Bitcoin Forum

The problem with this particular forum is that it seems that many (most?) of the posters don't really know the slightest thing about basic economics. Not the Austrian School, the Chicago School, Keynesian economcs, Paulsy Krugmanian, Bastiat, Hayek, Mises, Prescott, Lucas, zip. Nada. Nothing.

It reminds me of the people who will happily discuss US budgets and monetary policy, but don't know the first thing about fiat money, the Federal Reserve, what the power of the printing press actually means, or anything else. They are the same people that think that there is a Social Security "Trust Fund" and never pause to think what it would mean to loan money to themselves.

As a greater commentary, beyond this board, it's a very sad thing. This stuff is important.

Rather than moaning about people here not understand economics, why not write something to enlighten us?

I'm curious as to what you observed that leads you to believe this is the case, and what you intend to accomplish by starting this thread.

I find it more sad that economists think they know anything when their theories are so useless and almost always wrong.

Modern economics are more like sports commentary or religion than a science.

I'll give you points for mentioning the Austrian school of economics though.

But everyone quotes the "Austrian School", seems to be the most quoted, on these forums anyway. Means nothing to me, but like you say, economists are almost always wrong.

Nice post, Back to the roots ... cd ~$
my 2p (pence)

I would suggest that documentary
Quants: The Alchemists of Wall Street
http://youtu.be/OINqYdkhOAw

You don't need to know anything about economics to make money... With bitcoins many who made lots of money had luck. I know few friends who got into it just because someone told them it is funny and that some day it might be worth a lot. Some of them now have 2000-3000BTC
And also most of you I hope knows that money is like IOU, nothing else. It is a paper that is telling me/you how much we owe for something....

btw,
I found bitcoin stuff while searching for minecraft, because my 8 years old son was looking for a minecraft mod ... so I think own him and I own to BTC community as well for make my life more fun  ;)

well, obviously they are not going to teach you this stuff at school, and everyone knows you don't need to learn anything if they didn't teach it to you at school. Because if it would be important they'd teach it at school right?

Well, sure, that's one way of looking at it, of course. Nothing wrong with that. I sincerely wish you (us) the very best.

I most certainly will, as the opportunity arises. This was more a general lament (moaning) on the state of things.

Mostly what I observed as I read beyond mining information.

As far as accomplishing anything, it's just a discussion. I'm always interested in seeing if there's any way to teach people something that they know instinctively and yet deny when it does not suit them.

This^^ pretty much sums up the mindset of the majority on this forum -- "Ignorance is bliss."
"I don't know how anything works, so I could definitely do better."

Would you like to provide some reasoning? Your conclusory statements ain't true jest 'cuz yew sez so.

Their "theories" explain human behavior and the choices that humans make. Well, at least the honest economists do.

Yeah, we aim to please. 8^]

Yes, as we can see, public schooling has been quite the success.

/s

This comment illustrates my point precisely.

"I don't know anything about the subject at hand, but I will posit a completely ignorant personal conclusion, without any reasoning whatsoever".

Well played, Sir. Well played.

no child left behind lol

There isn't.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"  - Upton Sinclair wrote this about people who sold adulterated food over 100 years ago.  Its still true today.  

Which strikes me as funny--an ignorant ideologue stating something very true, while at the same time writing books that suggest he has no idea what his own phrase means.

One of the reasons a lot of people on these forums don't care about economic theory is because it doesn't work.

Like everything to do with money once someone figures how to manipulate the system, the system stops working and ends up being something it was never intended to be.

The beauty of bitcoin is that once someone starts to manipulate it and it stops working right, people can simply abandon it for a different altcoin of some kind.

It's that simple...conventional economic theory is so yesterday.

Brilliant, yet another person who doesn't understand simple economics at all ("economic theory...doesn't work"), then states an ignorant conclusion without any support whatsoever.

Economics works regardless of the monetary system because it is how human beings live their lives, whether they are conscious of it or not. Every single decision, no matter how small, no matter how many each day, is made using cost/benefit analysis. You state that "it doesn't work", might I ask why you believe such a thing?

It's that simple...cost/benefit analysis is so every day.

@brush242:
Please understand that debating people who take pride in their ignorance is no more productive than debating a rusty bucket.  Neither is likely to change, regardless of the strength or the eloquence of your argument.

