> There is no intrinsic value in gold. Or any other thing. The only value things have are the exchange and use values humans imbue them with.
Your definition of “intrinsic value” does not match that of standard economic terminology.
Gold has intrinsic value beyond speculation because it can be used for industrial supplies and because it’s a well-liked jewelry item. Extrinsic value contributed by speculation can drive this price away from those anchors, but the anchors exist.
Your definition seems vaguely philosophical, but in any case your argument, as posed, is incoherent. Either you’re using the same definition as what others are, in which case your argument is simply incorrect, or you’re using an alternate definition, and your argument ceases to be relevant.
> Your definition of “intrinsic value” does not match that of standard economic terminology.
I am well aware of that—because using standard economic terminology in this case, that of ascribing the property of intrinsic value to gold, is dead wrong. It’s both a misuse of language and a confusion of terms. Value is a thing agents ascribe to objects; in economic theory, it is a measured result of social relations. It is not a property of the objects themselves. The physical properties of gold are intrinsic to gold itself. The use and exchange value is created by humanity.
If everyone decides gold has no value tomorrow, it has no value. There’s nothing intrinsic about it.
> Gold has intrinsic value beyond speculation because it can be used for industrial supplies and because it’s a well-liked jewelry item. Extrinsic value contributed by speculation can drive this price away from those anchors, but the anchors exist.
You are describing use values, and each of them are further describing exactly my point. The intrinsic physical properties of gold are found to have use value by acting agents. The value found, discovered, or created on the basis of an object’s properties is not intrinsic to the object itself. It comes from outside.
> Your definition seems vaguely philosophical, but in any case your argument, as posed, is incoherent. Either you’re using the same definition as what others are, in which case your argument is simply incorrect, or you’re using an alternate definition, and your argument ceases to be relevant.
I find the argument that use and exchange values are intrinsic to any object to be far more incoherent. All of economics is rooted in philosophical positions on value, markets, commodities, exchange, and so on. The notion that value is intrinsic to an object is one of the most incoherent foundations to most people’s understanding of economics and value. I am using the same definition—but directly disputing its coherence. It’s fine if we can’t agree that the notion of intrinsic value is a confusion of terms itself, but that doesn’t render incoherent those who point this out.
This whole “gold has intrinsic value” notion is, in my opinion, a sad confusion of the intrinsic theory of value as it has over time trickled into common parlance. When most people go about saying, “Gold has the nifty property of intrinsic value”, that statement far too often suggests or implies value as a property, rather than a measured result (of socioeconomic activity among actors in a market).
The economic value of a commodity is both use and exchange values. You’re talking of use values here. They are included when talking of the value of an object.
You’re also, like other commenters, unnecessarily stuck on the example of gold. See past that. Gold is no different from any other object—anything can lose its value, because that value is the product of human activity, ideas, and relations in a market. When I say If everyone decides gold has no value tomorrow, it has no value, I was talking all value. Your scheme won’t work when everyone decides gold has no value, because gold is nothing more than an object in the market whose value is constructed by human relations and activity.
You are overestimating the value of gold as a utility.
Think about diamonds. They have utility to and they have value as jewelry, they used to be of almost no value as jewelry.
It's not impossible that we will be able to create to find another metal that corrosion resistant. The value as a jewelry is exactly like bitcoin. It's speculative.
I think intrinsic means in this context "valuable for something other than bartering with".
Gold has intrinsic value in electronics. It is used for electrical connectors due to its corrosion resistance and conductivity. Tiny golden wires are used in packaging integrated circuits (connecting the ICs to the pins of the chip).
Bitcoins have no such intrinsic value. They can only be bartered for something else.
Even fiat has intrinsic value: you can burn bills for warm.
You are describing use values that are found in the intrinsic physical properties of gold by human agents. Their societies then assent to recognizing those use values. That value is not intrinsic to gold itself—it is not one of gold’s properties.
Thinking “gold is valuable” is a shorthand for this recognition of use and exchange values on the basis of gold’s intrinsic physical properties. But the value found in those properties is not a property of gold itself.
But that's consistent with what people mean when they say 'gold has intrinsic value.' All they are saying is it 'has some value that is not one of the three functions of money.'
Does anyone know what the above logical fallacy would be named? I see this kind of argumentation a lot: where one refutes an argument which has not been made.
That it is consistent does not mean it is equivalent. Humans are pretty poor at avoiding conflating their terms and categories into messes of confusion. This fiction that gold (or any other thing) possesses intrinsic value is one of best examples of such confusion in economics. Things have value because people decide they do—and as soon as they decide otherwise, that value steadily declines to zero, despite how many people ardently believed that value was intrinsic to the thing itself, as if it was one of the physical properties of the thing, an indivisible part of the object. This is nonsense.
