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I'm sorry, but I don't see the incentives here. We have on the one hand a number of professional economics writers (e.g. Krugman) who are skeptical or dismissiv

• CWilliams1013 14y ago
  Paul Krugman was also skeptical and dismissive of the Internet: > The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law" -- which states that the number of potential connections in a network is proportional to the square of the number of participants -- becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's. > As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.
  • buss 14y ago
    Being wrong once doesn't make you wrong forever.
    • cle 14y ago
      Of course not, but it does affect your credibility, and rightly so. I don't know what his track record is on technology in general, but dismissing something as important and revolutionary as the Internet makes me seriously wonder about his ability to understand the impact of new technologies.
      • Jtsummers 14y ago
        Being wrong on technology as an economist isn't an indicator in this case. Bitcoin is intended as a currency, his skepticism is directed towards that. His background as an economist and success/failure there should give weight to his views.
      • kosei 14y ago
        It doesn't for me. A lot of people were wrong about the Internet. It was a revolutionary technology, but for every revolutionary technology that has succeeded, there are plenty that fail. If we look back 10 years from now, BitCoin could either be hugely successful or a mere afterthought. I'm not going to hold anyone accountable for being "right" or "wrong" about predicting its future. But I suppose this is why sensationalist journalism works.
        • deleted 14y ago
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      • danielweber 14y ago
        Bitcoin is about economics and technology. Technologically, it's pretty amazing. People who try to attack it on technological grounds are probably wrong. Economically, it's a different story, and it's about the economics that economists are most concerned and most informed.
  • zeteo 14y ago
    Yes, having a Nobel Prize in economics doesn't make him right every time. But at least he doesn't have a direct financial incentive to be wrong.
    • VMG 14y ago
      His incentive is his reputation among peers.
      • deleted 14y ago
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      • ebbv 14y ago
        Which would be damaged if he were wrong. So his motivation is to be right, not to dismiss BitCoin.
        • fnordfnordfnord 14y ago
          If you turn out to be wrong, along with everyone else in your cohort, that's okay (you can't win them all). It's being wrong, while going against the majority of your peers that gets you laughed at.
    • ExpiredLink 14y ago
      > Yes, having a Nobel Prize in economics doesn't make him right every time. Yep, he proved that several times when he wrote about the imaginary Euro crisis.
  • eridius 14y ago
    I think it's safe to assume that Krugman is a lot more trustworthy when talking about something that's actually within his realm of expertise; namely, economics.
    • erva 14y ago
      Krugman's "expertise" in economics is akin to an Alchamist's "expertise" in chemistry.
    • cinquemb 14y ago
      economics boil down to human behavior. what does it say about a person who is dismissive about the way technology can affect/influence human behavior? what makes him an expert? is it because he panders to what is the status quo (the ever-present monopoly of sorts)? is it because he engages in thoughtful exploration of ideas and notions with a larger community and helps bring about great discussion? is it because he has a degree? is it because he has done something notable for humanity?
    • waterlesscloud 14y ago
      He was evaluating the internet's impact on economics.
  • gamblor956 14y ago
    Paul Krugman was mostly right on both accounts...but for the wrong reasons. The fax machine was a sea change when it was introduced. It absolutely was the one communications device every business had to have. It revolutionized white collar businesses and the sales process (imagine! transcontinental signed sales agreements within minutes!). Hell, the catalog industry (upon which the founding laws of e-commerce rest) owes its existence to the fax machine! Krugman misunderstood how important the fax machine was to businesses. And he was right about the number of jobs for IT specialists, which has been declining for the past decade as IT operations are increasingly outsourced (even as other technology-related fields programming/design/etc have vastly grown) to foreign countries or specialized operators (i.e, Google Apps, Office 365, Amazon AWS, Salesforce, etc).
    • tolmasky 14y ago
      So with the fax machine analogy, you're saying that not only did he have no idea what he was talking about with his predictions of the future, but he also couldn't even comprehend the present. With relation to IT jobs, wow that is one hell of a stretch.
  • snowwrestler 14y ago
    Paul Krugman is an expert in economics, not the Internet. And while bitcoins live on the Internet, the study of their exchange is economics.
  • nhaehnle 14y ago
    I am curious: Has Krugman actually made any predictions about the potential uptake of Bitcoin? From what I recall, his statements basically amount to saying that using Bitcoin as the basis for the economy is a bad idea because it would hurt macroeconomic developments. Those are very different things, and obviously Krugman is much more likely to accurately predict the latter than the former.
