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Krugman isn't perfect, but he actually has been one of the more accurate prognisticators (http://www.poynter.org/latest-news/mediawire/130485/claim-krugman-is-t

Krugman isn't perfect, but he actually has been one of the more accurate prognisticators (http://www.poynter.org/latest-news/mediawire/130485/claim-krugman-is-top-prognosticator-cal-thomas-is-the-worst/ http://www.poynter.org/latest-news/mediawire/130485/claim-kr...) More importantly, Krugman actually admits when he is wrong based on new data, as he has done on several occasions in his blog and the NYT. To me, that is the mark of a scientist, one who is able to be swayed by data. Very few of the Austrians and Chicago types seem to admit to being wrong, and often, contradictory data is simply waved away as conspiratorial (inflation, econometrics). The whole notion of praxeology turns their conclusions into untestable pseudo-science. It takes on the air of a religion rather than geeky engineers willing to hold their ideas to fire of real world tests. There are two issues at play here: the deep desire of technolibertarians for "free money" and decentralization, and moral arguments surrounding the function of the state and application of force, and the real world where their predictions often fail. It's possible to love Bitcoin, but also admit Krugman is right about it. Bitcoin is a magnificent creation of cryptography. In fact, the entire field of modern cryptography, from one way functions, zero knowledge proofs, oblivious transfer, to high level schemes involving money, voting, homomorphic encryption, et al, is staggering beautiful. When I first read of Broadcast Encryption, despite its use in DRM, my mind was blown. I love all this stuff, and have a deep affinity for subversive systems. But Bitcoin isn't the anarchocapitalist utopia enabler that converts the world into Galt's Gulch, because the deep beliefs about how a totally free economy would work in practice don't have to be any more true than the beliefs about how anarcho-syndicalist communities would work when scaled up. The real world is complex, and a mixed set of strategies is more adaptive and stable than a set of purist ones.