No offense to anyone.  ~~Merry Christmas~~

Economy works in a modern life to some degree. It looks on system of production and trade and a need to satisfy the needs of millions. In a modern way it does work as I said, but economy is in the eye of beholder. Bitcoins are perfect example of a thing called Giffen good where as the price raises the demand gets higher and as price drops so does the demand. That's a thing that doesnt follow normal rules in economy and that is why economists dont agree that Giffen goods exist.

You can't apply rules you find in economy to everything in a real life. That is the reason what one day you can be worth billions and the next day lose everything.

Bitcoin is a currency -- money.  Not goods.

Yes, the more money is worth, the more people want it.  All money, not just bitcoin.  Price of goods rising is the exact opposite of the price of currency rising.  If a bitcoin is worth twice as much today as it was worth yesterday, of course people would want it more -- it buys twice as much stuff (goods).  That's not called Giffen, that's called common sense.  And that's why it helps to know a bit about economics.

Money in fact is a good that is used in transactions.. In economics good is describes something that satisfy human need, that needs to be obtained only difference is that bitcoins are intangible goods, like information... Bitcoins are goods in that way since atm they satisfy our need and greed, same as everything else before invention on money as a payment for a good. In the time when people used to trade items. So now you trade bitcoins for money or you use it to by something else.

So yes it helps to know a bit about economics....

So the world will just switch altcoins every few years. What a future to look forward to ;)

Wrong.  To begin learning, start with Wikip, here (http://en.wikipedia.org/wiki/Good_(economics)), and continue 'till the end.


If a bitcoin costs double (in dollars or cows), that means that each bitcoin buys twice as much dollars or cows, and thus is about twice as desirable.  If you find this phenomenon curious, paradoxical, or if this makes bitcoin "Giffen good" in your eyes, i would suggest either affordable counseling or adult continuing education.

Economics is a lot like physics.

Probably no theory will ever be able model the economy in its entirety, considering that the economy is grounded on our physical reality.

It's also worth considering that economics is probably less advanced than our understanding of physics. The General Theory of Economics is a lot like Newtonian physics. I suppose Hayek's theories are much more "relativistic", but we have so much more to discover.

Economics is in a way more difficult than physics because you can't throw money and scientists at the problem to create controlled experiments.

In the future we might see more advanced economic model simulators that can predict the outcome of different models. But without the advanced software or hindsight, economic theories are all educated guesses that probably don't fit reality.

The answer to future advancements in economic theory is in simulation software and grand scale experiments. Bitcoin is a grand scale experiment.

Economics is nothing like physics. Physics seeks to discover the real laws that govern our universe, our very creation. Economists just argue endlessly and produce models, none of which work very well.

You never hung out with phys. grads. :D  At least economics geeks don't add handfuls of dimensions & creative fudge factors constants to make their models jive.

Umm... They do.
But we're digressing, the strength of any scientific theory is that ultimately, it has to be testable (make predictions).
Some economic theories do, but other have been proven to be flat out wrong and should be
discarded.... (http://en.wikipedia.org/wiki/Keynesian_economics)

Well perhaps he, and the century of people who read him, didn't have your brains  :P 

Lol. Wiki. And you wanna be taken serious? I can write a topic on wiki, that doesnt mean it is true...
http://economics.about.com/cs/studentresources/f/money.htm

Read this, same thing..
Bitcoin is a mean of obtaining items you need. Money is the same thing right. But can you make your own print your own money? No, but you can " print " bitcoins without the government help ( or so we think it is now ).

You are looking it wrong. BTC has a value, atm thats lets say 700$ and the trade is lower then it was when it was 1100$. When it drops to lets say 300$ you can by close to 4x more for the same amount of money when it was 1100$ but the trade won't be as good as back it was before. So yes, you my little boy need to go back to school...

I like to think of economics today as like medicine in the middle ages. Everyone could empirically see that bleeding people didn't cure them, but they carried on doing it regardless because it was the best idea they had. Sometimes, the best economic policy a government can do is to do nothing. Recession? do nothing. That's my advice to any world leaders who happen to be reading this :) Economics is also rife with cognitive biases. The action bias for example can lead governments to run huge stimulus programs even though they only make the situation worse. I've also noticed a lot of non-sequitur arguments. The unemployment rate fell so such and such a government policy obviously worked. This is like saying giving women the vote caused world war 2.