• Nemo_ 14y ago
  Well, I am the author of the linked piece. First, I have never owned any bitcoins, nor do I own any now. It is a fascinating and massive experiment, and I am quite happy to remain an observer rather than a participant. Second, I suspect I know more about economics than you think (more a response to pico303 than to you). Obviously the deflationary argument is one of the strongest. The others are mostly noise, but wow is there a lot of noise. I do wonder, though... What would happen if someone were to create something like Bitcoin but with, say, crowd-sourced monetary policy instead of a finite supply?
  • fish2000 14y ago
    One minor point: “Money ain't got no owners – only spenders” … see http://www.youtube.com/watch?v=BWbq-WgE6yo http://www.youtube.com/watch?v=BWbq-WgE6yo But yeah, great reaction piece, +1 for excellent fulminations.
  • slg 14y ago
    I don't think a crowd-source monetary policy is a good answer. There is a reason why the US Federal Reserved is somewhat separated from the normal political process. They often have to make unpopular decisions that are in the best interest of the economy. The issue of deflation is a perfect example. As far as I am aware there isn't any real debt owed in Bitcoin. So everyone who uses it has some positive value of Bitcoin. That means each and every one of them would individually benefit from widespread deflation, but that would have a negative long term impact on the currency as a whole. I am not sure if I trust the public to make the right long term monetary policy decision over something in their own personal interests.
    • kiba 14y ago
      As far as I am aware there isn't any real debt owed in Bitcoin. People absolutely do loan each other bitcoin with high interest rate. Unless you meant something different for "real debt".
      • slg 14y ago
        That is what I meant and like I said I wasn't aware of any. A quick Google search for "Bitcoin debt" mostly yields people expounding on the virtues of a "debt-free" currency. The existence of debt would complicate my example as popular opinion on monetary policy would differ. Debtors would prefer inflation while creditors and general currency holders would prefer deflation. Either way, I still don't think something like monetary policy should be left up to crowd sourcing.
• cinquemb 14y ago
  This makes me think of what Fred Wilsion was talking about here with Monopolies(traditional fiat e.g. USD,EUR,CNY,AUD,JPY) vs. Startups(cryptographic,e.g. Bitcoin): http://www.avc.com/a_vc/2013/04/monopolies-and-startups.html http://www.avc.com/a_vc/2013/04/monopolies-and-startups.html "Monopolies aren't great for society. So we have trust busters in government whose job it is to keep the monopolies in check. But they don't do that so well. And our government is pretty good at handing monopolies out. Just look at the cable industry. A few entrepreneurs in a garage. Or a few hackers on the Internet. They are the best trust busters of them all. Look what open source Linux did to Microsoft (funny that Microsoft contributed m̶o̶s̶t̶ a significant amount of lines of code to the Linux kernel starting in 2009; EDIT: http://arstechnica.com/business/2012/04/linux-kernel-in-2011-15-million-total-lines-of-code-and-microsoft-is-a-top-contributor/ http://arstechnica.com/business/2012/04/linux-kernel-in-2011...). They put a dent in a machine that the government could not. And look at what Lyft, Sidecar, and Uber did to the medallion owners in San Franscisco. They got cabs on the streets when the government could not. Never doubt that a small startup can take on a huge monopoly. Indeed, it is the only thing that can."
  • yoasif_ 14y ago
    "(funny that Microsoft contributed most lines of code to the Linux kernal)" is not quoted in the source material and isn't true. Please provide some proof for this claim.
    • gjulianm 14y ago
      It provided a lot of lines of code, and it was the main contributor one year IIRC. But most of that was Hyper-V related code, to make Linux work better as a virtual machine guest over Windows.
    • cinquemb 14y ago
      this is the internet right? http://arstechnica.com/business/2012/04/linux-kernel-in-2011-15-million-total-lines-of-code-and-microsoft-is-a-top-contributor/ http://arstechnica.com/business/2012/04/linux-kernel-in-2011...
• paulhodge 14y ago
  If tulips had a near-zero storage cost (ie they didn't go bad), and a near-zero transmission cost, and if they supported anonymous ownership, and if the process for generating tulips was more fair, and if the speed of tulip generation was guaranteed to slow down, then tulips probably would have made a decent form of currency too. Other than that though, totally the same thing.
  • zeteo 14y ago
    Or maybe the similarity is a wave of speculative frenzy in both cases, inflating prices to unsustainable levels. The factors you mention (low storage and transmission cost, anonymous ownership) make speculation easier, not harder.
  • ars 14y ago
    Clearly you have not studied the subject. No tulips were ever exchanged during the mania - only contracts for tulips. The contracts had near-zero storage costs, near-zero transmission cost (just membership in the trading hall), anonymous ownership (sort of), and the process for generating tulips seems fair to me - the more work you do, the more tulips you create. (Not that is actually mattered - the entire thing happened during the dormant season of the tulip, and no one actually grew any.)
• deleted 14y ago
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