Moreover, there is no logical fallacy here on my part. I was not refuting an argument that was not made—I was directly disputing the coherence of an economic adage the average person has been taught is actually rational and sensible when it was brought into the discussion.
Value is never intrinsic, but always created by economic actors—the logical fallacy is arguing otherwise.
Gold, like silver, various other precious metals, and a number of other things—like land, for example—have long histories of value. The historic value of gold among human societies can not be disputed. But that long history has not infused value as a physical property upon gold—or any other thing—itself.
My original statement was neither outrageous nor illogical. Bitcoin is in this case a rather perfect example that highlights exactly what I’m pointing out—the value of bitcoin is in no way intrinsic to bitcoin itself. Bitcoin possesses a number of properties which, analogous to similar properties in a physical object like gold, are found to have both use and exchange value among economic agents. But that value is not actually a core property of bitcoin anymore than value is a core property of gold. Agents identify properties in bitcoin and assign them value. This is always where value comes from—use values from the things one can do with the commodity, and exchange values from the things one can buy with the commodity.
Sure, you can argue that a house, a hamburger, and a car have no intrinsic value per se, but only in relation to humans and/or because we give them value.
But again, with that you're departing from the modern economic notion of intrinsic value in discussions of money.
Do you mean the numismatic notion of intrinsic value? Because that is a very different thing from saying economic intrinsic value. I’m not departing at all on the economic part, I am directly talking to that notion.
It’s an abuse of definitional scope. The commenter is not arguing against a point that has not been made (that would be a strawman); instead, they’re arguing against the applicability of terminology in an argument that was made, but by using an incorrect or alternate definition for the terminology.
In this specific instance, the commenter is using a non-standard definition of “intrinsic value” to argue that gold has no such value. I like to call this “Wittgensteinian chaos” - you see it happen whenever two or more parties fail to explicitly define terms before arguing. It’s usually accidental, not deceptive. In particular, this is likely to happen with technical terminology that does not look enough like jargon to prompt people to look it up, because it also has a coherent, non-technical meaning.
Now circle back to “intrinsic value” - if you aren’t immediately aware that this is a specific economic term[1], you might think to yourself, “oh I get what he’s trying to say”, and proceed to try and refute it. I think economics is particularly prone to this in internet debates.
As I stated in my other reply to you, I am very well aware “intrinsic value” is a specific economic term. I was speaking exactly to that term—what it means, what it implies—and disputing the logical sense of the term itself.
You have twice now in your comments made a host of assumptions about my intentions and the coherence, relevance, and applicability of my statement. You’re ascribing an awful lot of impossible-to-possess knowledge of my mental processes here.
The notion that gold has intrinsic value—despite the longstanding place that notion has remained in social and economic thought for quite some time—is inconsistent with reality. There is no damage done to gold, its value, its physical properties, or economics itself to point out this inconsistency. We’d be better served to use terms that reflect and remain consistent with reality. And when it comes to economic value, the harsh reality we ought to always keep in mind is that no value is intrinsic—despite how frequently it feels (or even seems sensible to believe) otherwise.
The thing your argument is that no one is arguing about these philosophical ideas of intrinsic value. People are just saying: 'if people didn't use gold as money anymore because they lost faith in it, the gold would still be useful (ie as in jewlery, circuit boards, etc).'
I mean I could do you one better with this type of argumentation and say 'your idea is wrong because all ideas are social constructs, so all are equally the imagination of peoples and all are equally valid,' and we could just have nothing left to talk about and get nowhere with anything.
You could do one better but that would be missing the point.
The claim was that gold have intrinsic value and bitcoin doesn't. But to the extent of discussing intrinsic value in economical terms then bitcoin does too.
In other words you can't both have your cake and eat it.
Either both bitcoin and gold has intrinsic value in economical terms or none of them have in philosophical terms.
Bitcoin can fulfill the function of money (but just like gold it's cumbersome, try and pay for a tshirt with gold in H&M).
Bitcoin also have other uses such as store of value (just like gold) and a unique footprint which makes it useful in the digital space.
So no it's not wrong at all.
There was a time when gold wasn't useful for much other than as a store of value and as jewelry. If we are to follow your own argument then Gold had no intrinsic value because of it's limited use before the industrial revolution.
Only the market determines whether something have value. The idea of intrinsic value in anything (also when used in economic terms) is simply misleading and not representing reality but rather the illusion of a reality that doesn't exist.
Well, there is its physical essence. Cryptocurrencies are a bit like a DVD vs a movie on Netflix. Everyone is starting a new cryptocurrency nowadays, whereas opening a gold mine is an entirely different matter.