nateabele 14y ago
Ah, Krugman... love that guy. He's my favorite comedian! > But Bitcoin isn't the anarchocapitalist utopia enabler that converts the world into Galt's Gulch [...] I think the Austrians would be the first to admit that the world is complex.[0] ;-) To be fair, BitCoin has come extraordinarily far in an incredibly short period of time. Just imagine trying to explain its present-day state to almost anyone two to three years ago. It seems to me, the whole point of this posting is that trying to judge BitCoin as a technolibertarian savior today is a bit like judging the internet's equivalence to a fax machine in 1998: it's just too early to tell, especially if (like Krugman), you have so little vision. Who knows, maybe BitCoin is only cryptocurrency's ARPANET. Just give it a minute. [0] http://www.goodreads.com/quotes/102966-the-curious-task-of-economics-is-to-demonstrate-to-men http://www.goodreads.com/quotes/102966-the-curious-task-of-e...
- parasubvert 14y ago
  "Just give it a minute"? Krugman isn't saying "shut it down", he is making fun of the euphoric media reaction that looks a lot more like the Pets.com IPO than anything rational. The problem with Bitcoin is twofold, - it presumes (by some) to be changing the nature of money, but if you look closely, it really isn't; its just fiat currency with a different framework for issuing the fiat other than the nation-state. - there are some very old and obvious issues with its specific limitations (such as mining and being a fixed quantity). This is not necessarily a fundamental limitation, however - just limits its creators declared by fiat. But it betrays a misunderstanding of what money is. None of the critiques have anything to do with crypto currency in general or the cooler/geekier aspects of Bitcoin like the global ledger. Bitcoin is a useful experiment but let's also not get ahead of ourselves.
  - richcollins 14y ago
    Maybe you can explain why the fixed quantity is a problem? If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?
    - nl 14y ago
      Maybe you can explain why the fixed quantity is a problem? See http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem? No. The fact that Zimbabwe dollars were available in multiple of millions as a single note didn't fix hyperinflation in Zimbabwe.
      - richcollins 14y ago
        So that provides evidence that it doesn't work?
        nl 14y ago
        Why would it work? As I said elsewhere: The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.
martythemaniak 14y ago
You nailed it. My view is that bitcoin fans tend to be so enamoured with the cool technology that they wholly ignore the economics and social aspects of it. From a mainstream view though, the technology is completely irrelevant - no one cares if iPhone apps are written in Objective C or Lisp - what matters is the end product and what people can do with it. When someone like Krugman looks at bitcoin, they do not see any of the technology (nor should they). They see a deflationary currency with vicious boom-bust cycles. Knowing the miserable experience with such currencies in the past, they don't think highly of this particular one.
- cconroy 14y ago
  Does it not have business appeal in that it allows transacting parties to pay direct -- without a middle man (banker) collecting fees? Also it being deflationary (to me) is as much as a problem as USD being inflationary. I don't spend all my USD as quickly as possible fearing next week those things will be more expensive. EDIT: Also rereading the post there is nothing substantial in his arguments to support his conclusion -- mostly focusing on red herrings to discredit it: He may not like it politically.
  - AaronFriel 14y ago
    I think part of the deflationary problem is that as bitcoins become more valuable, the initial holders of bitcoins get an increasingly large share of global wealth. Suppose bitcoin continues on its current trajectory. The Winklevoss twins allegedly invested $11 million into Bitcoins, and they allege they own 1% of all the coins. If they hold onto that asset and say, the entire rest of the world switches over to bitcoin, various sources have suggested the total money supply is between 50 and 75 trillion dollars. Assume that this amount converts to 21 million bitcoins - the 110-120 thousand coins they own will be worth a quarter of a trillion dollars. The Winklevoss twins will have made over a two million percent return, doing nothing but joining a bandwagon with a decently sized investment. This is, I think, one of the big problems with bitcoin. The incentive to "join in" is going to be less and less and less because existing owners of bitcoins will have an enormous amount of wealth. That's not even the largest bitcoin account. There's one account listed[1] with nearly 450,000 coins - imagine them controlling 2.1% of the global monetary supply (over 1 trillion dollars) merely for being an early adopter. Ugh. Disgusting. [1] http://bitcoinreport.appspot.com/ http://bitcoinreport.appspot.com/
wdr1 14y ago
> Very few of the Austrians and Chicago types seem to admit to being wrong... You either don't know what you're talking about or are just making hand-wavy generalizations and hoping nobody calls bs on your bs. Both Hayek and Friedman have multiple occasions were they would explicitly correct themselves on past statements and admit they were wrong. They were economists, not politicians or theologians.
illuminate 14y ago
"Very few of the Austrians and Chicago types seem to admit to being wrong" In the case of the Austrian school, they invent scenarios where they can't be wrong. http://en.wikipedia.org/wiki/Praxeology#Criticisms http://en.wikipedia.org/wiki/Praxeology#Criticisms

nateabele 14y ago

Ah, Krugman... love that guy. He's my favorite comedian! > But Bitcoin isn't the anarchocapitalist utopia enabler that converts the world into Galt's Gulch [...] I think the Austrians would be the first to admit that the world is complex.[0] ;-) To be fair, BitCoin has come extraordinarily far in an incredibly short period of time. Just imagine trying to explain its present-day state to almost anyone two to three years ago. It seems to me, the whole point of this posting is that trying to judge BitCoin as a technolibertarian savior today is a bit like judging the internet's equivalence to a fax machine in 1998: it's just too early to tell, especially if (like Krugman), you have so little vision. Who knows, maybe BitCoin is only cryptocurrency's ARPANET. Just give it a minute. [0] http://www.goodreads.com/quotes/102966-the-curious-task-of-economics-is-to-demonstrate-to-men http://www.goodreads.com/quotes/102966-the-curious-task-of-e...

