Bitcoin DO NOT WANT!?

[Anenome]

@Smiling Dave

Bitcoins cannot retain value because they have no value in the first place.

This seems to be the heart of your argument generally. So let’s take a look at value generally and value of bitcoins specifically.

We know that value is subjective, meaning different people assign different values to things. Even something most would consider worthless might be extremely valuable to a particular person say for sentimental reasons.

Value is to be distinguished from price, because the two are quite clearly not the same. Someone may value something much higher or lower than its price. And it is indeed this fact which makes commerce possible. We tend to value highly that which we lack, and tend to discount that which we have much of. For this reason, someone with a well does not highly value clean drinking water, and will readily sell it to someone dying of thirst whom will pay virtually any price for his next drink of water because he highly values his life and must drink to preserve it.

Price is instead an aggregate measure of two things, as we know, supply and demand. Now we’ve built the link between value and price via supply and demand.

It’s really useless to argue that bitcoins have no value at all, because were this true there could not be any price above zero for bitcoins in the marketplace.

The fact that bitcoins currently have a nonzero value means that some people are valuing them highly enough to purchase them from sellers.

What you really mean, Smilidave, is that bitcoins have no commodity value. You are fixated on the idea that only this one kind of value can serve as money. Why? When there are so many kinds of value, why can commodity value be the magical one?

We know that bitcoin has some kind of value, since it has a non-zero price in the marketplace. And clearly it is serving as money. And we know that bitcoin has zero commodity value.

Therefore, it must be true that items with something other than commodity value are able to serve as money, because here is one doing it right now.

I suggest that bitcoin has service value and that this is why it has a non-zero price in the marketplace. And that service is its excellence as money. That is, it has exchange value far above its commodity value, which as you rightly say, is zero. Its value as a medium of exchange is the sole thing responsible for the demand for bitcoin–what else could it be, given zero commodity value?

At some point you have to bow to reality, and existing theories of what makes something money must expand. Don’t be so caught up on authority that you can’t grok what’s happening in the real world on your own, right now. I wonder if there’s anyone who refused to leave the Titanic because they still believed it was unsinkable

@Smiling Dave

Again, you have yet to refute Mises’ Regression Theroem.

You have yet to refute the reality that bitcoin has value now and is being used as money, despite supposedly violating Mises theorem, or at least your take on it. And again, your own quote of Mises made a distinction between commodity and exchange value–a concept you are apparently unable to grasp–which shows that exchange value can be a value on its own. Mises formulated this thereom in a time before bitcoin was even imaginable, yet you fail to take this into account. Were he formulating it today, he would have to take non-commodity moneys into account. Or perhaps apply his own theorem as we are now, to explain something with only exchange value.

@Smiling Dave

Let’s make one thing clear. Mises’ theorem does NOT say bitcoin will never be used by a few people for a limited number of transactions per person. That is not what his theorem is saying at all.

What he is claiming is that *it will never be commonly accepted.

Remains to be seen.

@Smiling Dave

You make it sound like “commonly accepted” is some weird Austrian definition of money, that you are in the mainstream with your calling it money. But the fact is that you are using some weird defintion of money that no one else uses. It’s like you are proving that squares are round by calling circles squares.

You can’t on this basis not call it money. You can only call it not commonly accepted. But your attempts to do the former are what we’re pushing back against.

[Seraiah]

@Dave

First, bitcoin is so convenient to use when buying and selling stuff. This gives it intrinsic value, and so the regression theorem is OK with bitcoin.

No. Bitcoins gain subjective value through intrinsic attributes they possess. Just like gold.

@Dave

Thus Mises regression theorem is disproven by the real world, where bitcoin is a money.

Your misuse of the Regression Theorem has been disproven by the real world.

@Dave

Thus the train of abstract logical reasoning he builds does not apply to digital money.

Bitcoin is the first scarce digital resource ever invented. It’s scarcity is the reason that the Regression Theorem doesn’t apply.

@Dave

For example, if a certain mama tells her girl to make sure she marries a rich man, she has not given a precise number, has she?

Qualitative words are great when talking interpersonally betwen a mother and daughter. The daughter knows her mother how she’s been raised, and how “rich” is usually used when they communicate together.
Qualitative words are absolutely horrific on a web page in which we cannot infer anything, especially when it’s suppose to be a definition.

