Topic: George Selgin advocates Bitcoin AGAIN - page 3. (Read 6010 times)

+1

Please everyone: stop saying bitcoin is democratic.  It is not.

What you seem to dislike most about what you see as "democracy" is what is called the tyranny of the majority.
It is usually guarded against, among other measures, by enshrining the rights of individuals and minority groups in
things like constitutions and charters of rights etc. ( Getting elected officials to pay attention to such inconvenient
documents is another matter that we shouldn't blame on the concept of democracy itself. )
 
The tyranny of the majority is something, it seems, that the wealthy few complain about the most, when it looks
like they may have a little of their overwhelming power reigned in slightly.

Don't confuse the concept of democracy with what is claimed to be a shining example of it.  
For example if places like the U.S. and Canada had true democracies, where the majority of its
citizens had a fair say in the setting of policy, then marijuana would be legal. A lot of things
would be different.

What would you see as a better system to have instead of a constitutional democracy?
A benevolent monarch like one might find in fairy tales?
Or perhaps you are an anarchist...  no danger of anything like mob rule with that.

Remember that a key prerequisite to having a good democracy is an informed populace.
In an anarchistic system that would be even more important. And in case you haven't
noticed a lot more money has been going into the military than things like schools... at least
since Eisenhower gave that warning.  With the rise of the neocons the dumbing down of
our Western nations has been taken to new levels.
Is that because of democracy or because of the lack of it?  

Of course no system will be perfect which involves people trying to get along with each other...
what's that famous quote... democracy is the worst form of government, except all the others
that have been tried.

^^ I share this sentiment

You are right, just saying the words makes no difference and I should just ignore it even if it's not correct.

But with the word democracy I just can't help myself. It's one of those words that's responsible for so much evil and suffering in world and yet has an immensely positive image which is something that makes me want to throw up every single time I run across it and I'll be damn if I have the chance to object if I'm not going to use it whenever it's being applied to something wonderful and absolutely not evil and despicable unlike a democracy.

I believe Satoshi's white paper referred to the hashing algorithm as analogous to casting votes, so I guess that's one similarity. And some democracies allow a minority government. E.g.: New Zealand has had a few of those.

But anyway, I don't think it's that important to put a label on it. What if someone came along and said "wow! Bitcoin is great, it's got elements of Marxism and Islam, and Tao te Ching all rolled into one!"? I'd just roll with it.

UGH. No, no, no and no! 

The only thing at work is voluntary collaboration. There's no majority ruling over a minority and I'm baffled how people somehow keep seeing this. Isn't it true that even if 99% of people switch to a protocol with different rules than the rules in Bitcoin, Bitcoin still exists for the 1% and still has the same rules?!

This is NOT democracy at work.

i think Selgin believes "someone" (who undoubtedly will have a vested interest) can set up a desktop computer, program it for 2% inflation, hardcode the software so that the algorithm can't be changed, and then tie the global financial system to it.  

he doesn't realize that what makes Bitcoin work is the sheer size of the distributed network (which protects it) and open source nature (democracy at work) of the no inflation algorithm that ppl have voted to use and support with their money, time, effort, ingenuity, software, and hardware.

Guys, of course I agree with you that it's not that simple. I'm just pointing out that Selgin is not only aware that the money supply (well, in his case, since he's a fractional reservist, the monetary base) must be immune to political pressure, like the Austrians usually are. He also, unlike many other Austrians, sees that a synthetic source for this immunity can work just as well, if not better, than a naturally occurring source. This is a big step forward, as plenty of other Austrians I emailed with have some mental block against this. Well at least Hoppe is somewhere in the middle, he indirectly admitted (if I got that right) that an invented commodity is hypothetically acceptable.

cypherdoc is right, you need a network behind the rules embedded in the code to make sure those do not change or if they do that they have unanimous consent.

I'm not sure what Selgin is talking about is even possible to invent.

i think its more than just writing a computer program and pretending to throw the key away.

its making the computer program enforce the rule of the majority of participants who will respond to the program in a favorable way if it doles out justice in monetary policy.  by allowing participants to contribute their own computing power to the network is the means of voting and making the network secure enough for a financial system.

By the way, this is what Selgin writes in Less Than Zero (1997):
(emphasis added)

Keynesian economists seem to think that the money supply shouldn't just be inflated according to a blind formula without any regard for the size of the economy. As a crude example, if the economy grows by 10%, the money supply should (according to them) be increased as well so that the average price of a basket of goods (CPI) doesn't go down. However, there are a lot of problems which Keynesians seem to brush off as irrelevant. For example, who decides what goods should be eligible for CPI statistics? Similarly, who decides what criteria are allowed for determining the growth of the economy? What if cars (or some other important product group) go out of fashion and start skewing CPI results?