parasubvert 14y ago
"Just give it a minute"? Krugman isn't saying "shut it down", he is making fun of the euphoric media reaction that looks a lot more like the Pets.com IPO than anything rational. The problem with Bitcoin is twofold, - it presumes (by some) to be changing the nature of money, but if you look closely, it really isn't; its just fiat currency with a different framework for issuing the fiat other than the nation-state. - there are some very old and obvious issues with its specific limitations (such as mining and being a fixed quantity). This is not necessarily a fundamental limitation, however - just limits its creators declared by fiat. But it betrays a misunderstanding of what money is. None of the critiques have anything to do with crypto currency in general or the cooler/geekier aspects of Bitcoin like the global ledger. Bitcoin is a useful experiment but let's also not get ahead of ourselves.
- richcollins 14y ago
  Maybe you can explain why the fixed quantity is a problem? If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem?
  - nl 14y ago
    Maybe you can explain why the fixed quantity is a problem? See http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral http://en.wikipedia.org/wiki/Deflation#Deflationary_spiral If it had some way to allow bitcoins to "split" while maintaining their owner would that fix the problem? No. The fact that Zimbabwe dollars were available in multiple of millions as a single note didn't fix hyperinflation in Zimbabwe.
    - richcollins 14y ago
      So that provides evidence that it doesn't work?
      - nl 14y ago
        Why would it work? As I said elsewhere: The original deflationary spiral was defined in 1933[1]. The spiral is caused by the growth in value of currency AND a decrease in velocity of circulation. Splitting bitcoins wouldn't solve either of these problems in the same way having higher denomination currency doesn't solve inflation.

martythemaniak 14y ago

You nailed it. My view is that bitcoin fans tend to be so enamoured with the cool technology that they wholly ignore the economics and social aspects of it. From a mainstream view though, the technology is completely irrelevant - no one cares if iPhone apps are written in Objective C or Lisp - what matters is the end product and what people can do with it. When someone like Krugman looks at bitcoin, they do not see any of the technology (nor should they). They see a deflationary currency with vicious boom-bust cycles. Knowing the miserable experience with such currencies in the past, they don't think highly of this particular one.

cconroy 14y ago
Does it not have business appeal in that it allows transacting parties to pay direct -- without a middle man (banker) collecting fees? Also it being deflationary (to me) is as much as a problem as USD being inflationary. I don't spend all my USD as quickly as possible fearing next week those things will be more expensive. EDIT: Also rereading the post there is nothing substantial in his arguments to support his conclusion -- mostly focusing on red herrings to discredit it: He may not like it politically.
- AaronFriel 14y ago
  I think part of the deflationary problem is that as bitcoins become more valuable, the initial holders of bitcoins get an increasingly large share of global wealth. Suppose bitcoin continues on its current trajectory. The Winklevoss twins allegedly invested $11 million into Bitcoins, and they allege they own 1% of all the coins. If they hold onto that asset and say, the entire rest of the world switches over to bitcoin, various sources have suggested the total money supply is between 50 and 75 trillion dollars. Assume that this amount converts to 21 million bitcoins - the 110-120 thousand coins they own will be worth a quarter of a trillion dollars. The Winklevoss twins will have made over a two million percent return, doing nothing but joining a bandwagon with a decently sized investment. This is, I think, one of the big problems with bitcoin. The incentive to "join in" is going to be less and less and less because existing owners of bitcoins will have an enormous amount of wealth. That's not even the largest bitcoin account. There's one account listed[1] with nearly 450,000 coins - imagine them controlling 2.1% of the global monetary supply (over 1 trillion dollars) merely for being an early adopter. Ugh. Disgusting. [1] http://bitcoinreport.appspot.com/ http://bitcoinreport.appspot.com/

wdr1 14y ago

> Very few of the Austrians and Chicago types seem to admit to being wrong... You either don't know what you're talking about or are just making hand-wavy generalizations and hoping nobody calls bs on your bs. Both Hayek and Friedman have multiple occasions were they would explicitly correct themselves on past statements and admit they were wrong. They were economists, not politicians or theologians.

illuminate 14y ago

"Very few of the Austrians and Chicago types seem to admit to being wrong" In the case of the Austrian school, they invent scenarios where they can't be wrong. http://en.wikipedia.org/wiki/Praxeology#Criticisms http://en.wikipedia.org/wiki/Praxeology#Criticisms