In the end, the only attribute of “money” that bitcoin lacks is that it isn’t accepted in 51% of some arbitrary section of some arbitrary economy. You espouse this silly qualifier so that you can keep hanging on by your finger tips saying “Bitcoin can’t and never will be money!”

Dude, it’s already money in everything but name, and there’s no reason at all it couldn’t become the defacto currency of an entire nation.

[Anenome]

@Clayton

Clayton’s basically defining money as a commodity

Try to keep up… I defined money as the universally acceptable medium-of-exchange.

There is no universally accepted medium of exchange, so according to you the world is without money. Awesome.

@Clayton

It follows from very simple praxeological arguments

Apparenlty misleadingly simple.

@Clayton

• given by Hoppe in the above-linked lecture - that no money can arise in the unhampered market in money production that does not already have a value by virtue of its non-monetary uses. That money must have non-monetary value is not a definition, it’s a conclusion of a praxeological argument. If you want to disagree, disagree. But don’t pretend you’re merely disagreeing with a definition, you’re disagreeing with a praxeological argument which rests on basic assumptions (humans act, division-of-labor leads to greater social and individual wealth, etc. etc.)

I disagree only because there is in existence now a currency which violates Hoppe’s assertions, called bitcoin, and I’ll take the evidence of reality for now and let the theorists catch up.

You may find yourself like one of the physicists of the early 20th century proclaiming the impossibility of flight, even as the Wright brothers publicity had dawned.

[Anenome]

Third one is just silly. It’s like saying the laws of physics discovered by Isaac Newton do not apply to automobiles, which did not exist in his time.

No, it’s like saying Isaac Newton did not understand special relativity. Which he didn’t. Isaac Newton’s theories would not have been sufficient to explain the phenomenon which proved special relativity true. Neither does Mises’s theories of what makes something money, drawn from a world of observation which did not include the current class at issue: the digital world.

[Anenome]

I think there may be a deeper philosophical issue here which economists, much less the rest of us, have not yet come to grips with.

It is the question of whether digital goods are real.

Which is a question of metaphysics. For that matter, the question of what is money is also a metaphysical question.

The rules change a bit for digital goods. They can be copied almost without cost, and thus the concept of theft is muddied, which is why online pirates maintain that piracy is not theft as theft always deprives the original owner of their good.

A lot of misunderstanding about digital goods comes from trying to apply the intuitively understood rules of material goods to digital goods.

Bitcoin, being a cryptographic currency, circumvents this infinitely copyable property of digital goods with cryptography to create unique digital coins that cannot be copied in the same manner as other digital goods.

There are a class of people that consider it insane to pay for a digital good because they don’t feel it is real, it has no material substance.

But neither do thoughts and ideas, nor knowledge. You cannot touch them or taste them.

A digital good is like a thought that has a very slight material presence–being encoded in digital bits. It’s more material than thought, just barely, but still much less so that, say, a chair

But it is very real, as a new class of property, and one we’re just coming to grips with.

To assume that praxeological theories based on material goods must automatically apply to digital goods–which do not play by the same exact rules–is already pure hubris.

[Anenome]

Again Mises’s quote showing that some things can have value as money:

"The amount of other goods which can be obtained in giving away a medium of exchange, its “price” as expressed in terms of various goods and services, is in part determined by the demand of those who want to acquire it as a medium of exchange. If people stop using the good in question as a medium of exchange, this additional specific demand disappears and the “price” drops concomitantly."

If something is demanded as money, for whatever reason (commodity value or not), it gains exchange value.

Clayton’s statement that Bitcoin could devalue completely any hour now, and conspiracy theories about it being some scam or honeypot notwithstanding, for Bitcoin to actually devalue it would have to lose whatever aspect it is that makes it valuable to those who have bought bitcoin.

Since these attributes are locked in mathematically, chances are that ain’t gonna happen.

[JackCuyler]

Argument: People complain about Bitcoins not being backed by a commodity, but there’s nothing preventing people from backing Bitcoin with whatever they like.

Rebuttal: People would just exchange Bitcoins for the backing.

Response: The backing is necessarily less valuable than Bitcoin because of Bitcoins unique attributes.

