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Given Bitcoin has failed miserably as a currency, being almost universally abandoned for this purpose for various reasons, I don't see how you can present it as

Given Bitcoin has failed miserably as a currency, being almost universally abandoned for this purpose for various reasons, I don't see how you can present it as the future of money. Also, game theory is a very limited model of human behavior. That you choose to invoke it, and you choose to believe that humans are simple rational game-theoretic "players" is not in any way proof that they actually are any of these. There is a lot of observable human behavior which contradicts rational and game-theoretic models - just look at some observations from behavioral economics.

nerdponx 7y ago
Also, game theory is a very limited model of human behavior. That you choose to invoke it, and you choose to believe that humans are simple rational game-theoretic "players" is not in any way proof that they actually are any of these. There is a lot of observable human behavior which contradicts rational and game-theoretic models - just look at some observations from behavioral economics. There are also plenty of scenarios in which humans do behave according to game theoretic predictions. This is such a tired argument that I can't believe I'm repeating it, but game theory is a bit like highly school physics ("assume the cow is a sphere and there is no friction") in that it's an oversimplified model of human behavior that you can still use to make testable predictions. Also the deviations from expected utility maximization in behavioral economics can and are being incorporated into current game theory research. See for example "Repeated Games with Endogenous Discounting" by Kochov and Song. The point of all this is to say that you can't dismiss an argument out of hand because it appeals to game theory, on the grounds that "game theory bad".
- nk1tz 7y ago
  Thank you for the succinct defence of the validity of game theory. On a meta level: Is there a generalized reason why people reject tools of analysis on the basis of "imperfect reflections of reality". I've never come across someone rejecting the formula for the diameter of a ball just because it's "only an approximation". Does it have something to do with number and size of assumptions involved?
  - simiones 7y ago
    I think an important difference is that physical models usually have a pretty good idea of what details they are ignoring, and thus some quantifiable idea of the amount of error they may introduce. Meanwhile, sociological models don't really have any idea of how much relevant detail they are ignoring, meaning that it is far more likely than in physics that the model is simply not useful, equivalent to saying that may make unfounded assumptions (like trying to use a spherical frictionless cow model to compute what kind of cow shoes work best).
  - rytill 7y ago
    preamble: I think game theory is super useful and applicable. It's when people hear an analysis and remember experiences in their past where, had they applied that same analysis, they would have been completely wrong and maybe even achieved a much worse outcome for themselves. Another take is that some situations have chaos-like properties when approximation analysis is applied to them. The diameter of a ball isn't going to explode several orders of magnitude wrong and into negative space.
- simiones 7y ago
  I did not mean to dismiss GP's argument simply because it appealed to game theory. In fact, GP did not have an argument at all - they just dismissed the article's historical description by simply saying "game theory explains that better" without any additional explanation, and then proceeded to make claims about human psychology presumably on the same basis. Thanks for the pointer to the article. Game theory is an extremely valuable tool and model, it is just not the ultimate word on human behavior, at least as it stands today.
  - jotakami 7y ago
    Sorry I didn’t cite the list of peer-reviewed economics research that forms the basis of my intuition on this subject, I’ve only got a limited time budget for HN commenting.
    - simiones 7y ago
      If you had not been commenting this on an article explicitly explaining why it contradicts generally accepted economic theory, you would have had more of a point. Also, I wasn't asking for citations, just some general arguments.
abstractbarista 7y ago
You may state it has failed from your perspective, but it is actually used quite often. It's just not used for the things you're buying. You don't need BTC to buy stuff at the store. The State enforces dollar legitimacy. So what's it good for? Anything the State does not recognize. In this realm, BTC and siblings like XMR are vigorously exchanged. Surely your imagination can fill in the details. :)
- simiones 7y ago
  Most uses of Bitcoin for actual transactions would not exist at all in an ideal world, with perhaps some minor exceptions (e.g. protecting money from tyrannical regimes).
nk1tz 7y ago
We learned this lesson in 2016 during the Bitcoin scaling wars. The path to global unit of account does not begin with "medium of exchange" it begins with "store of value". The primary purpose of Bitcoin is to be a store of value (the definition of money), without this achievement it cannot evolve to a medium of exchange (definition of currency).
- garmaine 7y ago
  Store of value is absolutely not the definition of money, which is an inherently transactional concept...
- rmah 7y ago
  "Store of value" is not how economists (and most normal people) define money. Pretty much any non-degrading asset can be a store of value. That doesn't make them money. To be money, something must fulfill three criteria: 1) be a medium of exchange, 2) be a store of value and 3) act as a unit of account. It helps if the something is also fungible, easily divisible, etc.
  - jotakami 7y ago
    Missing the forest for the trees. Those three functions of money are the “cliff notes” description of money, but there is a deeper abstraction that all of those properties can be derived from: money is a ledger. In the case of cash or bitcoin, the ledger has a constraint that negative balances are not allowed.
- jotakami 7y ago
  Right, Bitcoin will never have a competitive advantage as a payment method (“medium of exchange”) but as long as there are healthy, liquid markets to convert between Bitcoin and fiat currencies it doesn’t really matter.