Economics is wrapped up with politics. The main message of economics is that people should be free to make their own decisions. This undermines the need for government. As a result, it is difficult for young people to hear this message. Keynesianism is a notable exception. It teaches that we need a powerful government to push us around and tell us what to do. I was taught Keynesianism at school under the guise of teaching economics. It suits the governments position, (I grew up in a socialist country).

Another nice comparison I have seen is Soviet genetics. In the Soviet Union genetics research was repressed as it undermined communist ideology. Soviet genetics was developed as a counterpoint. This doesn't change the fact there is one and only one genetics. I believe that there is one and only one economics, and Austrian economics is the best understanding of economics that we currently have. The fact that is undermines the state is irrelevant. It doesn't make it any less accurate.

Theories have views on how economics work, none of them are necessarily right and in uncharted territories it would be impossible to decide on which school of thought to use. I know investing from the gut is not encouraged but I don't think its any worse than what you're doing, as long as they abide by basic investor guidelines, eg; dont invest what you cant lose, don't play with all of ur investment in day trading, etc.

And the problem with "economics" is that none of the models actually reflects what happens in the real world (maybe a silhouette at best until a bubble bursts and they all stand around looking dumbfounded wondering how did that happen because that's not in their model), and that people who call themselves "economists" are complete shams too.

Here is the reason why I'm investing more in bitcoin:

Our monetary system requires an ever expanding debt base in order to sustain itself (because money=debt). The issue is that most people, governments and companies in the western nations are so far in debt that they cannot take on the required loans to continue the expansion of the money supply to the level that is required to keep the system working. This is why central banks have had to step in with Quantitive Easing - to make up the shortfall in debt/money creation that we previously took on ourselves.

So our monetary system essentially behaves like a great big ponzie scheme (which actually broke in 2008 and has been collapsing ever since). Just wait until the Fed starts to reduce QE in 2014 - I predict markets to start going haywire and they will have step back in and actually increase the money printing to $100+ billion every month. That's when the average people (and the media) will finally realise that things have started to go really wrong, and the price of bitcoin will break into 6 figures.

Couple a monetary system that requires infinite growth with the fact that we live on a planet with finite resources and it's pretty easy to predict how it will turn out. There is nothing to be admired about anyone that calls themselves an "economist" or thinks they know about "economics".

Here is a litmus test to try out on someone who claims to be an economist: Ask them if they think economics is a science. If they say "yes", then ask them if they can explain the "scientific method". If they can explain it, then ask them why economics is taught as a "humanity" in school? If they can't explain, punch them in the face.

OP, the reason people here ignore economics theory is: If you have the right to print money and made that money the only medium of transaction, you can promote any economics theory that you see fit and even award them with a Nobel price of economics with your printed money  ;)

I'm sure one day bitcoin economics theory will thrive and replace mainstream economics theory

phiche, agree 100%

As someone who excelled at Economics in high school I have to admit that economic theory (nowadays) is but an excuse for the horrific amount of financial theft taking place in today's system.
It has so little bearing on reality that economics textbooks may as well be sold in the fiction section. As a teenager, economics seemed something so noble. It was the science that explained how people connect through commerce, why currencies exist, why wealth gaps exist and how governments administrate the economy for the good of society.  

When you see the sheer amount of corruption and theft at the highest level, you begin to see that all this is irrelevant.
We are all rats in an economic experiment which aims to test just how low you will go just to be able to consume more so that you can satisfy some manufactured craving. IMO, western society has been reduced to the economic formula: work->consume->die.

Hopefully, people on this forum see how cryptocurrencies can help us break out of this hypnotic cycle and start to change the world around us for the better. I don't think you need to be very knowledgeable in economics to see what is going on.

+1

What I see in this thread:

An economics grad who probably has a hard time finding a job, coming in here to feel important but repeatedly using the fallacy of "appeal to authority" because he has no strong arguments that work very well in the bitcoin world.

Personally, I enjoy the economics lessons I've learned on these threads.  Too bad the OP failed to deliver.

You can blame schools teaching only the economics the government wants people to believe in for that one which is "printing money fixes the economy and boosts confidence in the markets" seriously, that's what I remember from reading up on the Weimar Republic in history.

I would only like to say that you don't have to know such Schools to predict some event future etc. because thay can be all proven wrong like all theories. Ofc you can benefit from understanding of such things, but truth is everything we know can change in one day (and i'm not speaking only about economics).

It's like when i first saw forex markets and realize that cornerstone of world economics is pure gambling and whale manipulation at least for last 50 years :-\

You're right, and I understand that. There is a small part of me that hopes (my own idiocy right there) this might somehow change.

