Topic: Grand Unified Monetary Theory - page 2. (Read 3554 times)

I disagree.
When market value plummets and only the intrinsic value is left, i'd rather have a milion paper slips then a milion bitcoins.
For one, you can isolate your house with paper slips.
You can also burn them for heat.

I think with instrinsic value it is meant that you can use the "money" for itself even if nobody will trade you for it.
For example, wheat has been used as money in ancient times. If nodobdy would trade your wheat you could always eat it yourself. Thus wheat as money always has a minimum intrinsic value.
Gold also has an intrinsic value. You can use it to make jewelry or electronics.

I'm not sure if Bitcoin has an intrinsic value. At the most basic level Bitcoin is a system of recording and sending unique tokens over the Internet. So it does have a core usefulness, more useful than small slips of paper with ink on them. Still, you can't really do anything with those tokens other than trade them.

I am not concerned, this is your list.
To me, the term 'loss' would include things like theft and i'm sure that was not the direction that Aristotle was heading with this.

He WAS indeed talking about practicality and in his eyes these big coins were bad money as they would not flow easily through society.
It has nothing specific to do with theft, it applies to all uses of the currency.

It allows for a smooth change in price.
Today a chicken is worth 1 coin.
Tomorrow, a chicken costs 0.97 coin.
How will you pay for this chicken if the coin is not divisible into, say, cents?
Again, this is about the practical use of the currency.
Things like liquidity and ease of exchange are related to the widespreadidness of the currency and are not dictated by it's divisibility.
And to become widespread it is essential that the currency be practical in several ways, according to aristotle.
And divisibility makes the currency more practical.

Such as that even if the market collapses you are left with something (the physical part of the currency) that has some value of its own.

People tend to trust such currency easier and are more eager to use such a currency.
This actually adds to liquidity and ease of exchange.

Yes you are. You're desperately trying to distill things you think are important now from things written by aristotle.
What you do wrong is that you only consider his points without considering the direction of those points.
So i still think that you should make a list based on what is needed now instead of trying to find a way to transform these old ideas because now is a completely different situation than aristotles times.

No offense benjamin, but your post does reek of shoehorning bitcoin sound bytes into the "grand unified theory". Like, for example, the concept of intrinsic value is dubious enough as it is, then you somehow manage to attribute this value arising from a viable attack on the network.

I said it already. Bitcoin would be just a user interface to money. A tool. That's all it is. A tool to store and transport this information. It's an UI instead of the OS. Many n00bs confuse these two things.  

You're right, owning a Bitcoin doesn't tell you anything about these things. That's why it is not perfect money, as I said. As soon you resort to such a commodity, you've already lost a great deal the accuracy and efficiency that the all-knowing computer-system has.

Gold would be just a commodity like any other in such a system. Same with Bitcoin as a digital commodity, it may or may not still find some purpose.

Okay... still sounds like loss to me.  Are you generally concerned about others destroying their Bitcoins, and the effect it has on you or "the currency"?  If so, why?


So, what does my owning a Bitcoin tell me about who owes what to me?  How about a dollar?

I agree that money is information.  But it isn't information about debt.  It is information about supply and demand of scarce resources.


Frankly, given the rather spectacular inconsistencies in the multiple schools of modern economic thought, I think I'd prefer to use words based on their regular, English meanings.  And since I'm making more of a philosophical, rather than economic, assertion, perhaps you can just pretend that "market failure" has a more generic meaning than the technical meaning you might usually proscribe to it?

If not, well, then here's my argument.  I disagree that "market failure" is a natural consequence of "shortcomings of the concept of a market itself."  I think, rather, that it is a natural consequence of something else, force and fraud, intentional harm, ie. crime.  In my view, calling this "market failure" is a complete abuse of the language, newspeak even.

Let's say we decide to meet at the coffee shop to exchange Bitcoins for fiat, and you decide to rob me of my fiat instead.  Would you call that a failure of the market for Bitcoins?  No.  That's crime, something "the market" doesn't even pretend to protect against.  Since we were in a coffee shop when the crime occurred, is it a failure of the coffee shop to protect against crime?  No.  The "concept of a coffee shop" doesn't include "protection against crime" any more than the concept of a market does.  It's a failure of something else, morality, government, individuals, society perhaps, but not "the market" or "the coffee shop".

So, I'd prefer to use the term "market failure" to mean exactly what it says, failure of the market, rather than failure of the concept of a market to be so expansive as to include every possible human action.  If I'm going to posit a "concept of a market" at all, it would be a complete fool's errand to try to make it dependent upon all the stars in the universe aligning in order for it to function properly and not be deemed a "failure".

That's why I tend to view the concept of a "market" as one of voluntary exchange in good faith between reasonably self-interested individuals, rather than some mystical all-encompassing pseudo-religion capable of solving all human problems.  Externalities can and should be relegated to some other mechanism, the justice system or similar, since I also disagree with your assertion that externalities are "very rare".  But that's for another post.

