Smiling Dave,
I just want to point out I have not forgotten where we left off:
I still object to condeming coerced market phenomenons that do not benefit State, Inc. on the basis they do not fit an Austrian definition of money in a free market when there is presently no free market.
Sorry, Live Free, I wrote along reply, but forgot to save it.
Bottom line is that what little limited usefulnes bitcoin has right now is economically insignificant. The regression theorem claims that this is no accident, but inherent in the very nature of bitcoin, and thus bitcoin is doomed to never be more than an insignificant dustmote in the grand ballroom of the Universe.
Smiling Dave,
you have yet to explain in a coherent manner how your argument logically fits together.
I’ve found Smiling Dave’s posts to be quite good overall. I can’t say the same for you.
There is a difference between “good” and “logically correct”.
Considering the context, I would expect one would understand that “good” meant “logically fits together”. I can see why you have trouble understanding posts.
I happen to consider anything that does not benefit State, Inc. signifigant and any effort offering alternatives to State, Inc. an ally.
This statement is premised on the existence of a free market system or the emergence of a free market system. I do not consider the latter iminent. Unless of course the regression theorom also applies to coerced markets?
I do not see what is wrong with Austrians embracing bitcoin. I thought libertarians supported building coalitions. To me, it seems like this would be an easy coalition to build, albeit it is apparently much more difficult if bitcoin insists it fits an Austrian free market definition of money. It seems everytime someone on behalf of bitcoin asserts it is money there are plenty of Austrians to weigh in and condem bitcoin.
To me the whole “is bitcoin money” conversation is a distraction to opposing State, Inc.
In any event you acknowledged bitcoin presently has
I have no further objection.
Ok then, can you show me an example of something Smiling Dave wrote that logically fits together?
I’m sure if you were to pick any 10 of his posts, 9 of them would be sufficient for our purposes.
Any particular reason why you’re not more specific?
I remember a post I made a while ago that you refused to respond to. I’m just returning the favor.
This does not sound like me. Care to provide a reference?
I don’t really feel like going and looking for it. It’s buried in one of the bitcoin threads somewhere. I don’t want to wade through all the bullshit.
Ramon,
Thanks for mentioning. I have been absent from Forum for a while, mainly because it’s not easy to find the appropriate Mises thread.
I certainly feel comfortable being in the company of Mises. The particular attribute of a cryptocurrency like bitcoin is more than simply ‘a decrease of transaction costs’. The “Binary Corollary” addresses a circumstance, or precondition, for the applicability of a general theorem. This is more akin to the ‘if statement’ contained in Gresham’s Law, which states that bad money drives out good (if the exchange rate is set by law). Of course, without the legally-imposed exchange rate, we all know that good money will drive out the bad.
And, so it is with the Mises Regression Theorem which holds only “if the State doesn’t restrict currency competition”. Because, in a State setting where the rules and the playing field are determined by the monopoly currency provider, there exists an incentive for the monopoly issuer to extinguish or prohibit free-market challenges to its superiority. Currencies that would normally evolve with ‘original use’ and able to satisfy the Regression Theorem are rendered useless and this effect is amplified in the transition to a digital monetary unit which the 20th-Century Austrians could not have reasonably anticipated.
The cryptocurrency bitcoin is a unique reaction to the confiscation and arbitrary enforcement against ‘original use’ e-Gold and to the unfortunate centralization of digital bearer instruments such as digicash. If those two examples would have thrived and imbued digital cash with the anonymity and untraceability attributes of paper cash, a bitcoin would not have been necessary. However, bitcoin is necessary precisely to ‘route around’ the interference caused by the State that has disrupted the natural order of the free-market Regression Theorem. Money is a mass illusion to begin with…a mass faith in something. If humans can mutually value a digital item through ‘crowd recognition’ or ‘swarming’, then we have made a great leap because we have restored the power to define what we value in the digital sphere.
Bitcoin is ‘digital gold’ and gold is ‘analog bitcoin’.
Hello John,
I was worried about “talking behind your back” but it looks like you’re reading this thread too so I’m relieved.
We started discussing this some time ago but I didn’t follow up on that because I didn’t think it was important. But for the purpose of a full argument I will amend that now.
I should maybe clarify that by transaction costs, I do not only mean transaction fees. The latter is merely a subset of the former. The transaction costs include all the costs associated with a transaction that are not the immediate part of the transaction. For example, if you want to pay with cash, you need to carry the corresponding amount of cash with you to the place of transaction. This necessity to carry cash is a transaction cost associated with paying in cash. If you need to spend effort on hiding your money from the government in order to pay with that money in the future, this is also a type of transaction cost.
