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> What if Bitcoin does recover? This is what's interesting to me about all of this. I don't think anyone knows whether or not it's going to work in the long te

by gphil 13y ago

> What if Bitcoin does recover? This is what's interesting to me about all of this. I don't think anyone knows whether or not it's going to work in the long term. The only predictions (both positive and negative) that I've seen have come from dogmatism and not from data. The ultimate test is whether or not it actually works. Very rarely are radical ideas like this put to the test, which is why it's so exciting to watch it unfold. I have no idea what is going to happen.

thenmar 13y ago
It's fascinating to watch it happen. I hope it does recover. But I hope the most vocal proponents become a little more mature. I think part of the reason bitcoin seems radical to people, especially the tech-outsider non-first-adopter crowd, is that bitcoin is championed by radical free market types who don't just want deregulation, they want complete abolition of government.
chimeracoder 13y ago
> The only predictions (both positive and negative) that I've seen have come from dogmatism and not from data. Well, that's because we've never had a cryptocurrency of this scale before. Of course, we've had other alternate currencies (Ithaca Hours, anyone), and based on that data, Bitcoin's future doesn't look too bright? But you could make the argument that those aren't the same. One reason that you aren't seeing much "hard" data in favor of Bitcoin is that the Austrian school of economics (which provides the foundation for deflationary economics) actively rejects empirical research and deductive reasoning[0][1]. In contrast, virtually all economic models that are taken seriously[2] do try to incorporate fundamental principles (inductive reasoning), but revise those in the face of empirical evidence when necessary (a process that's not dissimilar to what is done in, eg., quantum mechanics - a field in which theory oftentimes advances beyond the means to test theories empirically). [0] https://en.wikipedia.org/wiki/Austrian_School https://en.wikipedia.org/wiki/Austrian_School [1] https://mises.org/etexts/austrian.asp https://mises.org/etexts/austrian.asp [2] Yes, I am excluding Austrian economics, because very few non-Austrian economists actually take them seriously
- Xdes 13y ago
  I do not see where in your sources Austrian Economics "actively rejects empirical research and deductive reasoning." The foundation of Austrian Economics is in studying human behavior in the market (Praxeology[0]). Austrian economists use praxeology give meaning to economic models. [0] https://en.wikipedia.org/wiki/Praxeology https://en.wikipedia.org/wiki/Praxeology
  - chimeracoder 13y ago
    Well, for starters the "Methodology' section opens with > Critics generally argue that Austrian economics lacks scientific rigor and rejects scientific methods and the use of empirical data in modelling economic behavior. Some economists describe Austrian methodology as being a priori or non-empirical a statement which includes citations from five different sources. You may disagree with that conclusion, but I think it's clear where I found it in those two links. And if you dig a bit more into both of links that I provided, you'll find a more detailed exposition, even in sections that don't use the word "data" explicitly.
  - rayiner 13y ago
    But their "studying of human behavior" isn't based on empirical models. Its based on idealized assumptions. For example, they continue to use rational actor abstractions despite empirical research showing that human behavior is irrational in predictable ways. We are going to realize, sooner or later, that cognitive psychology pretty much obliterates the assumptions underlying Austrian economics.
    - AnIrishDuck 13y ago
      > human behavior is irrational in predictable ways. My favorite example of this is the ultimatum game [1]. The game has two players. The first player proposes a split of a "pot" of money. The second player can accept that split and take their share, or reject the split leaving both players with NOTHING. The "rational" action for the first player to take is to suggest a split where he keeps the largest amount of the pot possible. The "rational" action for the second player is to then accept that split, because something is better than nothing. As you can imagine, real-world runs of this game have proven that nobody acts "rationally" (splits of less than 20%, when proposed, are often rejected). Homo economicus [2] doesn't have emotions or empathy. It doesn't value extrinsic things like "justice" or "fairness". Homo sapiens does. In other words, while people might act rationally, the economic definition of "rational" and the common definition of "rational" are often two entirely different things. 1. http://en.wikipedia.org/wiki/Ultimatum_game http://en.wikipedia.org/wiki/Ultimatum_game 2. http://en.wikipedia.org/wiki/Homo_economicus http://en.wikipedia.org/wiki/Homo_economicus
dasil003 13y ago
Yeah it's funny how the technical perspective of this post swung rapidly to economic ideology at the end. Having confirmed that it was complete amateur hour over at MtGox, how can a critical thinking person make the huge leap that only bureaucratically controlled government currencies are viable. All it maybe shows (and this remains to be seen) is that Bitcoin is the wild west where people will steal from you and generally not face legal repercussions, but that is the social layer on top of Bitcoin and has nothing to do with its fundamental viability. When this story repeats with more professional operations and more savvy users then we'll start to get a more realistic view of whether Bitcoin can ever cross the chasm or if it's fundamentally lacking the ability to generate the trust necessary to stabilize its economy.
- jbooth 13y ago
  The wild-west factor has everything to do with its viability. If bitcoin is ever going to outgrow its dutch tulip mania phase and actually be a medium of exchange for legal goods, people need to feel (and be!) at least as secure as with USD in a big dumb bank.
  - yummyfajitas 13y ago
    True - right now they are only as secure as paper money with a vendor on the road. And as we all know, no one transacts with paper money.
    - jbooth 13y ago
      A bit of a mixed metaphor given that we're talking about an exchange collapse, here. You don't deposit your paycheck in cash with a dude in a streetcart. Anyways, the thing with transformative new products is you have to be notably better in order to get people to switch. "Just as good" isn't good enough. "Less good but you get a lot of ideological satisfaction if that's your thing" is certainly not good enough. So far, BTC is a speculation vehicle, not currency.
      - yummyfajitas 13y ago

by gphil 13y ago

thenmar 13y ago

It's fascinating to watch it happen. I hope it does recover. But I hope the most vocal proponents become a little more mature. I think part of the reason bitcoin seems radical to people, especially the tech-outsider non-first-adopter crowd, is that bitcoin is championed by radical free market types who don't just want deregulation, they want complete abolition of government.

