2012-07-22/2012-03-31 ssrn.com/Temple Uni - Nerdy Money: Bitcoin, the Private

[julz]

posted to ssrn on 2012-07-22, apprently authored in March - but I don't recall seeing it reported anywhere.

NERDY MONEY: BITCOIN, THE PRIVATE DIGITAL CURRENCY, AND THE CASE AGAINST ITS REGULATION


Nikolei M. Kaplanov (Temple Law Review / Temple University Legal Studies Research Paper)
2012-03-31


http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2115203

...
Since bitcoin is not run by a single company or entity, it is not possible to shut down the technology either by injunction or other action. The problem is that “Bitcoin is an open-source project” and given the nature of the technology “there is no Bitcoin company to raid, subpoena, or shut down.”361 Further, even if the bitcoin website and the source code information underlying service were removed, bitcoin itself would be unaffected.
...
Bitcoin’s design provides a useful opportunity for law enforcement to investigate criminal activity while still allowing the benefits of bitcoin to flourish unabated. One commenter explained that “every [bitcoin] transaction is written to a globally public log, and the lineage of each coin is fully traceable from transaction to transaction.”
...
The final reason to resist prohibiting or even inhibiting bitcoin lies in the fundamental concept of the Internet itself. Allowing bitcoin to operate unfettered by substantial regulation allows it to contribute towards job creation, economic growth, and opportunity.
...



...law enforcement should become familiar with the technology—especially since bitcoin provides a public log of every transaction—and use existing investigatory tools to investigate and prosecute illegal activity. Trying to prohibit bitcoin or another bitcoin-like currency would only be problematic. On the other hand, allowing bitcoin to flourish, as the law currently provides, can provide limitless possibilities in commerce around the globe.

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[molecular]

posted to ssrn on 2012-07-22, apprently authored in March - but I don't recall seeing it reported anywhere.

The final reason to resist prohibiting or even inhibiting bitcoin lies in the fundamental concept of the Internet itself. Allowing bitcoin to operate unfettered by substantial regulation allows it to contribute towards job creation, economic growth, and opportunity.
...

What a line! How does that follow from the concept of the internet? Not that I don't like the implications of this reasoning, but it sounds a bit far-fetched. By that reasoning, all drugs should be legalized, yet that's not being done.

[lonelyminer (Peter Šurda)]

What a line! How does that follow from the concept of the internet? Not that I don't like the implications of this reasoning, but it sounds a bit far-fetched. By that reasoning, all drugs should be legalized, yet that's not being done.

Menger writes in Principles of Econimics (1871, i.e. 141 years ago):

If men and their possessions (the economies of individuals) were not separated in space, and if the mutual transfer of command of goods between one economizing individual and another did not therefore generally require the shipping of goods and many other economic sacrifices, the full economic gains resulting from an exchange transaction would accrue to the two participants. But such cases are very rare. Cases are indeed conceivable in which the economic sacrifices of an exchange operation fall to a minimum neglected in practical life. But it is not easy to find an actual case in which an exchange operation can be performed without any economic sacrifices at all, even if they are confined only to the loss of time. Freight costs, loading charges, tolls, excise taxes, premiums for marine and other insurance, costs of correspondence, commissions and other sales costs, brokerage charges, weighages, packaging costs, storage charges, the entire cost of the commercial banking system, even the expenses of traders and all their employees, etc., are nothing but the various economic sacrifices which are required for the conduct of exchange operations and which absorb a portion of the economic gains resulting from the exploitation of existing exchange opportunities. Indeed, these economic sacrifices often render exchange impossible when it would be possible if only these “expenses,” in the general economic sense of the term, did not exist.

Economic development tends to reduce these economic sacrifices, with the result that even between the most distant lands more and more economic exchanges become possible which previously could not have taken place.

[molecular]

What a line! How does that follow from the concept of the internet? Not that I don't like the implications of this reasoning, but it sounds a bit far-fetched. By that reasoning, all drugs should be legalized, yet that's not being done.

Menger writes in Principles of Econimics (1871, i.e. 141 years ago):

If men and their possessions (the economies of individuals) were not separated in space, and if the mutual transfer of command of goods between one economizing individual and another did not therefore generally require the shipping of goods and many other economic sacrifices, the full economic gains resulting from an exchange transaction would accrue to the two participants. But such cases are very rare. Cases are indeed conceivable in which the economic sacrifices of an exchange operation fall to a minimum neglected in practical life. But it is not easy to find an actual case in which an exchange operation can be performed without any economic sacrifices at all, even if they are confined only to the loss of time. Freight costs, loading charges, tolls, excise taxes, premiums for marine and other insurance, costs of correspondence, commissions and other sales costs, brokerage charges, weighages, packaging costs, storage charges, the entire cost of the commercial banking system, even the expenses of traders and all their employees, etc., are nothing but the various economic sacrifices which are required for the conduct of exchange operations and which absorb a portion of the economic gains resulting from the exploitation of existing exchange opportunities. Indeed, these economic sacrifices often render exchange impossible when it would be possible if only these “expenses,” in the general economic sense of the term, did not exist.

Economic development tends to reduce these economic sacrifices, with the result that even between the most distant lands more and more economic exchanges become possible which previously could not have taken place.

So cheaper economic transactions improve the economy by enabling exchanges which would not before have taken place due to inhibitive cost? I see. Does this necessarily mean more jobs? I'm not sure... the economy can grow without jobs being created. Especially if we're talking about a gray/black market bitcoin economy: how many tax-paying jobs does that create? (these are the relevant ones since OP is making a suggestion to regulators/governments, right?). Also: how many jobs in the banking industry are destroyed if bitcoin is used more widely?

I think it's pretty clear bitcoin can make our economy more efficient, I'm not sure it will in aggregate create jobs and frankly: I don't care, we should work less, not more. Less tax-money for govts to spend? Fine by me

[lonelyminer (Peter Šurda)]

So cheaper economic transactions improve the economy by enabling exchanges which would not before have taken place due to inhibitive cost? I see. Does this necessarily mean more jobs?

It means more options for specialisation of labour.

[nevafuse]

Most of the paper is devoted to bitcoin's legal status.  I personally don't think it matters so I didn't care much for the paper.

[lonelyminer (Peter Šurda)]

Most of the paper is devoted to bitcoin's legal status.  I personally don't think it matters so I didn't care much for the paper.

The author made several points about economics which I arrived to independently as well.