Durability has to do with a currency in use and is not about loss protection. It's more about expiration. Like when the orange you traded for a brick starts to mold or the ink on your $10 bill starts running. It is about the destruction of the currency, not generally about losing it  (dropped wallet on the street, wiped bitcoin wallet).
Portability has nothing to do with protection agains theft. It is about how easy it is to have it on you and use it.
Divisibility is not about liquidity or ease of exchange, it about the possibility to use fractions of the currency.
Consistency is not about counterfeiting, it is about fungibility. That 1 unit of currency has the same value everywere and can be swapped for any other one unit of currency.
Intrinsic value is not about protection against market failure, it is about the various effects that intrinsic value has.

I think you should just make your own new list instead of shoehorning them into aristotles set of ideas.
Demand for properties of a monetary system do change you know.

Grand Unified Monetary Theory? That would be the essence of money:

Money is information. That's all it is. Who owes what to whom.

The perfect money is neither inflationary, nor deflationary, it is not scarce, nor is it abundant, it just is.

Any monetary approach up to date cannot reach this perfection. All have to make compromises.

A gold coin or bitcoin is just a user interface to money. A tool. That's all it is. A tool to store and transport this information.

Ideally, money would be invisible. Like any great tool that's not in the way of your workflow. Imagine a giant, all-knowing computer system that tracks all transactions and economic activity. If you tell it you want that car, it can tell you exactly how many more days you'll have to work in your current job to earn it.

Of course, such a computer system would be quite dystopian. Bitcoin is information money too, but compromises to enable better privacy by emulating a scarce commodity.

No, in an economic sense, a market failure is a situation that leads to less than optimal results due to the shortcomings of the concept of a market itself. Naturally these situations are very rare, but include things like pollution and other externalities. On an economics board, you'd do well to use the jargon properly.

I don't.

The same article says


When using Bitcoin or gold/silver as currency, you don't have unlimited supply even if your life depends on it. Because of the algorithm, miners need to do the work to get new coins and same thing goes for gold coins; someone has to actually go, dig, process and mint the metal into coins.

Oops, I mean to quote this.  I got it from this article, but the reference seems to trace back to Schumpeter's History of Economic Analysis, pp 59.



I see scarcity as being contained within protections against counterfeit and market failure.

Where is scarcity? Or in other words, a limited quantity and being hard to get more.

Airstotle eh, can you give more info on this reference?  Thanks  

In the economic sense, a "failed" market is a less-than-perfectly-functional market.  Obviously Bitcoin does not provide perfect protection against market failure.  It cannot regulate externalities the same way governments do, for instance.  But it is competitive, is relatively information-transparent, is resistant to external threats, operates with a minimum of both public goods and middle-men, and enables rational self-government, which is one of the best defenses against externalities.

As a medium of exchange, Bitcoin is probably the medium most resistant to market failure in the history of money.

I don't think you are using market failure in the appropriate sense. And intrinsic value isn't necessary, it just has to have consensus value. Nothing has intrinsic value, it is just what people agree is valuable.

Aristotle laid out his qualities of good money as follows:

• Durability
• Portability
• Divisibility
• Consistency
• Intrinsic Value

Those are all fine and well.  But they are all specific, physical qualities, which only provide for the aspects we truly value in money.  So what are these, more general aspects that Aristotle's qualities provide?

• Durability
  
  • Protection against loss
• Portability
  
  • Ease of transport
  • Protection against theft
• Divisibility
  
  • Ease of exchange (liquidity)
• Consistency
  
  • Protection against counterfeit
• Intrinsic Value
  
  • Protection against market failure

So, by induction, these are the major aspects that any good money should have:

• Protection against loss
• Ease of transport
• Protection against theft
• Ease of exchange (liquidity)
• Protection against counterfeit
• Protection against market failure

How, then, does Bitcoin provide for these fundamental aspects?

• Protection against loss
  
  • As digital information, Bitcoins can be copied and backed-up in multiple places at once.
• Ease of transport
  
  • Bitcoins can be transferred across the globe within minutes via the internet.
• Protection against theft
  
  • Bitcoins can have extremely high value-density, and can be protected with wallet passwords and multiple signatures.
• Ease of exchange (liquidity)
  
  • The 21 million Bitcoins can currently be divided into 2.1 quadrillion Satoshis, and theoretically near-infinitely.
• Protection against counterfeit
  
  • As a 128-bit ECDSA key pair, a Bitcoin key is nearly impossible to counterfeit; and this protection can be extended if this ever changes.
• Protection against market failure
  
  • The Bitcoin network is the largest supercomputer in existence, and would require either 51% control of this network, or extensive, coordinated internet failure to break.