Hence, staying in control of all the information seems very complicated and labour-intensive, and for what? The holy grail of making sure that pizza/milk/shoe prices always stay the same? Prices keep creeping up forever anyway.

i don't think Selgin understands that what makes Bitcoin popular, at least to me, is the open source democratic nature of the algorithm.  ppl are essentially voting for the type of money supply being offered to them and the fact that Satoshi has designed a fixed supply system is what makes it popular.  the beauty of the system is that anyone is free to fork the chain and introduce any system they want; such as a fixed 2% inflation.  this has already been tried and has failed spectacularly. 

Selgin advocates writing a computer algorithm and then "throwing away the key".  i don't think he understands how biased this approach is.  first of all, whoever writes the program will have an incentive to slant the properties of that algorithm towards their own special interests.  it would be like how the insurance industry has wrote Obamacare and thus it favors their interests.  and their is no such thing as "throwing away the key" in that scenario.  the authors will always be tempted to have a backdoor.

as already said, if he believes such an inflationary money supply is needed, and if he feels a derivative of Bitcoin can be used to achieve it, then he should write such an algorithm.  i believe it would fail miserably b/c i think the ppl have wised up to how the bankers are debasing our currency.

Can you elaborate on that? I don't get what you mean.

Coincidentally I emailed a couple of times with Selgin about Bitcoin, and I made exactly the same argument, that adjusting money supply based on rules like the GDP targeting is unlikely to work because it depends on complex empirical data. So he's aware of the objection.

Well if he's so smart, why doesn't he invent a digital currency that does what he wants? It can't be that hard, just define the system very precisely, and there's your skeleton code -- half way there! As it stands, he's just being a smooth-talking critic in front of a camera.


All these massive requirements are built on top of the urban legend that a currency must grow (and shrink) to keep pace with an ill-defined concept of economic growth. What if a revolutionary new product or industry is created that transforms the economic landscape, thus changing the very definition of economic growth?

There is no such thing as a free market and never will be. You can only mitigate the circumstances that restrict trade. That is a matter of politics.

+1

I sounds to me like he wants the currency to remain stable in price, so if you have X units that can buy Y units of a basket of goods then in 20 years that same X units will buy that same Y units of the basket. That would make planning much simpler, for businesses and retirement. But it can't work. There's no way any central authority can possibly know enough to manage the money supply, no matter how much computer power it has.

The only way to manage a money supply is to not manage it at all - that is, to let the free market manage it via the interactions and choices of everyone.

I think you are right.
I also think that Dr. Selgin understands bitcoin very well, not so much from this video as he doesn't go into its details, but from antother one I saw before. He understands how decentralized governing by an algorithm works: In the other video, he said that people accept only money (coins) that adhere to their own standard. So that if you change the algorithm (eg. altering block rewards), you created another currency that is only viable if others change their algorithm in the same way.

Now what I think he would like, judging from this video, is a currercy that is controlled in the same way as bitcoin (decentralized) but with a different algorithm. First he discredits a money supply where the inflation is predetermined. He prefers an algorithm that tracks GDP. Unfortunately he doesn't give any insights as how this should work technically. Here are my ideas:

Personally I think there are two main difficulties in implementing this. The first is the control algorithm. We cannot control the desired state directly (GDP), let alone independently. There are many other states that we may or may not want to control. (Economics is too complex. I think the whole point is that if we focus on only one state - GDP - and control it properly everything else will be fine).
One of the other states is the money supply. In Bitcoin we have an input that directly controls that state: Block rewards. But it can only increase it.
So we need a model for the economy that tells us how the states and inputs relate, and then find a control law that governs the desired state by controlling the inputs. One of the questions is if this system is controllable at all, we may need more inputs.
One thing to make the system more controllable is if we also can invent a way that destroys bitcoins when a block is created. And does anyone else have an idea about which other inputs might be used?

The second problem I foresee is that the state measurement must be automatic. Currently the GDP is yearly published by government agencies.  But the algorithm must be able to determine the GDP without the interference of humans. Selgin explicitly states that a system like this brings only stability if there is absolutely no human in the loop that can act unexpectedly. Also, this measurement must be accurately performed often: Delays in control systems make them harder to stabilize. A yearly publication is probably too slow. Maybe monthly publications/measurements are fine, maybe this is possible, in fact I don't know how often this is currently done.

And, as somebody else mentioned, we must be very careful to measure the actual state, not a proxy (like the sum of all transactions in stead of only those that represent economic activity).

Any other ideas?