Topic: Does Bitcoin have intrinsic value because a user's private key can be used (Read 2363 times)

Me neither, but moooing is sometimes nice.

It would be presumptuous of me to weigh in on Marxist vs. Austrian School debate.  My understanding of both is laughably shallow.
I can only point out that both Marx and Mises are currently on the fringes of mainstream economics, while Keynes' work remains canonical.
Travesty

Thats about right. You asked for a qualification. I am open to discussion on each point (but I will argue and elaborate mine until a well thought out counterargument is presented).

Since you havent read my posts, they might be badly written, probably too long - noted.

What you meant to say, really, is "you haven't read my posts and accepted them as the unimpeachable truth". And you would be right to say so, as I haven't.

The marxist main problem is of course the focus on collectivism with its tencency to sacrifice the individual for the collective. Drones, anyone?

As I remember it, there were two grave errors in the economy of Marx. The first was the labour theory of value. Mises has shown that the value comes from the mind of individuals. But if you just look at the numbers, it seems that value is connected to price of the work and capital factors (capital being condensed labour). The explanation is that when consumer revalue some product higher, work and capital will line up behind that product. Hence the correlation is indirect, starting with consumer preferences.

The other grave error is that the profits that the capital owners reserve, is partially hoarded. Since the workers did not receive their complete productive value in wages, they would not be able to consume all the goods they produced. Therefore there will always be overproduction relative to what the consumers could buy. The funny thing is that this is exactly what Keynes and Bernanke puts forward now. They must have gotten it from Marx. Mises on the other hand teaches us that demand balances supply, and money is not in the equation. Demand being the value of the work brought to the market. The amount of money is irrelevant, and rapid changes in money holding preferences will only momentarily produce imbalances.

The word "intrinsic" means different things in different contexts.  See here. 
Understanding such basics is helpful when setting out to refute Marxism with a parenthetical aside.

So you don't want to use the word "intrinsic" to describe the subjective direct use value. This is contrary to its use in the realm of money. But that is ok here and now, i can use subjective direct use value.

Everything on the market except the purest money have subjective use value. That is the reason they are produced and traded. It is not objective, no sensible person would say it is objective. Both direct use value and indirect exchange value is subjective, it is derived from individuals comparing the value of different goods in their minds.

Gold has some direct use value. It is impossible to say how much. Gold having indirect exchange value is a problem for gold used directly. Consider the use of gold if the exchange value of gold should disappear, leaving only the direct use value. We could use gold in all switches and contacts, not only in fine electronics. We could have less house fires.

Gold bugs like the fact that gold has direct use value, because its total value can not fall under that price point. It is a guarantee that gold will have some value, even if the moneyness disappears.

The same can not be said of bitcoin. It has no direct use value, therefore it can fall to zero, if the indirect exchange value disappears.

Nothing has intrinsic value.

Value is subjective, it's an opinion people have on stuff. Therefore it cannot be an intrinsic attribute of the valued thing. Saying something has intrinsic value equals saying value is/can be objective, what's dangerously false. (Marxism is entirely supported by this theoretical mistake, for instance)

I think we've all been using "intrinsic" when we meant "inherent" all along!

In general language, these are synonyms, nothing to write home about. In the realm of money, intrinsic means direct use value. There is no inherent value either to money or other goods. It's all subjective, that is it is decided by each individual, by comparison with other goods.

fiat - has strong intrinsic value. You cannot live without fiat currency at all, as taxes and the majority of major retail/commercial purchases require it.
This is not intrinsic value, but exchange value. There is no fundamental qualitative difference in exchange value between different kind of money, or different kinds of goods at all. There is only a question of the easiness to sell, and since there are thick markets for all kinds of money, the quality of money only differes in the practicalities of conversion from the one to the other.

gold/precious metals - no intrinsic value. Essential for nothing, but desirable for at least a few purposes.
The precious metals have direct use value which is a part of its valuation. You can make pretty and useful things out of them. This is intrinsic value.

bitcoin - no intrinsic value.  
correct.
Ditto gold, but with different specific purposes.
Gold has intrinsic value as explained.

Inherent value, well, that's a different thing.
When using intrinsic in the general sense, it is synonym to inherent, not a different thing.

I must be tiring some of the audience. Maybe I should stop hammering on the intrinsic thing and use other words. Anyway, the concept of two sources of the value of money is important, among other things to be able to see the future value of bitcoins, without having to recede to statistics and projections.

