George Selgin discusses privatization of the money supply based on Bitcoin

[lonelyminer (Peter Šurda)]

I read the paper and I believe George Selgin is incorrect in his analysis.  He invents a new term called "quasi-commodities" and claims that bitcoin is a quasi-commodity.

I would not call it incorrect, but incomplete. It is possible to view Bitcoin as a quasi-commodity and from this perspective, I agree with most of the paper. In particular, Selgin gets what many economists don't, that Bitcoin is less prone to counterfeiting and supply side shocks than the alternatives, and this is a comparative advantage as a potential money. He also correctly argues that the advantages of a new currency can under certain circumstances outweigh the network effect accompanying the old one (he's not the first one making this argument, but many economists appear to neglect this).

However, Selgin, similarly as most of the other economists I was in contact with, neglects that it's also possible to view Bitcoin as a service, and this is a source of additional value, as well as additional features unmentioned in his paper.

Bitcoin is something which has never existed before, and people attempt to interpret it from the perspectives they are accustomed to, which they used to analyse historical phenomena in the past. To fully grasp the multifaceted properties of Bitcoin is a difficult task.

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[defenestra]

he advocates a hard target for 5% spending which i don't see meshing well with Bitcoin's set supply.  whats wrong with a fixed supply of money?  prices will just decrease over time as the economy grows. there is nothing wrong with this.

Nothing wrong for savers but many people are notorious debtors. Especially those who can force others to spend (governments with deficits) so deflation is dreaded as it makes servicing debt much harder in real terms.

the main bullish argument for a fixed supply of money is that businesses and savers can count on their money retaining its value.  i, being an inherent saver, would be more than willing to lend out my savings for additional return or even for investing in risk assets such as stock.  with the exchange value of my money whipping all over the place under the current regime, i am LESS willing to speculate with my money b/c now i have to worry about exchange value along with speculative risk.

You are managing your assets in a sound way; you have savings. Unfortunately, majority of people aren't capable of such thing and most of their possessions are debt based. So politicians make propaganda that "inflation is essential".

the Bitcoin pessimists here will say that gov'ts will fight Bitcoin and establish their own server farms to destroy it.  i say that the collective will of humanity will not reject a good idea like Bitcoin but will in fact over time embrace it.

Collective will of humanity, eh?

If there is a common "will" shared by all homo sapiens that is that of animals: to eat (preserve itself), to kill (reduce competition) and to copulate (propagate the specie). Popular culture reflects that very well indeed...

We yet have to do a herculean work first, to be able to claim that we have something resembling "the collective (intelligent) will".

[lonelyminer (Peter Šurda)]

he also misunderstands the part where he says that alt cryptocurrencies can appear alongside the "original" Bitcoin which will "always survive".  if an alt chain rises up that is better than Bitcoin, it will take over and eliminate Bitcoin.

I think that's a misrepresentation. In the paper, he does not say that, rather emphasises and supports the competition this creates:

But such misgivings appear misplaced: they treat as a fault of Bitcoin what is in fact a virtue of currency competition, to wit, the possibility that a new currency may shove aside an established one, despite network externalities favoring the latter, provided that the new alternative seems sufficiently advantageous in other respects.

[Phinnaeus Gage]

I read the paper and I believe George Selgin is incorrect in his analysis.  He invents a new term called "quasi-commodities" and claims that bitcoin is a quasi-commodity.

I happened to look that phrase up the other day and noticed that it's not a new term: http://books.google.com/books?id=pIg5AAAAMAAJ&q=%22Quasi-Commodity%22&dq=%22Quasi-Commodity%22&hl=en&sa=X&ei=jBI1T5qTKoP40gGd6KHcAg&ved=0CDsQ6AEwAQ

[cypherdoc]

he also misunderstands the part where he says that alt cryptocurrencies can appear alongside the "original" Bitcoin which will "always survive".  if an alt chain rises up that is better than Bitcoin, it will take over and eliminate Bitcoin.

I think that's a misrepresentation. In the paper, he does not say that, rather emphasises and supports the competition this creates:

I was referring to what I remember him saying in the video

[Piper67]

I read the paper and I believe George Selgin is incorrect in his analysis.  He invents a new term called "quasi-commodities" and claims that bitcoin is a quasi-commodity.

I happened to look that phrase up the other day and noticed that it's not a new term: http://books.google.com/books?id=pIg5AAAAMAAJ&q=%22Quasi-Commodity%22&dq=%22Quasi-Commodity%22&hl=en&sa=X&ei=jBI1T5qTKoP40gGd6KHcAg&ved=0CDsQ6AEwAQ

For Bitcoin, I prefer the term "commodency"

[lonelyminer (Peter Šurda)]

I was referring to what I remember him saying in the video

I only watched the video briefly so he might have said something else there but I still think that's a misunderstanding of some sort, based on other Selgin's writings.

I happened to look that phrase up the other day and noticed that it's not a new term: http://books.google.com/books?id=pIg5AAAAMAAJ&q=%22Quasi-Commodity%22&dq=%22Quasi-Commodity%22&hl=en&sa=X&ei=jBI1T5qTKoP40gGd6KHcAg&ved=0CDsQ6AEwAQ

Well the idea that "strange things" can be money is certainly not new. For example, there's an article Fiat Money as an Administrative Good.