression theorem.

But the regression theorem is more of an explanation. It doesn't really predict much at all by itself.

It's more like the law of supply and demand. The law gives no predictions about the supply or demand of a good by itself, but it does explain what happens when the supply or demand changes.

All economists believe in eternal growth, this decade will be harsh for them.

A theory is only valuable if it makes useful predictions before the outcome is known. If the application of the Regression Theorem failed to predict the outcome with regards to Bitcoin then it should be revised or abandoned, just like any other theory.

If you can only get accurate results from the theory by applying it to known outcomes after framing those outcomes to be compatible with the theory it is a useless tautology; pure mental masturbation.

The reason we call a certain period in history "The Enlightenment" is because that's when we learned empiricism trumps theory whenever there's a conflict, which allowed is to invent science.

wow i think you made some really good points. i liked the pearl analogy. And yes bitcoin could have had value early on in the same way that a painting has value not because its useful but because some people just like it, for what ever reason. This definitely could have granted bitcoin its initial non-exchange value.

It doesn't create value, but it does prove value. Pearls aren't valuable because people dive into the ocean to get them. But if you observe someone dive into the ocean to get pearls, that proves he does value pearls. If people spent time and computer resources in order to aquire bitcoins that means they had value. Since people did this before there were any exchange value, we have proof that bitcoin had non-exchange value before its exchange value.

Now we can speculate why bitcoins had value even without any exchange, but that is irrelevant to the regression theorem. Value is subjective. Any none-exchange value makes the regression theorem valid.

I've had similar thoughts as you here. And while it does seem somewhat circular I don't think it breaks the regression theorem, and it's a plausible theory.

But there are other possibilities as well. People often talk about gold's "intrinsic" value, and while gold do have some industrial uses, what people tend to forget is that back when it became money, it really didn't. It was a useless yellow rock that you couldn't do anything with. Basically, its only use was esthetic. Bitcoin could easily fit into that same category. Bitcoin is very esthetic/interesting to a crypto geek, making him want to aquire some even before there were any exchange. This could be bitcoins non-monetary value. Bitcoins intrinsic value could be "geek points".

I think you are both saying the same thing. Either way it's insightful!

The expending of resources to create bitcoin is not relevant to its value. If it was than this would be an example of the labor theory of value. But i really believe mises was correct when he said that all value is derived from the subjective preferences of consumers and not from the labor put into creating something.

Yes people spent real resources to create bitcoins before they were used in exchange, but thats because people were speculating on their future utility as a media of exchange, not because they had any existing utility in that capacity, or any existing utility in any capacity (other than as a speculative vehicle).

I guess you could say they had non exchange value as a speculative vehicle for future exchange value. maybe that satisfies mises criteria but at this point my brain is beginning to tie its self in knots. (im not as smart as mises)

The problem is that you can't simply be wrong about only one thing when it comes to praxeology. if a praxeological assertion is proven false it means that the praxeological axioms are false as well, since you can't come to false conclusions from true axioms. It's like if the Pythagorean theorem was proven false somehow, then you couldn't just say that mathemathics was wrong about just this one thing, because it would have huge implications for all mathemathical theories.

Bitcoin doesn't disprove the regression theorem though. The regression theorem tells us that exchange value can only arise from non-exchange value. That's it. Applied to Bitcoin it gives us two options. Either bitcoins can't can't have any exchange value, or bitcoins were previously valued for some other reason. The first option is obviously absurd and disproven empirically. The second option is completely plausible though. Bitcoin went for a year or so without any exchanges, but people were still expending resources in order to aquire bitcoins. This is proof that bitcoins were valueable even without any exchange value.

i love mises.org but i hate how some of them are almost fundamentalist worshipers of mises who believe he could do no wrong. Well he was wrong in his claim that money can only be created out of a commodity that has existing utility, this is demonstrably the case. Mises was wrong about something, that doesn't mean he wasn't brilliant, get over it, move on.

Agreed, his point is valid, Bitcoin is valued for the services it provides to its users...but it's not at all interesting, a static analysis of current conditions.  I don't think anyone here or outside of LVMI really cares whether Bitcoin is the *most* used medium of exchange.  Second or third, overtaking silver's market cap in the coming years, would be a giant accomplishment and do just fine for most of us. 

Plus, the race is just starting and nowhere near played out, the article is a bit like me writing an article in 1995 pointing out that email is not the most widely used communications medium.  A useless observation without looking at the trends and making future projections.  Even gold, at some point in history, was not the most widely used or circulating medium, it had to earn that distinction over time, gold has a 5000 year headstart over Bitcoin, not exactly a small advantage.  As Tucker points out in his article today, it's amazing that after 4 years you can actually buy as many things as you can with Bitcoins (effectively, many more things than what could be bought by gold just 100 years ago!).

Did a monkey wrote all these idiocies or what? Not even the name is correct!

He can't even spell Satoshi Nakamoto correctly (he spelt it Nakamote) which immediately makes me think he has done zero research.

Bitcoin is going from strength to strength these people should take a look at what is actually happening in the Bitcoin space!

EDIT: Ok I actually read the article and he has a point - we are valuing BTC against the USD and not independently, but I can imagine a few years where a BTC will be accepted for what it is both online and in stores - probably for about 1000 USD worth of goods and services

First they ignore you, then they laugh at you, then they fight you, then you win. -Gandhi

Since Jeffrey Tucker is not in charge of the mises.org it is obviously the overall level of interesting articles decreased.

He's totally lost ... even spelled Nakamoto wrong (Nakamote)
E.g:
If he doesn't know that nearly 90% of existing money supply is already electronic he is not worth reading. Catch up, it already happened, we are on a electonic fiat standard, if we weren't then bernanke and the CB's would not be able to "print" $80 billion per month (does he even know what that looks like in $100 bills I wonder?. They just push a button and it magically appears in some banks special account ...

Starting to lose respect for mises.org ... particularly if they keep entertaining dullards like this guy  

I think bitcoin is becoming a "thing" for certain section of Austrians ... it will never change for them and that school of thought won't die until they die. Like paradigms shifts in Science theories.

http://mises.org/daily/6411/The-Bitcoin-Money-Myth

This must be the same guy at mises that a couple years ago on the forum wrote something like "a bitcoin now is worth around a $ but it will soon plunge to zero".