Qualify "this"

This is confused. See other posts in this thread.

Yes, there is a general use of the word which is inexact, maybe on purpose, reserved for the politicians.

The economic definition from investopedia is concerned with the valuation of firms, which is not relevant for us here.

Still, in the realm of money, it means the direct use value component of the money's total value. Other things on the market have only intrinsic value. Money has another value component that is exchange value.

I still can not find a straightforward definition in the writings of the old heroes, but still in any writings about money value the word intrinsic is used it refers to the direct use value, sometimes the two are used together, with one of them in parantheses. By the way, I also found the expression "non-monetary value" describing the same thing.

The problem is there are many conflicting definitions of "intrinsic value."

In philosophy, it means "value without relating to other," as in: "Truth is intrinsically good."  Intrinsic value is opposed to instrumental value and is thereby never relative.  It's an awkward concept, describing a null set to a relativist, but allows for ponderous statements like "God is good" without some wiseass replying "for what?"

The dictionary definition, like all dictionary definitions, is inexact & gives you the Cliffsnotes version.

In economics, it's this.

All this is correct, but it remains that in the realm of money, intrinsic value means the direct use value. It is correct that most things on the market has direct use value. Those things has value also for other people, making them sellable. Money is special in that it aquires more value than the direct use value because it can be used in indirect trade, facilitating the store of value and the time-shifting function. This added value is the moneyness, or the exchange value.

Many hold that gold is good money because of its intrinsic value. I hold the opinion that the best money (for the world at large) is money that has exchange value. but as little intrinsic value as possible. Fiat and bitcoin come into that category.

The value of the system, the cost of running the system, and the cost of producing a unit of the money stuff is independent from the intrinsic value and the exchange value.

I think we've all been using "intrinsic" when we meant "inherent" all along!  

Edit:

Revised "intrinsic" value designations are as follows:

fiat - has strong intrinsic value. You cannot live without fiat currency at all, as taxes and the majority of major retail/commercial purchases require it.
gold/precious metals - no intrinsic value. Essential for nothing, but desirable for at least a few purposes.
bitcoin - no intrinsic value. Ditto gold, but with different specific purposes.


Inherent value, well, that's a different thing.

You are correct that bitcoin has no intrinsic value, but the reason is wrong. Intrinsic does not mean required for survival, it does not mean objective, rather it means the subjective direct use value.

There is an interesting link between gold standard (which often means redeamability but only fractional backing) and rebate systems like frequent flyer points. These systems often give you a certain amount of points as a fraction of what you buy, and they are redeemable for goods of the same type or sometimes goods of other types in addition.

The notable observation is that you never get one point per dollar spent, or .1 or .001 point per dollar spent. You always either get 2 or 200 or 5 or 500. The point is to obscure the relation between the dollars spent and the number of points. Therefore the customer can not easily see the real rebate he gets. Normally they just believe that they get something for free. This can be used also to debase the value of the points, by repricing their goods measured in points.

With a gold standard, you have the same thing, where the backed notes do not have written on them the amount of gold, rather it is named with some arcane unit of mass like mark, and by inception they also redefined the unit of mass to some arbitrary mass of gold, not the exact mass that the mark stood for originally. This opens the door to redefine the mass of gold that the note represented. This was done to the dollar last time in 1934, and the redeemability was abolished in 1968. Had the notes been called 1 gram instead of 1 dollar, it would be more difficult to pull tricks like that.

You might see governments creating a new national currency that is redeemable and partially backed, but you will never see them print notes denominated in gram or some other well defined unit of mass of gold.

When some currency is redeemable and fully backed by gold, it is theorethically the same as gold. But the question is always, is it really fully backed or is there some scam going on in the dark, and, will it be redeemable also in the future? This means that it is either the same as gold, or less, depending on the trust of the users of its redeemability and backing. Its use value is therefore something between gold's intrinsic value and nothing.

Theoretically, yes, due to the direct redeemability. In practice, when the French state, amongst others, began to redeem increasingly more of their gold holdings from the US, Nixon ended up all but admitting that the system couldn't take it. I'm not sure whether there was something that Nixon knew that everyone else didn't, but the facts as stated at the time were that a combination of the gold price trend, the dollar debasement trend and the redemption of gold trend couldn't be sustained, and that meant abandoning the gold standard.

Thanks guys for the thorough replies.

When the USD was on the gold standard, did it have intrinsic value?