
It Looks Like Nobel Economics Laureates Don't Like Bitcoin - champagnepapi
https://www.bloomberg.com/news/articles/2017-11-30/so-it-looks-like-nobel-economics-laureates-don-t-like-bitcoin
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elhudy
>It doesn’t serve any socially useful function.

I never thought I would so heartily disagree with a Nobel Economics Laureate,
but this appears to be a misguided opinion. Bitcoin drives an entire black
market which enables consumers worldwide to securely and faithfully make
purchases that they would be unable to otherwise make. Direct tax generation
isn't the only measure of socially useful functions.

~~~
paulgb
Not to mention it's the best-funded behavioral economics experiment in history
:)

~~~
fori1to10
I was thinking about this, since the blockchain is public, there is a lot of
data out there steadily accumulating. Are there any published studies
exploiting this data already?

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unknown_apostle
The obvious speculation aside, Bitcoin's behaviour is revolving more and more
about good vs bad money, aka _Gresham 's law_. "Good money" (bitcoin) is being
hoarded because people are starting to trust it as a long term store of value,
while elastic moneys like USD/EUR/JPY are being used for paying and playing.

Most modern economists just instinctively hate good money because they believe
saving is evil.

"It doesn’t serve any socially useful function."

They use the exact same phrasing when discussing gold.

(My only beef with bitcoin and blockchain is that it can become bad money in a
matter of milliseconds, without any heads up. E.g. when a major bug is found.
Bitcoin may ultimately just be too complex to be good savings money. Its
"badness" can be hidden in a massive, single occurence tail risk.)

~~~
paulgb
That's not what Gresham's law says. As Hayek put it in denationalisation of
money (section VI The confusion about Gresham's Law):

> Gresham's Law will apply _only_ to different kinds of money between which a
> fixed rate of exchange is enforced _by law_

(Emphasis in the original)

~~~
unknown_apostle
Why would the same principle not apply to any situation where a person owns
two kinds of money (both fungible, liquid, universally accepted), regardless
of exchange rate rules? People will always prefer to hoard ("save") the better
of the two and pay ("get rid of") using the worse of the two.

~~~
paulgb
Because in an efficient market, if one of the currencies is preferable that
will already be reflected in the price. If, based on public information, you
would rather hold currency X than currency Y, then so would your counterparty
in the exchange, so the buying power of currency X would rise accordingly.

Gresham's law applies when a legally fixed exchange rate means that the price
can't reflect the difference between the two currencies.

~~~
unknown_apostle
I'm not going to get dragged into a discussion on "efficient markets". You win
by forfeit.

~~~
paulgb
Efficient markets was just a simplifying assumption to make my point brief,
but the second sentence of my explanation does not rely on any more
assumptions than Gresham's law does.

In any case, I recommend that chapter of Hayek, it's a quick read and you
might find it clarifying.

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ukulele
I'm not a Bitcoin person, but it strikes me that neither of these people is
known for predicting markets successfully, so why would they be relevant
predictors here?

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sunstone
You would think that these people would understand that bitcoin, from a
financial perspective, behaves like disembodied gold. A store of value outside
of legal control.

So much so that, very likely that's exactly what its creators hoped to
achieve. You mine it after all.

~~~
xenophon
Some of the key characteristics of a store of value are durability, limited
supply, uniqueness, and portability. Unlike gold, BTC is neither unique nor
truly in limited supply, thanks to forks that create "inflation" and altcoins
that can substitute for BTC in all pertinent ways.

The vast majority of participants in this market aren't parking their money in
BTC to preserve it, and neither to use it as a medium of exchange. They're
doing it with the expectation of a return. If those returns fail to
materialize, the money will move elsewhere.

~~~
mattmanser
There are a load of comparatively worthless metals, compared to Gold.

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shubhamjain
From a technical standpoint, Bitcoin makes no sense. Bitcoin supply is fixed.
How can, then, a currency be valued 100x within a few years when there's no
major possibility of finding a magical utility of it. But, neither does
Facebook's success. I couldn't have imagined anyone could create a $400B+
social network company.

I guess if by being rational you're avoiding burning your hand, you're also
missing out on the hen who will lay golden eggs in the future. In a few years,
$10,000 might look peanuts to pay for Bitcoin. It seems logically absurd to
think so, but time and again, the skeptics have been proven foolish and the
believers have made the gains.

~~~
Dangeranger
The utility of Bitcoin, and the value it provides right now, is almost
entirely the returns it provides relative to a fiat currency during the period
of hyper-valuation.

