George Selgin advocates Bitcoin AGAIN

[cypherdoc]

http://www.soundmoneyproject.org/?p=7368

see 27:10

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[hazek]

More like advocated something like it, it wasn't an outright endorsement or anything like that unfortunately.

[grondilu]

Nice.  I like this guy.  I had seen once his speech about private coins and it was very enlightning:

http://www.youtube.com/watch?v=-gn55fTRXZw

Shouldn't this thread be in the 'press' subforum, though?

[kwukduck]

More like advocated something like it, it wasn't an outright endorsement or anything like that unfortunately.

Hm yea, he mentions bitcoin once and it sounds like 'hey they tried but failed...'

I wonder what he means in specific by bitcoin having it's problems, since it does exactly as he describes 20 seconds later...

[grondilu]

More like advocated something like it, it wasn't an outright endorsement or anything like that unfortunately.

Hm yea, he mentions bitcoin once and it sounds like 'hey they tried but failed...'

I wonder what he means in specific by bitcoin having it's problems, since it does exactly as he describes 20 seconds later...

I very much disagree.  He likes the idea of a monetary policy beeing handled by an unstoppable computer.  I guess he would like the bitcoin software to be modified to do so.  This is totally a positive attitude towards bitcoin, imho.

If we believe in monetary freedom, then we should hope that more people adopt this idea of modifying bitcoin to comply to their ideas regarding monetary policy.  Everyone would just pick the money they agree with and the market find a price for them.

[cypherdoc]

you can't really expect an academic economist to come right out and say we need to shift to Bitcoin. 

everything he says, IMO, comes right up to that point and stops probably as a personal hedging mechanism.  i think whats stopping him is that it might be that he believes we need a computer controlled monetary system that introduces a fixed amount of currency on a regular basis w/o interference.

i think he still has a ways to go before fully understanding Bitcoin as he says some things about it that are bizarre or incorrect.  but he does understand that it is democratic money not controlled by a special interest group and that it could solve our present problems with fiat money in an unbiased way.

[hazek]

democratic money

Man it irks me when I see this phrase being issued. 

[Portnoy]

democratic money

Man it irks me when I see this phrase being issued. 

Why? 

democratic -> pertaining to or characterized by the principle of political or social equality for all: democratic treatment.

Note that it isn't capitalized and shouldn't be confused with a certain American political party.
 

[hazek]

democratic money

Man it irks me when I see this phrase being issued. 

Why? 

democratic -> pertaining to or characterized by the principle of political or social equality for all: democratic treatment.

Yes that, I can't stand it. We are not equal and pretending or trying to force it on one another only leads to huge problems and actually even greater inequality and I can't stand the fallacious connotation of it being something we should strive for.

[Portnoy]

democratic money

Man it irks me when I see this phrase being issued. 

Why? 

democratic -> pertaining to or characterized by the principle of political or social equality for all: democratic treatment.

Yes that, I can't stand it. We are not equal and pretending or trying to force it on one another only leads to huge problems and actually even greater inequality and I can't stand the fallacious connotation of it being something we should strive for.

Lol

No one is being forced to use Bitcoin. The democracy is built into the system, for those who choose to participate.

Currency of the people, by the people, for the people. 

[blablahblah]

To me he sounded supportive of one of Bitcoin's themes, which is to automate the inflation according to a fixed set of rules and take it out of the hands of mere humans.

However, I'm not sure if Selgin fully accepts that the concepts of "central control" and "guaranteed scarcity" are simply irreconcilable. Computerising the FED would just be a fancy gimmick if banks could still exert the same power by controlling lending rates. The entire hierarchy would have to be automated -- so much for his wishful thinking about reducing regulations for his banking buddies. It boils down to 2 rational options: have the whole system nationalised and centrally controlled, or have it decentralised and uncontrollable.

[grondilu]

Computerising the FED would just be a fancy gimmick if banks could still exert the same power by controlling lending rates.

I'm pretty sure he didn't mean that.  To him the issuing of currency would be defined by an algorithm depending on the spendings (assuming a computer can know these data).  The FED would have no power on it once it is launched:  he insists on the idea of throwing the key a way, so it is not ambiguous at all.

I doubt there is anyway for a computer to measure economics activities though, since money transfers could easily be fake (with no real economic exchange behind) by anyone willing to increase the money supply.  But this is an other matter.

