Thank you Merle,
I like Piketty, and I like that book, as well as commentary he has given on
responses to debt in European history and with respect to Greece today.
I probably use the word theory in a way that is different than you intend here,
but that's fine. How I would use a word is neither important nor interesting
enough to be worth consuming public bandwidth over.
All best,
Eric
On Jul 23, 2015, at 2:39 PM, Merle Lefkoff wrote:
Eric--there HAS been a great advance in economic theory. Have you read
Piketty? And it's because this dorky guy knows how to make magic with
metadata, not because his primitive male brain is more altruistic. And
outlier economist Richard Smith has just published his dynamite book on the
end of capitalism as a theory cum ideology.
On Wed, Jul 22, 2015 at 4:37 PM, David Eric Smith desm...@santafe.edu wrote:
Hi All,
I was going to try to write something brief that avoided ideological
questions (which I have no wish to get involved in on email threads), and
said something I hoped would be useful that follows from being careful about
consequences of mechanism. But it looks like it turned into a TLDR. Rather
than just dump it, I guess I will send with the TLDR caveat.
I do think that there is an interesting economics to be thought about here,
and I don't know how much of it is being done. It seems to me to bear on
questions of economic theory that are poorly developed. It would be nice if
the resurrection of disputes about regulatory mechanism and goals, raised by
bitcoin et al., were a gateway into a conceptual advance in economic theory.
Anyway...
0. Let me not talk about digital currencies in general, because they can
have different properties that matter. Let me instead refer to bitcoin,
because its particular algorithm which designs in limits of supply-rate is
the starting point for the line in I want to take.
0a. Let me also suppose that the bitcoin algorithm performs as specified,
and that it has the cryptographic security features specified. That permits
a discussion of what a specific defined algorithm can or can't do socially.
1. With those assumptions, I think the main mechanistic feature is that
bitcoin becomes a kind of not merely digital cash, but more particularly
digital gold. The important mechanistic consequence being that the
mechanisms for altering its supply are extremely limited (hoarding by
powerful agents), compared to any form of money that has a fiat element, or
to any form of credit in variable supply. Indeed, bitcoin is
more-gold-than-gold, in that the supply rate of gold involves unknown
factors, such as discovery or extraction innovations, whereas the supply rate
of bitcoins follows a defined algorithm. The power to run cycles of the
algorithm may involve unknowns, but they are probably of a slightly more
limited range than the power to extract gold.
2. We are, of course, off the gold standard, in part, because governments
(and by proxy, societies), have decided they want regulatory flexibility over
the money supply that gold makes impossible. Who decided, why they decided,
whether their motives are noble or sinful, is of course another infinite tree
of emails, which I will not open because I am a mechanic.
3. HERE AN OPINION: I THINK the reason any digital currency with these
properties is appealing is that there are groups within society who either
don't like the forms of regulatory control that governments have over other
available monies, or they don't like the ways those controls are used. (This
is the way I think mechanism specifies a large part of the available
incentives). For simplicity and brevity, I will lump several other things
in with regulation-proper. Other social forces that come with
centrally-controlled monies include the concept of legal tender and taxation
(as Gary rightly emphasizes). I lump these with regulation because they are
in a sense the context that makes regulation possible, even though they are
different. We could use off-line currencies (cigarettes, tea, bits of paper
with Elvis's unforgeable signature, jade) as money, and if we did, the
government's ability to regulate its own currency and thereby influence
economic conditions would be diluted or eliminated. Therefore governments
promise to give legal protection to exchanges transacted in their tender, and
not to others. In addition to regulatory control, by directing the economy
through their money, they can increase the amount on which they claim taxes
owed, and although this is a separate problem of identification and
enforcement from regulation, it does depend on the magnitude of trade that
goes via the money system.
3a. I believe there is some overlap in the discourse of those who advocate
bitcoin-like digital currencies and those who want to go back onto the gold
standard, though the two