chimeracoder 13y ago

> The only predictions (both positive and negative) that I've seen have come from dogmatism and not from data. Well, that's because we've never had a cryptocurrency of this scale before. Of course, we've had other alternate currencies (Ithaca Hours, anyone), and based on that data, Bitcoin's future doesn't look too bright? But you could make the argument that those aren't the same. One reason that you aren't seeing much "hard" data in favor of Bitcoin is that the Austrian school of economics (which provides the foundation for deflationary economics) actively rejects empirical research and deductive reasoning[0][1]. In contrast, virtually all economic models that are taken seriously[2] do try to incorporate fundamental principles (inductive reasoning), but revise those in the face of empirical evidence when necessary (a process that's not dissimilar to what is done in, eg., quantum mechanics - a field in which theory oftentimes advances beyond the means to test theories empirically). [0] https://en.wikipedia.org/wiki/Austrian_School https://en.wikipedia.org/wiki/Austrian_School [1] https://mises.org/etexts/austrian.asp https://mises.org/etexts/austrian.asp [2] Yes, I am excluding Austrian economics, because very few non-Austrian economists actually take them seriously

Xdes 13y ago
I do not see where in your sources Austrian Economics "actively rejects empirical research and deductive reasoning." The foundation of Austrian Economics is in studying human behavior in the market (Praxeology[0]). Austrian economists use praxeology give meaning to economic models. [0] https://en.wikipedia.org/wiki/Praxeology https://en.wikipedia.org/wiki/Praxeology
- chimeracoder 13y ago
  Well, for starters the "Methodology' section opens with > Critics generally argue that Austrian economics lacks scientific rigor and rejects scientific methods and the use of empirical data in modelling economic behavior. Some economists describe Austrian methodology as being a priori or non-empirical a statement which includes citations from five different sources. You may disagree with that conclusion, but I think it's clear where I found it in those two links. And if you dig a bit more into both of links that I provided, you'll find a more detailed exposition, even in sections that don't use the word "data" explicitly.
- rayiner 13y ago
  But their "studying of human behavior" isn't based on empirical models. Its based on idealized assumptions. For example, they continue to use rational actor abstractions despite empirical research showing that human behavior is irrational in predictable ways. We are going to realize, sooner or later, that cognitive psychology pretty much obliterates the assumptions underlying Austrian economics.
  - AnIrishDuck 13y ago
    > human behavior is irrational in predictable ways. My favorite example of this is the ultimatum game [1]. The game has two players. The first player proposes a split of a "pot" of money. The second player can accept that split and take their share, or reject the split leaving both players with NOTHING. The "rational" action for the first player to take is to suggest a split where he keeps the largest amount of the pot possible. The "rational" action for the second player is to then accept that split, because something is better than nothing. As you can imagine, real-world runs of this game have proven that nobody acts "rationally" (splits of less than 20%, when proposed, are often rejected). Homo economicus [2] doesn't have emotions or empathy. It doesn't value extrinsic things like "justice" or "fairness". Homo sapiens does. In other words, while people might act rationally, the economic definition of "rational" and the common definition of "rational" are often two entirely different things. 1. http://en.wikipedia.org/wiki/Ultimatum_game http://en.wikipedia.org/wiki/Ultimatum_game 2. http://en.wikipedia.org/wiki/Homo_economicus http://en.wikipedia.org/wiki/Homo_economicus

dasil003 13y ago

Yeah it's funny how the technical perspective of this post swung rapidly to economic ideology at the end. Having confirmed that it was complete amateur hour over at MtGox, how can a critical thinking person make the huge leap that only bureaucratically controlled government currencies are viable. All it maybe shows (and this remains to be seen) is that Bitcoin is the wild west where people will steal from you and generally not face legal repercussions, but that is the social layer on top of Bitcoin and has nothing to do with its fundamental viability. When this story repeats with more professional operations and more savvy users then we'll start to get a more realistic view of whether Bitcoin can ever cross the chasm or if it's fundamentally lacking the ability to generate the trust necessary to stabilize its economy.

jbooth 13y ago
The wild-west factor has everything to do with its viability. If bitcoin is ever going to outgrow its dutch tulip mania phase and actually be a medium of exchange for legal goods, people need to feel (and be!) at least as secure as with USD in a big dumb bank.
- yummyfajitas 13y ago
  True - right now they are only as secure as paper money with a vendor on the road. And as we all know, no one transacts with paper money.
  - jbooth 13y ago
    A bit of a mixed metaphor given that we're talking about an exchange collapse, here. You don't deposit your paycheck in cash with a dude in a streetcart. Anyways, the thing with transformative new products is you have to be notably better in order to get people to switch. "Just as good" isn't good enough. "Less good but you get a lot of ideological satisfaction if that's your thing" is certainly not good enough. So far, BTC is a speculation vehicle, not currency.
    - yummyfajitas 13y ago