
Nash’s “Ideal Money and Asymptotically Ideal Money” Annotated - luisb
http://fermatslibrary.com/s/ideal-money-and-asymptotically-ideal-money
======
skilesare
I have a lot to say on this subject, and much of it disagrees with Nash. This
is a tough thing to do because the man was a giant. Anyway, here it goes:

He makes a bad assumption at the very beginning by assuming that 'good money'
holds its value. I'll argue that most of the inequality we experience in the
world today is a result of money holding too much value! When money holds
value, it is hoarded. When it is hoarded, it is unproductive.

Money can be used as a measure of potential utility, but you can't just open
it like a bottle of water and drink it all at one time. Instead we should
think of a unit of currency as a set of potential utility that is stretched
across time from now to the time X in the future. When you think of money in
this way, it become obvious that money should decay as time goes by. Good
money losses value at a constant, manageable, predictable rate because the
amount of utility that the human race can produce in the future is a
significant chunk less at the end of a than it is at the beginning of that
day.

If a dollar is held at the end of a day by the same person that held it at the
beginning of the day, some utility was left on the table.

Good money maximizes utility in all futures, not just the future you choose
while sitting on your pile of cash.

~~~
smokeyj
> When money holds value, it is hoarded. When it is hoarded, it is
> unproductive.

Except it's not hoarded, it's reinvested. The consumption of created value is
deferred while accruing interest at a market rate. This interest rate is an
important signal to the greater economy weather to start long-term projects
now or later. If interest rates are too high, big projects will be financed
later while simultaneously incentivizing value producers to defer consumption.
To me this is the best regulator for why you don't "drink the bottle of water
all at one time".

> Good money losses value

Money is a naturally occurring phenomena amongst rational actors. Any highly
marketable commodity that can be expected to be traded at a later date can act
as a form of money - for example, cigarettes in prison. I can't imagine
someone wanting their cigarettes to be prone to dissolving.

I personally wonder if we can trade without money at all. For example, trading
digital certificates that represent real-world assets (stocks, commodities).
Prices can be denominated in any asset, and payments go thru a clearing house
that matches and settles trades in real time. This would let me go to Subway
and buy a sandwhich denominated in Apple stock that I payed for with shares of
crude oil stock.

~~~
skilesare
> Except it's not hoarded, it's reinvested. The consumption of created value
> is deferred while accruing interest at a market rate. This interest rate is
> an important signal to the greater economy weather to start long-term
> projects now or later. If interest rates are too high, big projects will be
> financed later while simultaneously incentivizing value producers to defer
> consumption. To me this is the best regulator for why you don't "drink the
> bottle of water all at one time".

Re hoarding: Some is reinvested. Much is consumed along the way in management
fees, reserve requirements, and financial institution profits. It is not
optimal. The middle men will be eliminated eventually.

Re Interest Rate: The rate is an important signal for bank profits too.
Essential to them in fact. There are other signals. And deferring a big
project to later may be fine if you are building a high rise in downtown, but
delay can be deadly if you're trying to reduce pollution, cure cancer, map a
genome, ect.

> Money is a naturally occurring phenomena amongst rational actors. Any highly
> marketable commodity that can be expected to be traded at a later date can
> act as a form of money - for example, cigarettes in prison. I can't imagine
> someone wanting their cigarettes to be prone to dissolving.

Have you ever smoked a 5 year old cigarette? As for other examples, you can
make a bet that oil will be $50 in 5 years, many do, and many lose their
shirts(and some make a killing). Volatility rules.

>I personally wonder if we can trade without money at all. For example,
trading digital certificates that represent real-world assets (stocks,
commodities). Prices can be denominated in any asset, and payments go thru a
clearing house that matches and settles trades in real time. This would let me
go to Subway and buy a sandwhich denominated in Apple stock that I payed for
with shares of crude oil stock.

It is certainly possible...but stock has its own issues. It is a form of
hybrid capital and subject to all kinds of accounting shenanigans.

------
dvanduzer
It would be nice if this website offered an option anywhere to print the paper
without annotations (or with them, but in a sane serialized / readable
format). Since the source is a PDF available elsewhere, I was able to "save"
it for offline reading from this link:
[http://sites.stat.psu.edu/~babu/nash/money.pdf](http://sites.stat.psu.edu/~babu/nash/money.pdf)

------
natrius
Nash tries to convince the audience that money is good despite popular
opinions on money being the root of all evil. Those opinions aren't baseless,
though. Money entitles you to a reward from society, no matter how you got the
money. Even if some people know you did terrible things to get it, you only
have to find one person willing to reward you. The store that sells things to
that person is rewarding them for rewarding you for doing terrible things.
We're all complicit in rewarding people for terrible things because our money
makes us powerless.

We want the good part of money: it allows us to engage in economic games of
transferable utility, so we don't have to barter. But it'd also be nice to
prevent the bad parts as well. Our current solution is regulation, so the
profitable strategy becomes innovating new ways to profit at the public's
expense before regulations are in place.

We should just stop rewarding people for doing things that harm the public. If
you make money by polluting, we should stop rewarding you. If you make money
by tricking people into taking out loans they can't afford, we should stop
rewarding you. We know who these people are, but as individuals, we have no
way to stop rewarding them. We need a money that lets us do that.

Instead of today's currencies, let's just explicitly model our spending. When
I buy a bottle of water from a store, let's create a database record where I
assert that the store rewarded me with $1 of stuff. Let's also connect that to
the justification for the reward: either I did some work for someone else, or
the store is letting me owe them a dollar. Instead of using a traditional
private database, let's put these records in a public, shared database on a
blockchain.