That is simply untrue, every single person on earth uses economics in real life with every decision they make: they ALWAYS choose what they think at that moment will make their lives better with the information they have at hand. But you are right here: it IS in "the eye of the beholder". That can mean gold vs. silver, BTC vs. LTC, BigMac vs. Big King. That can alson mean a lesser of evils choice. That can mean a sacrifice to help someone else. That can mean they choose/chose poorly. That can mean nearly any outcome, e.g., silver, LTC, Big King, medicine over food, feeding someone else before themselves, whatever the choice they make, they choose to make their lives better than every single one of the alternative choices, even if the difference is nearly negligible.

This is why they all understand it at a gut level. This is why even the homeless wino doesn't stand in the middle of a abandoned missile silo site in Nebraska begging for money--he stands at the busiest intersection he can in the busiest city he can because he knows that he stands to make far more money at the corner of Michigan and Lake than he does there way outside of Lincoln, Nebraska.

Zinggggggg!

The answer to this is to look at the principles involved in human behaviour, of which I noted one: all else being equal, people make the best choice for them at the time the choice is made. Most simply: people respond to incentives.

I cannot comment on corporate economists much (I know full well why they do what they do), but I certainly know that gov't economists, academic economists, and the Paulsy Krugman-types certainly lose sight of this fact. I'm somewhat shocked that they still think they can model the aggregate outcomes of hundreds of trillions of individual decisions made every day.

Frankly, I'm not really sure why "we" (whoever that is), needs the outcome of their models.

More accurately "...none of which that (you) know of work very well."

There, fixed that for you.

Brilliant! Well played, Sir.

MOE: Uh, why don't you invite him over to dinner. Turn him from an enemy to a friend. Then when he's not expecting it... bam! The old fork in the eye.

HOMER: Do you think it might work, ~without~ the fork in the eye?

MOE: There's always a first time.

I like your post. All I would say is that who the hell cares if their models work or not? For the most part, every single model that every single economist ever made could be wrong. So what?

The issue becomes a problem when gov't uses law based on those idiotic models to force everyone to pay for nuclear weapons, "free" healthcare, wars, Social Security, et cetera. THAT is when the models are always wrong, and that is when we get skrewed.

Let's hope you're right!

Sadly, I think you must have some basis in economics. Most simply, because at some level "economics" is a euphemism for "my personal worldview that is soooo important to me that I will doublethink before I will face evidence conflicting with what I want to be true."

Well, if that's what you see, I am THRILLED that I do not have your eyesight. Actually, I'm a US attorney with an LL.M in Corporate and Securities Law from the London School of Economics, I didn't want a full on Econ degree.

Every point I've made her actually *does* apply to the BTC world, because I'm commenting on the principles involved. People will make their own BTC choices, just as they do with fiat currencies. That is true, on its face.

If I made some appeal to authority fallacy, you'd have to quote me. I haven't. I have said that many people have a lot to learn--I did not say posit that they should listen to me, Paulsy Krugman, or anyone else.

You should read about all the same BS stunts that they pulled in ancient Rome. And nearly everywhere else, ever since. Pretty much the same stupid mistakes, continuously.

I'm happy we live in a world where we can easily get such information; if it's true what is said, "Those who cannot remember the past are condemned to repeat it," then it seems the one thing we've been missing is a consistent and universal record of the past and present available to all people, so much so that "I didn't know" is no longer a valid excuse.

Here we go:

http://www.theverge.com/2013/12/31/5260534/krugman-bitcoin-evil-economists (http://www.theverge.com/2013/12/31/5260534/krugman-bitcoin-evil-economists)

"'To be successful, money must be both a medium of exchange and a reasonably stable store of value,' Krugman writes. He isn’t convinced that Bitcoin is a good medium of exchange, but it’s the store of value question where Bitcoiners think very differently from economists. In Krugman’s mind, a currency that is a reliable store of value is traditionally either backed by a central authority willing to buy back the currency, the way the dollar is backed by the Treasury, or it has some intrinsic value, the way gold can be made into jewelry. If a currency has no central authority and no intrinsic value, people can’t trust that it will retain value over time."

Good ole Paulsy. What he actually hates is that individuals control it with near impunity, and don't have to do what he thinks that the gov't should force people to do.

