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That's not actually true. Economics is not zero sum, and neither are markets, provided that they continue to rise commensurate with economic productivity. It re

by darawk 9y ago

That's not actually true. Economics is not zero sum, and neither are markets, provided that they continue to rise commensurate with economic productivity. It remains to be seen if cryptos will retain their high valuations, but presuming that they do, nobody needs to have 'lost' due to your trading activity.

Retric 9y ago
That would imply an unlimited lifespan. Lasting say 100 years is not enough. If they die in 10,000 years then someone will lose out in 10,000 years.
- darawk 9y ago
  That's not really how economic growth works. It's not zero sum. People who bought gold in the year 1500 didn't cause people today to 'lose'.
  - Retric 9y ago
    Sure they did, if they had invested in something productive the current economy and their descendants would be better off. Picture 500 years of interest vs a small bit of gold. Granted this assumes they buy the gold as an investment but if it's not sold for 500 years that seems reasonable. Except I am saying it goes to 0 so they don't actually get any gold. So, it's option A get nothing or option B possibly get something of value. I don't see how option A is better.
    - dsacco 9y ago
      What you’re saying doesn’t make sense, because the price of a single asset is not a closed system - it exists in the market, which is full of variable interactions. Concretely: for any asset appreciating in value, you can earn interest on it. This interest comes at the cost of personal liquidity, but not personal value - indeed, interest and asset appreciation are going to be positively correlated. While the single dimension of buy and sell price for any asset can be negative sum if it depreciates after your purchase, whether or not the complete value of the asset is net positive or net negative is a function of 1) the quantifiable advantages, like (but not necessarily) dividends or risk reduction, and 2) the amount of time spent holding it. This second point is also why the frequency of price changes (and net change in any discrete measure of time) is a very important part of the analysis.
      - Retric 9y ago
        Actual gold has physical storage costs aka a bank vault etc, those costs must be paid making gold negative sum. Say I buy 1,000,000$ worth of gold and agree the vault owner can sell gold to cover the costs for the next 100 years. Alternatively, I can spend 1,000,000$ but get less than 1,000,000$ worth of gold to pay for the vault. In either case in 100 years someone needs to keep paying for the vault. Any finite amount of gold is not enough to pay for it's storage costs forever. PS: You can spend less on security but you risk having nothing of it's stolen. Given enough time and it will be.
        dsacco 9y ago
        > Actual gold has physical storage costs aka a bank vault etc, those costs must be paid making gold negative sum. You can quantify those costs for the same measures of time that I keep talking about in this thread. As I keep saying: the cost of storing the asset is economically, demonstrably lower than the value of the asset for any meaningful, discrete timespan. > PS: You can spend less on security but you risk having nothing of it's stolen. Given enough time and it will be. By this logic, literally everything is negative sum according to thermodynamics. You’re not using a reasonable, accepted definition for this concept in the context of game theory. We know the heat death of the universe is going to happen, so does that mean the aggregate activity of the market is negative sum? This isn’t just incorrect, it’s incoherent.
        Retric 9y ago
        No, what you're missing is positive sum interactions are transformative. I want gasoline for my car even if the raw oil it comes from contains more energy that oil is less useful. Gold sitting in a vault stays gold sitting in a vault the outputs are identical in form and lower in amount. PS: A bank safety deposit box costs ~60$ a year store 1,000$ worth of gold for 20 years and you lost money unless it's worth more than twice as much inflation adjusted. Store 1,000,000$ worth of gold costs more than 60$ / month, but not 1000x more so it's not as pointless.
- SaltyBackendGuy 9y ago
  Same holds true with gambling. For instance, the 'smart' poker players think that the odds will even out. However, they rarely take the time scale into account. Sure, your luck will get better (it may take more time than you'll be alive though)
  - darawk 9y ago
    No, it doesn't. Because gambling is done with a fixed-size pie. Allocating capital to productive enterprises is positive sum.
    - Retric 9y ago
      How to you picture holding on to a coin as a productive enterprise? I buy a coin and in 100 years I sell it. In that time the coin has gained value because that coin what?
nwah1 9y ago
Economics is not zero-sum because of production which is what real investment is tied to, and is where the returns come from. Speculation is more zero-sum, but can send useful price signals when tied to an asset that relates to production. However, speculation that is completely disconnected from production is just gambling... zero-sum. Actually negative-sum, if we include wasted energy and time.
- dsacco 9y ago
  > Economics is not zero-sum because of production which is what real investment is tied to, and is where the returns come from. Yes. > Speculation is more zero-sum, but can send useful price signals when tied to an asset that relates to production. Yes, with the qualifier that the individual trades are what’s zero sum, with the aggregate activity and emergent signals causing the positive sum in real investment. > However, speculation that is completely disconnected from production is just gambling... zero-sum. No. Uninformed speculation is less useful for price discovery than informed speculation, but it does not nullify informed speculation. Furthermore, efficient price discovery is facilitated by liquidity, and uninformed speculation is a net improvement in liquidity.
  - nwah1 9y ago
    In simpler terms, you are saying that there is a huge bounty on guessing what other peoples' guesses are about the future usefulness of a currently useless technology.
    - dsacco 9y ago
      Sure. I don’t think that captures all the economic nuance (you’re just reducing it to a Keynesian beauty contest), but yes.
      - nwah1 9y ago
        It does create incentive for people to try to figure out the usefulness, if any. I agree with that. It also creates lots of other incentives that have no pro-social value. Furthermore, the incentive may be much higher than is actually required, and creates a lot of collateral waste in the process. Every bit of time, energy, and resources spent in this speculative endeavor crowds out other activities. And a large amount of this effort is just spent on a cybersecurity arms race over these hypothetically valuable tokens. I realize you were trying to make a point about speculation in general, such as with futarchy. Any kind of speculation over things related to real production, including bets about CEO performance, would have some obvious informational value. But bets about sports do not.