This is describing Bitcoins as a money substitute, and not money.

Argument: The best way to create a theory is to make observations and work from there.

Rebuttal: This doesn’t apply to Geometry or Number theory.

Response: Geometry and Number theory were created in exactly this fashion.

Simply false. No one has ever observed a straight line with no width that extends infinitely in both directions. No one has ever seen a point with no width and no length. These are the foundations of geometry, and they are imagined, not observed.

[ClaytonB]

for Bitcoin to actually devalue it would have to lose whatever aspect it is that makes it valuable to those who have bought bitcoin.

Again, this is tantamount to a denial of STV.

Clayton -

[Anenome]

@Clayton

for Bitcoin to actually devalue it would have to lose whatever aspect it is that makes it valuable to those who have bought bitcoin.

Again, this is tantamount to a denial of STV.

Actually it’s an affirmation of STV, so please provide some supporting rationale for your view. If STV is:

"The subjective theory of value is an economic theory of value that identifies worth as being based on the wants and needs of the members of a society, as opposed to value being inherent to an object.

It holds that to possess value an object must be useful, with the extent of that value dependent upon the ability of an object to satisfy the wants of any given individual."

I don’t propose that everyone need value any aspect of it higher than another, or at the same level of value. I don’t even propose that it’s any one quality that makes it valuable. All we know is that enough people value some aspect(s) of bitcoin enough for there to be aggregate demand for bitcoin as money, which is why bitcoin’s price on the market is above zero.

[jtimon]

“Intrinsic value” depends on the context. The ultimate worth of an object is subjective. If nobody wants it, it has no value.

However, when contrasting fiat money to gold, one can say that gold has intrinsic value compared to paper money. In that context it means that, stripped of its use as money, paper fiat money would have almost no [subjective] value, certainly not even close to the number printed on it. Gold on the other hand has [subjective] value even if it is not legal money.

I can accept a definition of “intrinsic value” that refers to the value of a given money that doesn’t comes from being money. That definition is only suitable for money and not for other goods like houses, factories or non-monetary metals.

I still think that “intrinsic value” and “objective value” are misleading terms that lead some libertarians into false theories of value, like Marx’s labor theory of value. I’m not saying that’s your case, but I’ve seen it many times.

Mises wrote extensively to disprove exactly what you just wrote.

Mises wrote nothing about bitcoin. He didn’t negate that bitcoin has superior properties over gold AS MONEY. And if he had, he would have been wrong.

You think that bitcoin contradicts the regression theorem because you part from the wrong assumption that bitcoin has not any value apart from being a medium of exchange. Your lack of technical knowledge makes you think that.
But bitcoin is valuable even if it’s not a medium of exchange. The fact that a proof of work (this is a computer science concept) is necessary to create them makes it valuable (although not as much as 6 usd for unit, of course). For example, you could use bitcoin as an anti-spam system. Another interesting use is smart property. Neither of those two valuable uses (and there’s more) has anything to do with being money.

I still fail to see how the regression theorem applies to mutual credit currencies like LETS. I don’t think it is a theorem at all, it is a false theory because it does not apply to all monies. But bitcoin is not the courterexample that proves it. I think credit monies are. He was wrong about the origin of money. Archeological findings suggest that the origin of trade wasn’t barter and that credit actually precede gold as money.

[jtimon]

Also, the reason I don’t like the “commonly used medium of exchange” definition is for the reasons you’re now revealing.

I don’t perticulary like the “commonly used” part and I don’t think it is useful, but although I like the definition “medium of exchange = money” I can accept separate definitions.

For example, it is time banking money? I would say it is, but I understand that some people don’t want to use the word money for that, despite being a medium of exchange. Is Ripple money? I think so, but not many people agree, despite being a medium of exchange and it is definitely not a currency.

I was using backed in two different ways. “Backed up” as in digitally copying into seperate locations and “backed currency” as in promising to redeem currency for a set amount of commodity.

Sorry, misunderstand you. Then you accept that bitcoin is unbacked.

Businesses accepting bitcoins?
There’s a black market as well as various legal retailers.

It sounds like if they were a couple of retailers. There’s many many businesses and non-profits accepting bitcoin.