nerdponx 7y ago

Also, game theory is a very limited model of human behavior. That you choose to invoke it, and you choose to believe that humans are simple rational game-theoretic "players" is not in any way proof that they actually are any of these. There is a lot of observable human behavior which contradicts rational and game-theoretic models - just look at some observations from behavioral economics. There are also plenty of scenarios in which humans do behave according to game theoretic predictions. This is such a tired argument that I can't believe I'm repeating it, but game theory is a bit like highly school physics ("assume the cow is a sphere and there is no friction") in that it's an oversimplified model of human behavior that you can still use to make testable predictions. Also the deviations from expected utility maximization in behavioral economics can and are being incorporated into current game theory research. See for example "Repeated Games with Endogenous Discounting" by Kochov and Song. The point of all this is to say that you can't dismiss an argument out of hand because it appeals to game theory, on the grounds that "game theory bad".

nk1tz 7y ago
Thank you for the succinct defence of the validity of game theory. On a meta level: Is there a generalized reason why people reject tools of analysis on the basis of "imperfect reflections of reality". I've never come across someone rejecting the formula for the diameter of a ball just because it's "only an approximation". Does it have something to do with number and size of assumptions involved?
- simiones 7y ago
  I think an important difference is that physical models usually have a pretty good idea of what details they are ignoring, and thus some quantifiable idea of the amount of error they may introduce. Meanwhile, sociological models don't really have any idea of how much relevant detail they are ignoring, meaning that it is far more likely than in physics that the model is simply not useful, equivalent to saying that may make unfounded assumptions (like trying to use a spherical frictionless cow model to compute what kind of cow shoes work best).
- rytill 7y ago
  preamble: I think game theory is super useful and applicable. It's when people hear an analysis and remember experiences in their past where, had they applied that same analysis, they would have been completely wrong and maybe even achieved a much worse outcome for themselves. Another take is that some situations have chaos-like properties when approximation analysis is applied to them. The diameter of a ball isn't going to explode several orders of magnitude wrong and into negative space.
simiones 7y ago
I did not mean to dismiss GP's argument simply because it appealed to game theory. In fact, GP did not have an argument at all - they just dismissed the article's historical description by simply saying "game theory explains that better" without any additional explanation, and then proceeded to make claims about human psychology presumably on the same basis. Thanks for the pointer to the article. Game theory is an extremely valuable tool and model, it is just not the ultimate word on human behavior, at least as it stands today.
- jotakami 7y ago
  Sorry I didn’t cite the list of peer-reviewed economics research that forms the basis of my intuition on this subject, I’ve only got a limited time budget for HN commenting.
  - simiones 7y ago
    If you had not been commenting this on an article explicitly explaining why it contradicts generally accepted economic theory, you would have had more of a point. Also, I wasn't asking for citations, just some general arguments.

abstractbarista 7y ago

You may state it has failed from your perspective, but it is actually used quite often. It's just not used for the things you're buying. You don't need BTC to buy stuff at the store. The State enforces dollar legitimacy. So what's it good for? Anything the State does not recognize. In this realm, BTC and siblings like XMR are vigorously exchanged. Surely your imagination can fill in the details. :)

simiones 7y ago
Most uses of Bitcoin for actual transactions would not exist at all in an ideal world, with perhaps some minor exceptions (e.g. protecting money from tyrannical regimes).

nk1tz 7y ago

We learned this lesson in 2016 during the Bitcoin scaling wars. The path to global unit of account does not begin with "medium of exchange" it begins with "store of value". The primary purpose of Bitcoin is to be a store of value (the definition of money), without this achievement it cannot evolve to a medium of exchange (definition of currency).

garmaine 7y ago
Store of value is absolutely not the definition of money, which is an inherently transactional concept...
rmah 7y ago
"Store of value" is not how economists (and most normal people) define money. Pretty much any non-degrading asset can be a store of value. That doesn't make them money. To be money, something must fulfill three criteria: 1) be a medium of exchange, 2) be a store of value and 3) act as a unit of account. It helps if the something is also fungible, easily divisible, etc.
- jotakami 7y ago
  Missing the forest for the trees. Those three functions of money are the “cliff notes” description of money, but there is a deeper abstraction that all of those properties can be derived from: money is a ledger. In the case of cash or bitcoin, the ledger has a constraint that negative balances are not allowed.
jotakami 7y ago
Right, Bitcoin will never have a competitive advantage as a payment method (“medium of exchange”) but as long as there are healthy, liquid markets to convert between Bitcoin and fiat currencies it doesn’t really matter.