by darawk 9y ago

Retric 9y ago

That would imply an unlimited lifespan. Lasting say 100 years is not enough. If they die in 10,000 years then someone will lose out in 10,000 years.

darawk 9y ago
That's not really how economic growth works. It's not zero sum. People who bought gold in the year 1500 didn't cause people today to 'lose'.
- Retric 9y ago
  Sure they did, if they had invested in something productive the current economy and their descendants would be better off. Picture 500 years of interest vs a small bit of gold. Granted this assumes they buy the gold as an investment but if it's not sold for 500 years that seems reasonable. Except I am saying it goes to 0 so they don't actually get any gold. So, it's option A get nothing or option B possibly get something of value. I don't see how option A is better.
  - dsacco 9y ago
    What you’re saying doesn’t make sense, because the price of a single asset is not a closed system - it exists in the market, which is full of variable interactions. Concretely: for any asset appreciating in value, you can earn interest on it. This interest comes at the cost of personal liquidity, but not personal value - indeed, interest and asset appreciation are going to be positively correlated. While the single dimension of buy and sell price for any asset can be negative sum if it depreciates after your purchase, whether or not the complete value of the asset is net positive or net negative is a function of 1) the quantifiable advantages, like (but not necessarily) dividends or risk reduction, and 2) the amount of time spent holding it. This second point is also why the frequency of price changes (and net change in any discrete measure of time) is a very important part of the analysis.
    - Retric 9y ago
      Actual gold has physical storage costs aka a bank vault etc, those costs must be paid making gold negative sum. Say I buy 1,000,000$ worth of gold and agree the vault owner can sell gold to cover the costs for the next 100 years. Alternatively, I can spend 1,000,000$ but get less than 1,000,000$ worth of gold to pay for the vault. In either case in 100 years someone needs to keep paying for the vault. Any finite amount of gold is not enough to pay for it's storage costs forever. PS: You can spend less on security but you risk having nothing of it's stolen. Given enough time and it will be.
      - dsacco 9y ago
        > Actual gold has physical storage costs aka a bank vault etc, those costs must be paid making gold negative sum. You can quantify those costs for the same measures of time that I keep talking about in this thread. As I keep saying: the cost of storing the asset is economically, demonstrably lower than the value of the asset for any meaningful, discrete timespan. > PS: You can spend less on security but you risk having nothing of it's stolen. Given enough time and it will be. By this logic, literally everything is negative sum according to thermodynamics. You’re not using a reasonable, accepted definition for this concept in the context of game theory. We know the heat death of the universe is going to happen, so does that mean the aggregate activity of the market is negative sum? This isn’t just incorrect, it’s incoherent.
        Retric 9y ago
        No, what you're missing is positive sum interactions are transformative. I want gasoline for my car even if the raw oil it comes from contains more energy that oil is less useful. Gold sitting in a vault stays gold sitting in a vault the outputs are identical in form and lower in amount. PS: A bank safety deposit box costs ~60$ a year store 1,000$ worth of gold for 20 years and you lost money unless it's worth more than twice as much inflation adjusted. Store 1,000,000$ worth of gold costs more than 60$ / month, but not 1000x more so it's not as pointless.
SaltyBackendGuy 9y ago
Same holds true with gambling. For instance, the 'smart' poker players think that the odds will even out. However, they rarely take the time scale into account. Sure, your luck will get better (it may take more time than you'll be alive though)
- darawk 9y ago
  No, it doesn't. Because gambling is done with a fixed-size pie. Allocating capital to productive enterprises is positive sum.
  - Retric 9y ago
    How to you picture holding on to a coin as a productive enterprise? I buy a coin and in 100 years I sell it. In that time the coin has gained value because that coin what?

nwah1 9y ago

Economics is not zero-sum because of production which is what real investment is tied to, and is where the returns come from. Speculation is more zero-sum, but can send useful price signals when tied to an asset that relates to production. However, speculation that is completely disconnected from production is just gambling... zero-sum. Actually negative-sum, if we include wasted energy and time.

dsacco 9y ago
> Economics is not zero-sum because of production which is what real investment is tied to, and is where the returns come from. Yes. > Speculation is more zero-sum, but can send useful price signals when tied to an asset that relates to production. Yes, with the qualifier that the individual trades are what’s zero sum, with the aggregate activity and emergent signals causing the positive sum in real investment. > However, speculation that is completely disconnected from production is just gambling... zero-sum. No. Uninformed speculation is less useful for price discovery than informed speculation, but it does not nullify informed speculation. Furthermore, efficient price discovery is facilitated by liquidity, and uninformed speculation is a net improvement in liquidity.
- nwah1 9y ago
  In simpler terms, you are saying that there is a huge bounty on guessing what other peoples' guesses are about the future usefulness of a currently useless technology.
  - dsacco 9y ago
    Sure. I don’t think that captures all the economic nuance (you’re just reducing it to a Keynesian beauty contest), but yes.
    - nwah1 9y ago
      It does create incentive for people to try to figure out the usefulness, if any. I agree with that. It also creates lots of other incentives that have no pro-social value. Furthermore, the incentive may be much higher than is actually required, and creates a lot of collateral waste in the process. Every bit of time, energy, and resources spent in this speculative endeavor crowds out other activities. And a large amount of this effort is just spent on a cybersecurity arms race over these hypothetically valuable tokens. I realize you were trying to make a point about speculation in general, such as with futarchy. Any kind of speculation over things related to real production, including bets about CEO performance, would have some obvious informational value. But bets about sports do not.