To me a computer should be economicly blind:  its only job should be to provide money at a predefined rate, whatever the economic situation is.  Selgin doesn't agree with that, but he likes the idea of a monetary system being "human-proof".

[wachtwoord]

democratic money

Man it irks me when I see this phrase being issued. 

Why? 

democratic -> pertaining to or characterized by the principle of political or social equality for all: democratic treatment.

Yes that, I can't stand it. We are not equal and pretending or trying to force it on one another only leads to huge problems and actually even greater inequality and I can't stand the fallacious connotation of it being something we should strive for.

Lol

No one is being forced to use Bitcoin. The democracy is built into the system, for those who choose to participate.

Currency of the people, by the people, for the people. 

Democracy does not equal equality, although existing states don't seem to comprehend the difference. Democracy is a way of making decisions by selecting a subset of entities or individuals from the society to make decisions for the entire society. Without is, for every decision we would need to have a referendum, which is impracticable.  The decision to choose the leaders with a unweighted majority vote of the population is our current (and imo totally flawed) implementation of democracy. Weighing towards the opinion of the more intelligent and more contributing members of society will increase the overall quality of the decisions.

Thankfully Bitcoin is not build on equality. If you mine (contribute) more your say is more heavily weighted. This is great, I am waiting for nation states to cease to exist because I don't think they will ever adopt this policy.

[blablahblah]

Democracy does not equal equality, although existing states don't seem to comprehend the difference. Democracy is a way of making decisions by selecting a subset of entities or individuals from the society to make decisions for the entire society. Without is, for every decision we would need to have a referendum, which is impracticable.  The decision to choose the leaders with a unweighted majority vote of the population is our current (and imo totally flawed) implementation of democracy. Weighing towards the opinion of the more intelligent and more contributing members of society will increase the overall quality of the decisions.

Thankfully Bitcoin is not build on equality. If you mine (contribute) more your say is more heavily weighted. This is great, I am waiting for nation states to cease to exist because I don't think they will ever adopt this policy.

Each Mhash is weighted equally. So if you contribute 10Mhash of effort, you are 10 times more likely to get the reward than someone who only contributes 1Mhash. There is no loading of the dice. Perhaps that's what people meant by equality?

[wachtwoord]

At least its not the type of equality that is usually present in nation states. The vote of a inbred hillbilly who never paid taxes in his life has equal weight as an educated upstanding member of society who pays loads of taxes in the highest bracket.

"Political scientists get the same one vote as some Arkansas inbred" - NOFX - The idiots have taken over

[dr_nix]

Computerising the FED would just be a fancy gimmick if banks could still exert the same power by controlling lending rates.

I'm pretty sure he didn't mean that.  To him the issuing of currency would be defined by an algorithm depending on the spendings (assuming a computer can know these data).  The FED would have no power on it once it is launched:  he insists on the idea of throwing the key a way, so it is not ambiguous at all.

I doubt there is anyway for a computer to measure economics activities though, since money transfers could easily be fake (with no real economic exchange behind) by anyone willing to increase the money supply.  But this is an other matter.

To me a computer should be economicly blind:  its only job should be to provide money at a predefined rate, whatever the economic situation is.  Selgin doesn't agree with that, but he likes the idea of a monetary system being "human-proof".

I think you are right.
I also think that Dr. Selgin understands bitcoin very well, not so much from this video as he doesn't go into its details, but from antother one I saw before. He understands how decentralized governing by an algorithm works: In the other video, he said that people accept only money (coins) that adhere to their own standard. So that if you change the algorithm (eg. altering block rewards), you created another currency that is only viable if others change their algorithm in the same way.

Now what I think he would like, judging from this video, is a currercy that is controlled in the same way as bitcoin (decentralized) but with a different algorithm. First he discredits a money supply where the inflation is predetermined. He prefers an algorithm that tracks GDP. Unfortunately he doesn't give any insights as how this should work technically. Here are my ideas:

Personally I think there are two main difficulties in implementing this. The first is the control algorithm. We cannot control the desired state directly (GDP), let alone independently. There are many other states that we may or may not want to control. (Economics is too complex. I think the whole point is that if we focus on only one state - GDP - and control it properly everything else will be fine).
One of the other states is the money supply. In Bitcoin we have an input that directly controls that state: Block rewards. But it can only increase it.
So we need a model for the economy that tells us how the states and inputs relate, and then find a control law that governs the desired state by controlling the inputs. One of the questions is if this system is controllable at all, we may need more inputs.
One thing to make the system more controllable is if we also can invent a way that destroys bitcoins when a block is created. And does anyone else have an idea about which other inputs might be used?