Trading bitcoins - Bitcoin Wiki

I still dont understand how bitcoin can ultimately set itself apart from the me-too crypto-currencies.

Why would you accept something that is identical to bitcoin but less accepted and less secure (with less people mining it, at an attack becomes more feasible)?

even if the BC does prove to have significant value, I would continue to hold alternative physical money such as gold and silver. I’d consider it a diversification of infrastructure.

That’s perfectly reasonable. I own both bitcoin and silver. You can even buy precious metals with bitcoin.

Do you have any links to good debates, debates that answer some of the questions brought up here and also debates that answer the technological questions?

Introductory sites:

What is Bitcoin? Introductory video and current Bitcoin price.

http://lovebitcoins.org/

the main site http://bitcoin.org/

FAQ in the wiki

https://en.bitcoin.it/wiki/FAQ

Here’s one thread, but there are plenty of them in the bitcoin forum. Search in the economics subforum.

Bitcoin does NOT violate Mises' Regression Theorem

[hashem]

@Seraiah

@Hashem

The necessity for money to have market value apart from and prior to it’s use as money is entirely relevant.

1.) Anything scarce may have value.
2.) That value is based on the attributes of the item.
3.) If those attributes are valued, then the item will be desired, and holders will be more resistant to give them up.
4.) People will offer more goods/services for the item until both parties think they have made an advantageous exchange.

This is subjective value. It applies to pens, houses, cars, gold, and even bitcoins. They all start with ZERO value.

Bitcoins are scarce and have attributes that people desire. What qualifier does Bitcoin not live up to?

Red herring. I’m not arguing that bitcoin doesn’t have value. I was arguing that from the austrian perspective, money is fiat—and therefore subject to failure in ways and for reasons which money proper isn’t—when it doesn’t have value prior to and apart from it’s use as as money. Bitcoin may be one thing or another, and it may be used as one thing or another, it may even have value, but it isn’t money proper because it didn’t have market value as a commodity apart from its use as money before its use as money

[Anenome]

money is fiat—and therefore subject to failure in ways and for reasons which money proper isn’t—when it doesn’t have value prior to and apart from it’s use as as money.

Name a way in which fiat money fails that bitcoin is subject to. The only thing I can think of right now that fiat currencies fail would be by mass inflation or disruption, either government inflation leading to a devaluation or bank inflation as a result of fractional reserve leading to a run on the banks.

With bitcoin, neither banks nor the gov are able to create money out of thin air, thus a run or a devaluation are not possible. What other credible ways do you suggest bitcoin may liable to repudiation, apart from those two?

Only one I can think of is if there proves to be a flaw in its cryptography. That would lead to a repudiation in a minute. However, we don’t know the odds that that may occur at any point. But it’s a lot easier to break cryptography than to create gold out of thin air

Time, then, will tell.

[hashem]

Name a way in which fiat money fails that bitcoin is subject to.
I’ve been pointing it out for my last 3 posts. If I pointed out that 2+2=4 you wouldn’t respond, “Not so easy, name a way in which 4 is arrived at by adding two identical numbers.” The answer, then, is exactly what I’ve been saying. So a way in which fiat money fails that bitcoin is subject to is that they are not valued on the market prior to and apart from their use as money.

[Anenome]

@hashem

Name a way in which fiat money fails that bitcoin is subject to.
…a way in which fiat money fails that bitcoin is subject to is that they are not valued on the market prior to and apart from their use as money.

That’s not a way in which a currency could fail, that’s a rationale for why one might fail. That’s an attempt at explaining why something did fail, not the way that it failed itself.

There’s a difference between saying the titanic sunk because it hit and iceberg and saying they used cheap steel to build the titanic thus making it prone to much more damage in an iceberg strike.

I’m asking for the way your rationale would actually play out.

So, you say bitcoin is not valued on the market “prior to and apart from their use as money,” therefore what? Obviously it’s not preventing its use as money currently. There must be some event that precipitates the destruction of such a currency. What is that event which bitcoin would be subject to that fiat currencies are also subject to? I’m talking about actual consequences in the real world now.

I listed an obvious one for you:

A national government not paying its bond holders, leading to, a devaluation of the currency.

This is possible with any fiat currency, but not possible with bitcoin. Not possible because the supply of bitcoin is not determined by some government printing press the chance of a devaluation due to zealous ink-slinging is also beyond remote.