If it fails to continue growing relative to the perception of the people
buying it, it's value on the market will plummet, and that will likely cause a
run on the exchanges.

~~~
usrusr
Is there even reason to expect exchanges to play along if the value starts to
really go south? It's pretty obvious that exchanges would be practically out
of business after a total collapse of bitcoin valuation, so a collapse would
be an existential threat to them and existential threats are known to inspire
desperate measures. What regulation would keep market makers from experiencing
"unexpected technical difficulties" in a panic (e.g. until their own holdings
are liquidated, and those of their friends)? There are many ways to add
arbitrary friction and hidden prioritization to sell offers if you are not
under the full scrutiny of all that regulation bitcoin aficionados want so
dearly removed.

If you were forced to find buyers for your btc on your own in a panic, without
the help of market makers, then collapsing nominal market rates would not be
the main problem of "btc millionaires", getting that collapsed rate, or even
just a significant fraction thereof, would.

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jokoon
I'm still wondering if bitcoin is currently and possibly being used to launder
money.

I guess bitcoin exchanges are not really regulated in any way.

Or maybe more drug resellers have found a way to sell drugs online using
bitcoin, meaning drug users are buying bitcoin en masse, inflating the price.

One possible way to launder money, would be to find a way to convert dirty
dollar bills to bitcoin at a higher dollar price.

[https://i.imgur.com/DocUl2S.png](https://i.imgur.com/DocUl2S.png)

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romanovcode
I don't like Bitcoin as well, even tho I own some. The problem in my mind is
that it is just sitting money, it is not circulating therefore it is not good
for economy.

~~~
AlexAltea
Bitcoin would be circulating way more if more services and online stores, e.g.
Amazon, PayPal, simply accepted it as just another currency. Rejecting it as
payment method because it's not circulating is just circular logic.

I have been spending plenty of mBTC in the stores (shopping, flights, hotels)
that accept it such as Overstock, Abitsky, Destinia, etc. and my experience
there has been way more comfortable than shopping with credit cards or even
Paypal.

~~~
popinman322
Shopping with cryptocurrency has always seemed safer to me, personally.

I keep all my BTC/LTC/ETH in Coinbase wallets, and whenever I want to send
money from those wallets I need to go through multiple 2FA prompts. My
debit/credit cards have never required anything more than a static number to
be used online.

~~~
a_c_s
If my credit card gets stolen then I just report it to the credit card company
and I get a new card (free) and all of the fraudulent charges reversed. If the
bank goes under, my funds are insured by the FDIC. If I lose my wallet I can
report that to my banks and get everything (except the cash in my wallet)
restored to pre-loss state.

If my Coinbase wallet account is hacked because I use a bad password, can I
get anything back? If Coinbase as a company goes under, what happens to my
bitcoins? If I accidentally send cryptocurrency to the wrong recipient, how do
I reverse that transaction?

As somebody living in the USA who doesn't transfer funds internationally, I'm
quite well covered by existing banking regulations: I'm struggling to see how
Bitcoin is 'safer' for me in any way.

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Dangeranger
My largest Bitcoin question is this; Bitcoin's continued growth requires the
addition of new coins to pay for the cost of verifying transactions. This
creates pressure for the price of Bitcoin relative to the dollar to increase,
leading to deflation of the dollar, and most other currencies relative to
Bitcoin. This will lead to one of two conclusions.

Either the hyper-valuation of Bitcoin relative to fiat currencies continues
above the rate of rise for the cost of verification, or it doesn't.

If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to
public perception, regulation or any other reason then the network will cease
verification and exchange within the network will stop.

If the accelerated price does continue to outstrip the rise in cost, then
people won't sell their Bitcoins because they will be worth more tomorrow than
they are today. So exchange outside the network will stop.

So in both scenarios you have a cease of exchange, the only difference is that
one ceases within the network and one outside the network.

Isn't this a failure in both cases?

~~~
tlrobinson
> If the accelerated price of Bitcoin fails to outstrip the rise in cost, due
> to public perception, regulation or any other reason then the network will
> cease verification and exchange within the network will stop.

The mining “difficulty” automatically adjusts every 2 weeks to always target
10 minute blocks.

If the price drops dramatically it can temporarily slow block creation,
especially if a different cryptocurrency (with the same mining algorithm) is
more profitable to mine, but it will eventually adjust.

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afsina
I think they do not understand it well. Or, they do understand, but it just
rubs them the wrong way. Probably because they are either ardent money
printing Keynesians or all-powerful-state loving social-democrats.

~~~
moxious
They do understand it but this disagreement masks a deeper issue -- they think
economics functions just as it did some years ago and others disagree. With
differing underlying assumptions, both sides' arguments are rational.

------
thehardsphere
Relevant HN discussion of the Bloomberg article from yesterday regarding
Stiglitz's opinion of Bitcoin (not a dupe):
[https://news.ycombinator.com/item?id=15812247](https://news.ycombinator.com/item?id=15812247)

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teilo
Perhaps because Nobel Economics Laureates are not equipped to deal with a
means of exchange that cannot be inflated, cannot be controlled by central
banks, and has equivalent utility to cash.

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xutopia
This sounds more like a vim versus emacs, dynamic versus static type argument
to me. I see Bitcoin as a new form of gold that is more easily transferred and
stored. Does he object to gold as well?

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mtgx
Bitcoin doesn't care if economics laureates don't like it.

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googletazer
Hyperbitcoinization is not something any "traditional" economist will like.

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ianai
It should be outlawed for its environmental cost alone.

~~~
dnautics
Perhaps we should outlaw dollars for its environmental cost, the fact that it
inflates (which encourages consumerism instead of conservation) and the fact
that a huge percent of it enables immoral wars.

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golemotron
I don't think that they like tulips either.