Also, the author wheezes:

"There are countless possible deaths of Bitcoin. The technology fails. Overspeculation causes an irrecoverable crash. The price never settles down. Deflationary pressure annihilates liquidity. A government shuts it down. A new currency makes it obsolete. Users abandon it for some other reason. And so on."

Wow. Brilliant analysis. You mean, every other new thing that ever comes to market never has to fight against nearly insurmountable odds? The odds are against ANYTHING surviving long term, EVERYTHING new has to face "countless possible deaths." Duh. OHMYGODDON'TYOUDAREUSEAWALKMANOVERTHELONGTERMBECAUSETHEREARECOUNTLESSPOSSIBLEDEATHSOFWALKM ANS!!! Ahhhh! Ahhhh! WONTSOMEBODYPLEEEEEEEZETHINKOFTHECHILDREN???!!!

http://www.theverge.com/2013/12/31/5260534/krugman-bitcoin-evil-economists (http://www.theverge.com/2013/12/31/5260534/krugman-bitcoin-evil-economists)

Economics is the mathematical mapping of intent. It has nothing to do with money, exclusively. It quantifies that which can be theoretically counted, but no methods exist of yet to count it.

Everything in the field after that is showmanship, like a hobbyist in rocketry trying to impress a crowd more than a particle physicist.

True. I try to avoid using the term "money" but I don't always remember.

Don't worry about it. The fact remains that green pieces of paper remain mankind's best alternative to violent intent.

One good example: "2% inflation a year is good for the economy" every mainstream economist will spout this but I have NEVER heard them cite a single study, they just pulled it out of their ass.

- Why 2% and not 0.5%, 2.5%, 3% or 10%?
- Typical justfications are "deflation is BAAD" or "keeps people employed", which may or may not be true, but you can't SAY stuff like that without some hard goddamn evidence.

Another good example is often they will cite a SINGLE data point and use it to justify insanely wide generalizations - examples that they often get wrong too:

- The great depression was caused by a bunch of bad investments that collapsed, this caused people to pull out their money and the value of money rose temporarily. Economists will often blame the deflation rather than the actual down to earth cause of bad investments.
This is by the way their ONLY example of why deflation is bad - and its wrong.

Finally science is actual a VERY simple protocol and economists do simply NOT follow it:

- Positivism is the core methodology behind science, without it you are simply not doing science.
- It states that a theory should be logically self consistent (ie if 2+2 equals 4 on mondays it should do so aswell on tuesdays, unless the theory specifies otherwise of course) AND a theory must be disprovable.
- So: 1. Make a theory. 2. Make a prediction (it can be statistical). 3. Test if true. I have NEVER heard of an economist theory developed or tested like this and hence per DEFINITION economics is NOT a science.
- You can see this often in the excuses economists make up on the fly as they are wrong again and again - it sounds a lot like religious people justifying their beliefs with weird exceptions and phrases.

Bonus stuff:
- Complete failure to include the physical world in their calculations, acording to economic theory you would probably have a swell economy if you had 2% inflation a year even if all energy sources in the world suddenly disappeared or "demand" would magically materialize the disappeared/used up energy.

- Complete amateurs often make better predictions, I remember Resilience.org documented a significant correlation between energy (oil) consumption and economic activity - wheras economic theory would make you believe energy prices should crash at increased supply.
They also showed that if economists idea of infinite growth held true, the planet surface would BOIL in 1-200 years from simply the activity going on (not global warming).

- I recently heard an economist say that economists assume 100% employment OVER TIME... and I could not believe how stupid it was.. its been millenia and hello not everyone is employed! There are COSTS to employing people and the retarded, handicapped and unwilling will NEVER be employed.

- I could literally just keep going.

+1

This thread had no apparent reason to exist, other than for OP to call all responders idiots.

We both qualified our statements:

I used the term "honest" economists, and you used the term "mainstream" economists, i.e., we both used "some" economists.

I replied to the comment that "economists think they know anything when their theories are so useless and almost always wrong. Modern economics are more like sports commentary or religion than a science," which simply isn't true.

The honest economists are getting away from mathematical models in some senses, because no model can realistically handle the trillions upon trillions of decisions people make each day, and then aggregate that into some prediction of the future. Using principles instead of mathematics can give a better idea of human choice, but still will never be perfect.

Science: given a choice between two identical items, people will always choose the cheaper one. Every day of the week, and twice on Sundays. That is a theory, it makes predictions, and has been proven over and over and over.