[p2p-hackers] Bitcoin incentive on Kademlia networks

[Changaco]

On Sun, 4 Nov 2012 16:11:31 -0700 Zooko Wilcox-O'Hearn wrote:
> That's interesting. Do you know of a succinct English summary of this
> "Relative Theory of Money"?

No, and I asked the author, he doesn't either.

Basically it just says that the only monetary system that respects
everyone's freedom is the one that creates money on a regular basis at
a fixed rate (temporal symmetry), and distributes it in equal shares to
users (spatial symmetry). It also gives a way to calculate an "optimal"
rate from the average life expectancy of people using the money.

> So, Coase's Theorem is that it doesn't matter how the resource is
> initially allocated if transaction costs are zero, but that it *does*
> matter if transaction costs are non-zerob& and transaction costs are
> always non-zero!
> 
> How does that theorem apply to this question? The transaction costs of
> Bitcoin are probably significantly lower than any comparable system,
> but of course it is never 0. Is the initial (more precisely the
> "early) distribution of Bitcoin important or unimportant to the
> ongoing function of the economy?

Important relatively to which goal ? If the goal is freedom and
equality, then it's important.

> This, I don't really agree with. I know it is a common belief among
> certain schools of economics, and I admit the theoretical soundness of
> the Paradox of Thrift, but I'm not really convinced that it is a
> sufficiently important problem in practice, nor that an inflationary
> currency is a solution to the problem whose benefits outweigh its
> costs.

What costs ?

> I mean: maybe! But maybe not. Who knows? How can one tell? All ex post
> facto empirical observations are inextricably entangled with
> confounders. In particular, I personally suspect that the
> *predictability* of a monetary policy is at least as important as what
> that policy actually is (today). Bitcoin (or perhaps some successor to
> Bitcoin that fixes some flaws) could have a policy about the aggregate
> monetary base that is predictable in a way that no other currency is.

Can't really do more predictable than a fixed rate.

> I don't like the word "hoarding", because it is an emotionally laden
> word without, as far as I understand, a specific meaning different
> from "saving". "Hoarding" is you saving money (or other resources)
> when I think you shouldn't. "Saving" is you hoarding when I think you
> should.

English isn't my native tongue so I just looked up a translation and
found "hoarding". I meant money that's neither spent on goods/services
nor invested, money that doesn't change hands, which is bad if your
axiom is that money is primarily a means of exchange.

> Anyway I admit that you're basically right if you put it like this: a
> currency can't be *optimal* for long-term savings and optimal for a
> medium of exchange, but I'm not at all sure that this implies a single
> currency can't be *good enough* for both. I also kind of think that:
> 
> (a) It isn't just that any one currency can't be optimal for both, it
> is that it is impossible to optimize both simultaneously in any way!
> That is: it wouldn't matter if you had two currencies, or a million
> currencies (hello, Ripple), or any other system, you still couldn't
> simultaneously optimize both savings (and the associated
> safety/robustness) and growth.
> 
> (b) I'm skeptical of the idea that it is better to tune this trade-off
> further toward the growth side and further away from the savings side
> b by use of an inflationary currency b than to use the setting that
> results from having a non-inflationary or deflationary currency. The
> theoretical insight of the Paradox of Thrift is certainly a
> fascinating and provocative observation (namely, that the aggregate
> utility of everyone in the society is increased if they are somehow
> coerced or tricked into spending more than their individual
> self-interest would dictate), but it seems far too abstract and
> speculative a guide to improving the fortunes of a real, complex and
> dynamic, economy.

I have a few remarks.

Firstly, inflation doesn't trick people into spending any more than
deflation tricks them into saving. Note that I include "investing" in
"saving".

Secondly, I wouldn't use the term "growth" because it implies
"something more", like "manufacturing more goods", or "increasing the
quantity of services". Those aren't goals for me.

Lastly, I don't see the link between "savings" and "safety/robustness".

> Thanks for the conversation!

Likewise.
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