I'm still curious about what are alternatives to using money. Surely there might be politics and some philosophy involved about how you manage and organize society. Aren't local currencies a part of the solution?
Money is great because it lets individuals manage their own selves, but I'm still a little worried about how fraud, abuse and mismanagement can wreak havoc in society when money is abused.
Regulating money and everything involved around money seems to be a hard thing, and at some point moving away from money or finding other ways to do things could make sense... Although I'm curious.
Don't economists write some philosophy about those things?
> Money is great because it lets individuals manage their own selves, but I'm still a little worried about how fraud, abuse and mismanagement can wreak havoc in society when money is abused.
So we need an alternative to money because of problems that we know about and manage rather well? (And yes, we do manage them rather well. You might be traumatized by the 2008 crisis and think "omg money is evil", but you'd be missing the big picture of all of the improvement in standard of living across the board and around the world since the Renaissance that has been made possible chiefly by having money and credit.)
Anyways, there are no alternatives to money (and credit). The only alternative is barter, and that's extremely inefficient.
If you want efficient trade in services and products then you need a money-like measure of value that stores value in itself for at least the short-term, meaning: for long enough that people are willing to use that money-like measure for trade. Such a thing is money.
Not having money and credit means reverting to a state we were in centuries ago because without it there is no way to leverage barter into the kinds of trades we do today on a daily basis.
Money without credit is not that good either. That's basically what we had in, say, the Roman empire days -- not exactly fantastic.
The same problem exists, regardless if its a fiat central bank or open source decentralized software token system: how is the money distributed and created?
Even given the Cryptocurrency ecosystem, there's threats of fraud like Tether (theory: https://hackernoon.com/the-curious-tale-of-tethers-6b0031eea...), or the inherent history and math behind Bitcoin and many proof of work cryptocurrencies distributing the supply to only a small group of users and cutting off the ease of producing more coins as easily to later users who use the software.
Deflationary systems (or systems which skew how labor is rewarded, i.e. PoW with changing rewards for work) run the risk of creating a class of slaves from new generations, or users who simply arrive days too late:
Best estimates are that there are about one million
holders of Bitcoin; 47 individuals hold about 30 percent,
another 900 hold a further 20 percent, the next 10,000
about 25% and another million about 20%, with 5% being
lost. So 1/10th of one percent represent about half the
holdings of Bitcoin and 1 percent close to 80 percent
(http://www.businessinsider.com/927-people-own-half-
of-the-bitcoins-2013-12). The concentration of Litecoin
ownership is similar
(http://litecoin-rich-list.blogspot.com).
Most of the big wallets have been in place from early on,
so sitting back and watching your capital grow has been a
very successful strategy.
>>or the inherent history and math behind Bitcoin and many proof of work cryptocurrencies distributing the supply to only a small group of users and cutting off the ease of producing more coins as easily to later users who use the software.
Keep in mind that the value of money derives from the net utility it provides in all of the trades it is used in throughout its lifetime. By implication, the only scenario where a new currency would displace old ones through market mechanisms like competition (as opposed to political ones like state mandates) is one where the value added by swapping out the old money with the new one in trades exceeds the cost for the economy to purchase the new money from those that minted it.
In other words, it's a net gain for society for a new money to displace the old one through market competition, regardless of the initial distribution of the new money.
The effect of the initial distribution on long-standing wealth distribution also diminishes over time, given a particular holding of currency can only be spent once. For long-run wealth distribution, what matters most is avenues to extract economic rent on a recurring basis, like regulatory capture, political privileges, etc, and new forms of money like cryptocurrency could alleviate these.
How do you foresee cryptocurrency alleviating those problems when existing capital can simply produce and acquire the majority of coins/tokens in existence?
For all we know the executives at the Goldman Sachs spent a few million dollars slowly purchasing BTC any any of the other altcoins since day 1.
Money only has value if someone is willing to accept it. Existing capital merely transfers into whatever other forex, seashell, or feather trading system there might be.
For long-run wealth distribution, what matters most is
avenues to extract economic rent on a recurring basis
That's oddly simplistic. No mention of wages, education, and tax policy?
regulatory capture, political privileges, etc, and new
forms of money like cryptocurrency could alleviate these.
How would new forms of money impact any of those?
There's certainly the possibility it could make all of those issues 1000x's worse.
>>How do you foresee cryptocurrency alleviating those problems when existing capital can simply produce and acquire the majority of coins/tokens in existence?
That is still a net gain for society.
Look at it this way: cryptocurrency could potentially replace high rent-extracting institutions, and it would only be able to do so if it provided its owners with much lower levels of economic rent than the institutions it replaced (that's where it derives its efficiency advantage). Just to clarify: economic rent is defined as income that is not derived from productive activity. It is unearned, from a broader economic perspective.
So now imagine the wealthy shareholders of Goldman Sachs sell their shares, and buy up all of the cryptocurrency. They're still very wealthy, but the assets they own don't hold the same unfair advantage that the GS shares that they once owned held.
That is what it means to be in a fairer world. Eliminating opportunities for exploitation (which can roughly be mapped to rent seeking) is how you durably reduce income unequality.
>>That's oddly simplistic. No mention of wages, education, and tax policy?
It's simplistic because it's a very broad analysis that only distinguishes rent-seeking from none-rent-seeking activity.
In this case I think it's appropriate given cryptocurrency has the potential to have a very fundamental impact on the macroeconomic picture. Moreover, speculating about the finer details of its impact might not be all that useful, given how hard it is to anticipate exactly what those more specific effects will be. The broader effects are easier to predict and thus a more appropriate object of speculation in my opinion.
Adam Smith's Wealth of Nations was the first, I guess. It specifically challenges mercantilism, which is the British policy described in the intro to this article.
Money is great because it lets individuals manage their own selves, but I'm still a little worried about how fraud, abuse and mismanagement can wreak havoc in society when money is abused.
Regulating money and everything involved around money seems to be a hard thing, and at some point moving away from money or finding other ways to do things could make sense... Although I'm curious.
Don't economists write some philosophy about those things?