As I argued elsewhere, the ability of Bitcoin to resist manipulation and confiscation by state is a quantitative, not a qualitative, feature. Of course that’s not to deny it exist, I also laid out several examples myself where this advantage is obvious. My favourite ones are a dead man switch (gold cannot teleport automatically when you’re imprisoned), “cheap horcruxes for everyone” (you can’t copy gold), and split-key signatures (you can’t split gold along a metaphysical boundary).
So, I agree that Bitcoin has an advantage in this respect, and other currencies or gold don’t. But that does not warrant a modification of the regression theorem, neither is a qualitative feature. The purpose of the regression theorem is to explain the formation of price of a medium of exchange (i.e. what Mises calls “objective exchange-value”). How exactly the features of Bitcoin influenced this formation is a matter of empirical analysis, and thus merely loosely connected to economics (Austrian, that is).
I give you that it is possible that without government interference, the decrease of transaction costs might have been insufficient for the price of Bitcoin to emerge (i.e. to counter the network effect of a free market money). It is even more likely that without a preexisting monetary system in general, the price of Bitcoin would not emerge (since there would be no forex markets). But again, this is a comparison of heterogeneous variables and can’t be taken as an economic rule. Nevertheless, from a practical point of view, since we do have a monetary system, and we do have government interference in money, there is no necessity to determine what would have happened in the absence thereof.
One potential mistake in Mises’ arguments is the ignorance of goods which are neither consumption goods, nor production goods, nor media of exchange (as I explained above). Once this is amended, the regression theorem becomes interpretable from a new light.
Selgin calls Bitcoin “quasi commodity money”: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2000118 , however he does not explain the emergence of the price thereof. Murphy, in the video you reference, argues that speculation plus ideology might be a sufficient explanation of what happened, and also says that based on this, it could be argued that Bitcoin is a commodity, albeit an unusual one.
I would simply generalise this into an expectation of the decrease in transaction costs. Bitcoin has a comparative advantage because it eliminates the necessity for money substitutes and provides the same service that historically required a bank clearing system (or newer competitors like Paypal or Western Union). This also includes the features you metion, for example, it’s easy for a government to tell the bank or Paypal to freeze your account. I therefore refer to Bitcoin as “money as service”, because I think that better explains its dynamic features (as opposed to quasi-commodity).
I presented this “money as a service” idea to several economists. Hoppe thinks it’s absurd because
This however is an empirical objection. We do have commoditised services, in particular things that are, like money, subject to the network effect. You can buy online diskspace, for example. I discussed the legal issues (Title Transfer Theory of Contract) with Kinsella to make sure there are no fundamental problems with sales of services (there are workarounds, so it’s not a big issue). I tried to explain the “money as a service” to Murphy too. He is also skeptical like Hoppe but at least I think he got my point better than Hoppe. In Murphy’s lecture we didn’t come to the regression theorem yet, so I’ll have another opportunity to ask him about this.
Once a price (of Bitcoin) has formed, the process is sustainable, because there are people who want to speculate and will continue as long as they expect to be profitable. Volatility or a falling price is not a problem for professional speculators. I for example used to do arbitrage between Mt.Gox and Tradehill during a falling price and was able to be profitable.
So the latest spin is that the regression theorem only applies in a free market, not where there is a coerced govt interference in something or other.
Well, that’s wrong.
Here is my challenge, which I predict none of you will be able to do: Summarize the regression theorem [and its proof] so we are all on the same page, then show exactly why it falls apart unless we are talking about a free market society. Or, equivalently, show exactly why it doesn’t apply in a coerced environment.
Extra credit: Explain why it does apply to fiat currencies, even though they are coerced as well.
Remember, asserting is not the same as proving. The burden of proof is on you guys, because my explication of the regression theorem on my blog applies even when there is all kinds of coercion.
And TY gotlucky for your kind words.
To make clearer what I mean, suppose someone would claim that the Pythagorean Theorem that A squared plus B squared equals C squared does not apply when the traingle is drawn in red. The burden would be on him to show which line of the proof is correct only when the triangle is black.
That’s what I’m asking for here. Because that’s exactly what you guys are doing to the regression theorem, inserting some ridiculous qualification. Have at it.
Smiling Dave, I’ll work on that if you work on this:
Bitcoin only represents the first challenge to the ‘intellectual purity’ of Mises’ Regression Theorem. Other challenges will come from the field of nanotechnology where original use and origin of value will start to lose meaning. Bitcoin is a pre-cursor to nanomoney. How will we pay for anything in a future world of ubiquitous artificial molecular machine systems?
See “Tangible Nanomoney” by Robert Freitas.
Smiling Dave,
If Jesus raised Lazerus from the dead how many witnesses does it take for it to become a verifiable fact?
How many fools does it take to believe bitcoins are money before it becomes true after a fashion?
If I am going to discern “facts” in order to offer “proof”, I want to know how many witnesses it takes to establish evidence?