25
Nov
2014
Potpourri
==> Dan Sanchez weighs in on Bitcoin and the regression theorem.
==> CATO’s monetary conference.
==> Some Protestant pastors want to separate marriage and State.
==> I’m not going to bother writing it up, but you can see in the comments here how I try to resolve Scott Sumner’s running feud with Paul Krugman. I am a peacemaker.
==> At this point, I have broken beyond the narrow Austro-libertarian world. I’m…kind of a big deal.
==> I agree heartily with Jeff Tucker’s review of the new “Hunger Games,” though be careful there are mild spoilers. Don’t read if you plan on watching the movie soon (and haven’t read the books).
==> The podcast I did at the Acton Institute following my talk on sound money.
Question: what was Bob Murphy’s favorite item as an infant?
First person with the correct answer gets a virtual high five.
Gold coin
No. It’s a pacifier, since he’s a pacifist.
All right that’s pretty good.
I’m gonna become a pediatrician is how I know smart things like this.
I like the one about the strippers.
It seems to me on reflection that the Regression Theorem may be an overstatement of the implications of Carl Menger’s explanation for the origin of money.
If people already have a form of money, why does a substitute for existing money need to start as something else? If Bitcoin had emerged in a vacuum, as the first and only generally accepted medium of exchange, it would be puzzling indeed to explain how that could be the case. But it didn’t, it emerged in a world in which money already existed. As far as I can tell, people who acquire Bitcoin do so to use it instead of other forms of money, that is to say as a substitute for them.
If a substitute for pre-existing forms of money needs to originate as something traded for other reasons, can someone explain to me why? Assume if this seems like a dumb question, that it is because I have missed something obvious.
Andrew_FL,
I think you’re misunderstanding what is meant by a “substitute for money”.
Think of that term as meaning an IOU. It’s not money, but a substitute for money. To those who trade the IOU’s, they get their value because they expect that they will be redeemable on demand FOR money.
A substitute is an IOU.
In the case of bitcoins, nobody’s claiming it’s a substitute for any particular thing, which is why it can’t even be a money substitute. Those who are trying to use it as money depend on the gullibility of others for any profit they make from it.
For those who think of bitcoins as X amount of USD, they are attempting to base their economic calculations on what they believe the USD to mean.
These people still think the USD is, itself, a substitute for some good, and so, for them, bitcoins are a substitute for a substitute for money.
I would think that a substitute for money is something used in the place of money? Certain forms of money may then substitute for one-another, and certain other things may be substituted for money. I clearly mean something different when I say this than “money substitute” in the sense you are using it, but it doesn’t seem to me an unusual use of the word “substitute.”
That being said, I wouldn’t object to the idea that bitcoin is merely an additional degree of substitution removed from money. It still seems to me that the Regression Theorem need not explain where it’s use as a substitute for a substitute comes from.
Re: Dan Sanchez
“Once a record of purchasing power is established, past purchasing power must be taken into account when explaining present purchasing power. But there needn’t necessarily be such a record for the first flickering of purchasing power to occur.”
He’s contradicting himself.
If you don’t need a record for the first flickering of purchasing power, then any past purchasing power is irrelevant when explaining present purchasing power:
What if a good has a 10 year record of purchasing power, and a new guy comes in wanting to know what it is? Would it really be a problem, in Sanchez’s view, if you told him “I don’t know, but why don’t we just arbitrarily decide such and such a number”?
From the point of view of the newcomer, he’s at that “first flickering of purchasing power” moment. Who should care what the past purchasing power of that good was, in Sanchez’s view?
The answer is “Nobody”, if he’s consistent.
That’s why if you don’t need a money to have a link to purchasing power, then you also don’t need a Regression Theorem, as I’ve noted before.
I’m an Austrian, but I’m tempted to convert you bitcoin adherents to Keynesianism just for the fun of it; Because I know that if they accept this argument that bitcoin adherents are offering, they’ve essentially granted the Keynesians their premise – that money prospers more people the more they use a common form of it, and the use-value of money is irrelevant.
What follows logically from this is that forcing people to use any kind of “money” at all necessarily prospers them, by virtue of their using a common currency.
So, in this view, people without money should be forced to use something as money for their own good.
Lord Keynes and I will laugh together, but I will also cry a little because I’m watching my fellow Austrians fail to follow the Action Axiom to its logical conclusion with regard to money.
Lord Keynes knows this, too. He’s not opposed to bitcoins at all, precisely because he knows they are consistent with Keynesianism.
We are so close, Austrians; I fear some of us are going to botch an opportunity when this next crisis hits.
For the record, Lord Keynes: When you’ve exposed the Austrian bitcoin adherents as inconsistent, you will not have proven Austrian theory wrong, in my view.
“This “commodity terminus” is perfectly conceivable and extremely likely in nearly all cases, but again, it is not the only terminus conceivable.”
This seems reasonable to me. I never saw why the “commodity” value was a necessity. There are other conceivable origins to value other than industrial (non-money) value. It seems this aspect has become a central part of discussions of regression theorem, whereas Sanchez suggests it is merely an unimportant tying off a loose end. Is this correct? If money could start from something that had no value before it was money, is that really not a problem for regression theorem?
You are thinking abut this the wrong way.
Why do people quite happily pay 5% of all their transactions to American Express, when they could just deal in cash and pay 0% ? Answer that first, then go back and look at Bitcoin.
I only recently started reading this list, maybe (probably) everyone else is ahead of me.
https://www.academia.edu/People/Austrian_Economics