This gives individuals the information to decide whose rewards they want to be
complicit in. If you've done terrible things, I don't want to reward people
for rewarding you. If you're impoverished and don't have a way to do valuable
things for other people, I want to reward people who reward you anyway.

This is merit capitalism.

[http://meritcapitalism.com/](http://meritcapitalism.com/)

~~~
seiji
Creating an electronic currency capable of "coloring" money by its origin is
much more interesting than anything the bitcoin camp can ever promise.

Though, it does become a giant money laundering problem. When Russian
oligarchs who obtained their money through destroying their own country and
killing their own people invest in YC, then YC funds startups, then startups
pay employees, how "dirty" is the money when it reaches the employee?

~~~
CyberDildonics
There are a number of fallacies in this.

First, ideal money has a neutral origin. Money isn't a physical thing at its
core. It is a shared ledger. Gold is a shared ledger. Bitcoin and all crypto-
currencies are a shared ledger. The currency of a country is a shared ledger
(albeit with more infrastructure and less guarantee of the total). So
'coloring' is extending the idea that money is physical into a place where it
doesn't work. The Russian oligarchs didn't create the money they have, they
had it transferred to them by others. Maybe they forced citizens by violence,
but then again, maybe they sold oil and natural gas to China. Who is 'guilty'
now and of what?

The second fallacy plays in to the first. Money is not law. Building law into
money has been an excessively dangerous idea throughout history that to no
one's surprise favors those who create and enforce the laws. Often those
people are the ones with the most money. It isn't a leap to see that this is a
cycle that reinforces itself.

~~~
jipsom
Nick Szabo is the person peoples most think programmed bitcoin. 20 years ago
he developed smart contracts, which is basically programmable money that uses
law as the analogue for its implementation. This is because this is
essentially what is happening the mergence of software, programming, money,
law, economics.
[http://szabo.best.vwh.net/shell.html](http://szabo.best.vwh.net/shell.html)
[http://szabo.best.vwh.net/smart_contracts_idea.html](http://szabo.best.vwh.net/smart_contracts_idea.html)

The current leading implementation is "ethereum"

~~~
CyberDildonics
Smart contract are a great idea, but they aren't exactly what you are
describing and are orthogonal to the original thread.

Smart contracts are further uses of the immutable shared ledger.

The mixing of law and money I was talking about is what we have now.

~~~
jipsom
I am not sure what you are pointing to or if we disagree. I mean to say the
relationship between money and law is that of the moon and its reflection. Not
separable but in this way.

------
dimitar
This is unfortunately a very bad lecture. Let me list why:

* Nash ignores the field of monetary economics and tries to re-invent the wheel.

* He justifies his ignorance of existing work because it is influenced by "Keynesians" who are bad, because, well just because.

* He apparently doesn't like "printing money", but he doesn't critique monetary policy at all.

* There is no rigorous model of anything.

* Worst of all he has shown no empirical evidence for anything.

The lecture is really a lot of handwaving. This is not his field. Read him on
game theory please.

~~~
jipsom
there are 10+ lectures and papers on the subject. The very first lecture
starts with:

>Money can be recognized as a technological development comparable to the
wheel and of similar antiquity.

Nash proposes we can use science and reason to rationally evolve the
circumstances and underlying tech that is money.

There is a specific paragraph in which he explains Keynesian banking is
central banking.

He doesn't say he doesn't like printing money, he notes the relationship
between supply and the quality. And that by controlling supply you can control
quality.

There is no rigorous model for your eyes but if you know ANYTHING about this
mans work you could be rest assured that he is thinking of something
incredibly accurate and technological.

Here is his basic concept for a network of computers designed as a future ai
system that we haven't reached yet:
[http://web.math.princeton.edu/jfnj/texts_and_graphics/Main.C...](http://web.math.princeton.edu/jfnj/texts_and_graphics/Main.Content/Various_Etc./RAND/k1361.a20)

Nash designed that in the 50's

In Ideal Money Nash proposes that the advant of an electronic money in the
form of a stably issued money supply will asymptotically take the power out of
governments and central banks to print money.

You sir, are simply oblivious to reality.

Read it again!

Btw Nash's solutions and triumphs in game theory from 70 years ago are MASSIVE
contributions to not only economics but nearly all sciences:
[http://www.eecs.harvard.edu/cs286r/courses/spring02/papers/n...](http://www.eecs.harvard.edu/cs286r/courses/spring02/papers/nash50a.pdf)

~~~
skilesare
Any idea on where one can find the whole corpus of what Nash put together?
I've seen the paper and the youtube, but that is most of what I can find.

~~~
jipsom
Here is the best I could put together:
[https://thewealthofchips.wordpress.com/2015/05/07/the-
levati...](https://thewealthofchips.wordpress.com/2015/05/07/the-levation-of-
ideal-money/)

My understanding: [https://thewealthofchips.wordpress.com/2015/07/09/the-
totali...](https://thewealthofchips.wordpress.com/2015/07/09/the-totality-of-
the-proposal-ideal-money/)

A summary:
[https://thewealthofchips.wordpress.com/2015/07/12/a-general-...](https://thewealthofchips.wordpress.com/2015/07/12/a-general-
summary-for-john-nashs-proposal-ideal-money/)

I've put together the best and most relevant quotes I could in relation to
emerging economics. But otherwise there is nothing put together.

Ideal Money the 8 page lecture is the real treasure but its very dense if you
really go into the meaning of everything.