So you’ll have to do better than that to answer my question, as your attempted answer is purely theoretical without any translation into actual history or practice.

[jtimon]

So a way in which fiat money fails that bitcoin is subject to is that they are not valued on the market prior to and apart from their use as money.

1. As I proved in my previous post BITCOIN IS VALUABLE APART FROM ITS USE AS MONEY.

2. He’s asking for a collapse scenario, not a fundamental cause of that collapse. Then explain how that collapse scenario (demonetization) is imposible with gold-money for the fact that it is backed by gold-commodity.

3. Haven’t we agreed that although bitcoin is unbacked (not redeemable for a commodity), it is not fiat (by decree, enforced by the state)?

[pairunoyd]

I don’t know all the economic terminology. Nor do I know formal logic (high school dropout). This ‘argument’ may be fatally flawed or incoherent. I do not know. However, I thought about it and thought about it and this is the way I see this whole situation. And like I’ve said before, I’m not anti-bitcoin (and my feelings aren’t nearly as evocative as my reply may seem). I’m all for those out there actually striving for something better. BRAVO!

A spontaneous organic agreement projecting monetary status upon an arbitrary electronic blip may engender those parties to substantiate such an agreement with their subsequent economic activity. Though they claim to valuate this monetary projection device, rational valuations can only be applied to its simulated monetary market. The confluence of valuations aren’t derived from rational valuations but rather are derived from trying to imagine what others have projected, are projecting and will project upon their abstract notion of money.

Bitcoin is nothing. It is incidental. It is not money but is an abstraction of money. It is the idea of money. To rationally valuate it would be like valuating car, chair, land, currency. Not the car, the chair**, the** land, the currency, but car, chair, land, currency. “I assign a value of $6.00 to currency. ”

If the bitcoin displaces the current fiat regimes, is universally chosen by the free-market for the remainder of time and all of the world experiences never ending prosperity, such a success story would not be due to the bitcoin’s superior monetary characteristics. You see, bitcoin possesses no knowable characteristics except those that are imagined and projected upon it. If projections such as these can yield the perfect money, then as Occam’s razor would demand, slice away the redundant bitcoin, projections alone shall suffice.

[Anenome]

@pairunoyd

If the bitcoin displaces the current fiat regimes, is universally chosen by the free-market for the remainder of time and all of the world experiences never ending prosperity, such a success story would not be due to the bitcoin’s superior monetary characteristics. You see, bitcoin possesses no knowable characteristics except those that are imagined and projected upon it. If projections such as these can yield the perfect money, then as Occam’s razor would demand, slice away the redundant bitcoin, projections alone shall suffice.

That’s a bit silly, to say bitcoin has no knowable characteristics? What? What sort of ridiculous epistemology is this? It’s source-code is open source, you can know all of its attributes quite well actually, and these attributes are not imaginaery or projected at all, but driven by reality itself through the medium of math, driven by properties of reality which the discipline of cryptography is built upon.

Just because something is digitable does not mean it is suddenly immaterial and imagined. Even thought has some scant physical basis, as electromagnetic fluctuations in a very material brain.

If bitcoin didn’t have intrinsic characteristics generated by its particular mathematical scheme then it wouldn’t be able to function as a currency at all. If its attributes were in fact mere projections upon it, then it wouldn’t have any universal characteristics because different people would project different things, which is like saying a pile of meat is a chicken if you project a chicken on it.

Well, bitcoin is a pile of math, and no amount of projection will change the details of that math one way or the other.

[hashem]

OK maybe we’re talking past each other?

I’m basically saying bitcoin doesn’t meet the requirements for money proper, rather it is fiat money. You’re not denying this.

You’re saying “So what, it has value and serves ends, just like money.” I’m not denying that.

So when you said, “Name a way in which fiat money fails that bitcoin is subject to.” my nature response is, “bitcoin fails at being money, just like any other fiat money.”

You responded with a red herring, just like the last time. I’m NOT arguing that bitcoin will fail at whatever it is valued for. I’m saying it fails at being valued prior to and apart from its use as money.

[pairunoyd]

You’re just talking about the manufacture and distribution and not the bitcoin. Everything is about everything but the bitcoin.