The second problem I foresee is that the state measurement must be automatic. Currently the GDP is yearly published by government agencies.  But the algorithm must be able to determine the GDP without the interference of humans. Selgin explicitly states that a system like this brings only stability if there is absolutely no human in the loop that can act unexpectedly. Also, this measurement must be accurately performed often: Delays in control systems make them harder to stabilize. A yearly publication is probably too slow. Maybe monthly publications/measurements are fine, maybe this is possible, in fact I don't know how often this is currently done.

And, as somebody else mentioned, we must be very careful to measure the actual state, not a proxy (like the sum of all transactions in stead of only those that represent economic activity).

Any other ideas?

[ShireSilver]

Now what I think he would like, judging from this video, is a currercy that is controlled in the same way as bitcoin (decentralized) but with a different algorithm. First he discredits a money supply where the inflation is predetermined. He prefers an algorithm that tracks GDP. Unfortunately he doesn't give any insights as how this should work technically. Here are my ideas:

I sounds to me like he wants the currency to remain stable in price, so if you have X units that can buy Y units of a basket of goods then in 20 years that same X units will buy that same Y units of the basket. That would make planning much simpler, for businesses and retirement. But it can't work. There's no way any central authority can possibly know enough to manage the money supply, no matter how much computer power it has.

The only way to manage a money supply is to not manage it at all - that is, to let the free market manage it via the interactions and choices of everyone.

[cypherdoc]

The only way to manage a money supply is to not manage it at all - that is, to let the free market manage it via the interactions and choices of everyone.

+1

[cbeast]

The only way to manage a money supply is to not manage it at all - that is, to let the free market manage it via the interactions and choices of everyone.

+1

There is no such thing as a free market and never will be. You can only mitigate the circumstances that restrict trade. That is a matter of politics.

[blablahblah]

Computerising the FED would just be a fancy gimmick if banks could still exert the same power by controlling lending rates.

I'm pretty sure he didn't mean that.  To him the issuing of currency would be defined by an algorithm depending on the spendings (assuming a computer can know these data).  The FED would have no power on it once it is launched:  he insists on the idea of throwing the key a way, so it is not ambiguous at all.

I doubt there is anyway for a computer to measure economics activities though, since money transfers could easily be fake (with no real economic exchange behind) by anyone willing to increase the money supply.  But this is an other matter.

To me a computer should be economicly blind:  its only job should be to provide money at a predefined rate, whatever the economic situation is.  Selgin doesn't agree with that, but he likes the idea of a monetary system being "human-proof".

I think you are right.
I also think that Dr. Selgin understands bitcoin very well, not so much from this video as he doesn't go into its details, but from antother one I saw before. He understands how decentralized governing by an algorithm works: In the other video, he said that people accept only money (coins) that adhere to their own standard. So that if you change the algorithm (eg. altering block rewards), you created another currency that is only viable if others change their algorithm in the same way.

Now what I think he would like, judging from this video, is a currercy that is controlled in the same way as bitcoin (decentralized) but with a different algorithm. First he discredits a money supply where the inflation is predetermined. He prefers an algorithm that tracks GDP. Unfortunately he doesn't give any insights as how this should work technically.

[...snip...]

Any other ideas?

Well if he's so smart, why doesn't he invent a digital currency that does what he wants? It can't be that hard, just define the system very precisely, and there's your skeleton code -- half way there! As it stands, he's just being a smooth-talking critic in front of a camera.

the algorithm must be able to determine the GDP without the interference of humans. Selgin explicitly states that a system like this brings only stability if there is absolutely no human in the loop that can act unexpectedly.

All these massive requirements are built on top of the urban legend that a currency must grow (and shrink) to keep pace with an ill-defined concept of economic growth. What if a revolutionary new product or industry is created that transforms the economic landscape, thus changing the very definition of economic growth?