Exactly. And also, the investment in ASICs etc is not the same as opening a gold-mine. An ASIC can mine Litecoin or Bitcoin whichever is profitable, a gold-mine cannot start extracting petrol when that is more profitable. That's the intrinsic value of gold.
No I am saying that bitcoin is bitcoin with it's own unique history and that there only will be a set amount of those bitcoins. That makes it scarce. It's not just first mover advantage it's the advantage of the history and the money now put behind it that makes it valuable.
What you and many other people seem to be confusing is that Bitcoin the protocol isn't what's valuable. It's the ability to turn it into a physical like property.
The value of gold can dissapear too overnight. Same rules apply. Gold can be obsolete and just because it historically have had value does not mean it will always have that.
No, it's not all that distinguishes it from clone coins.
Bitcoin has a unique history and a unique set of backers, current and future utility and more trust than any other cryptocurrency.
None of the other coins have that.
Your argument is like saying that the only thing that distinguishes the USD from the drakmar is branding.
There is always a reason why something have a value and people trust it. The value of that trust can appear and disappear from one day to the other with anything we consider valuable, just think of Diamonds as a great example of something that is suddenly worth a lot.
Humans decide the value, the market decides the claimed "intrinsic value" the market have determined the value of bitcoin.
It has no more utility than a direct clone. None whatsoever. It's a nonsense claim to say it has more than any other - it has less uility than most! Many of the alts added many new capabilities.
The US Dollar is supported by a government that will help adjust supply, interest rates etc to keep its value roughly stable and it's utility in place. By design Bitcoin has none of this stuff.
I'm not making arguments about intrinsic value, I am saying that the value of BTC is built on sand much more than a national currency, and it's limited supply street cred is no sort of guarantee, based as it is on brand.
US dollar is supported by a government (or more precisely a central bank) just like Greece and Venezuela is. But who supports the government? A government can default. The USD can default. It is only in very recent times that currencies have been stable (at the cost of having to grow the economy to beat the inflation) historically they haven't. Just ask the Germans in the 30ies.
It's an illusion to think that just because a government is behind a currency it's exempt from loosing all it's value.
The lender of last resort is the government but governments can fail.
Just because they are stable today does not make them stable tomorrow.
Bitcoin has more utility than a clone because it has a unique history and a unique set of backers (the network) and those backers have exactly the same function as they state.
Bitcoin is better supported than some currencies and worse supported than others. But it exist in that spectrum not separate from it.
I didn't say it's exempt from losing value, however we have some fairly good means of trying to ensure that doesn't happen, which have been relatively successful of late.
With Cryptocurrencies there are none, by design.
>> Bitcoin has more utility than a clone because it has a unique history and a unique set of backers (the network) and those backers have exactly the same function as they state.
This is utter nonsense, backers have none of the power of the state to alter supply, set rates etc etc.
>> Bitcoin is better supported than some currencies and worse supported than others. But it exist in that spectrum not separate from it.
Well, given the fees, processing times, lack of support mechanisms and transaction processing limits, I'd say it's a damn poor one.
No it's not nonsense at all. A country can default no matter the intentions and attempts of it's government.
There is always a reality. That same reality plays out differently with bitcoin compared to the USD but fundamentally there is no absolute base for either currency nor bitcoin. And history is littered with examples of this.
Because the state can create more currency, change interest rates and various other things that cannot be done with Bitcoin. This is by design and is widely celebrated by the community.
The question is irrelevant, there is a clear difference between the 'backing' of a state which can manipulate the currency supply directly and the backing of entities that cannot.
You claimed that bitcoin's backers have the same power as the state. They do not. End of story.
No I claimed that they have the same function. Neither of them can secure against defaulting completely but the function is the same. There is enough inertia in the bitcoin network enough people with most of the bitcoins gotten at a very low price and holding, other words there is a base.
So no it's not irrelevant it's the very core of this discussion.
That is not what intrinsic value means. Gold has value in electronics and jewelry (people will always value gold for jewelry and other ornamental objects, have since its discovery). You cannot just pedantically re-define the economic meaning of the term; the rest of the world disagrees with you.
Before electronics gold had two types of usages. Jewelry and store of value. Before a monetary system gold had some value as jewelry, before the ability to create jewelry or ornamental objects it had no value. In other words the "intrinsic value" is contextual and not objective.
Intrinsic value means the actual value but the only way to determine the actual value is to see what people will pay for it in an exchange. In other words the market determines the value of gold based on a set of assumptions. These assumptions can change in the future. Bitcoin is also valued by the market based on a set of assumptions.
The world doesn't disagree with parent, in fact it agrees with him and bitcoin is the proof of this.
You can't both have your cake and eat it. Either gold and bitcoin have intrinsic value by the economic definition and the market determines what that is or neither of them have.
