Appeal to ridicule noted, as is your failure to explain why you believe it's impossible to transition from A to B. Remember, you're the one claiming it's impossible, the burden is on you.
The oranges: yes i saw it already. The analogy can be improved: Everyone is allergic to the oranges, but these 'oranges' can be traded 'pseudonymously' without a person leaving their house, they can be traded internationally without incurring additional fees, they take next to no physical space to store, etc. Despite being inedible, these oranges have characteristics that make them so good for trading with, that people continue using them anyway.
Now why can't there be a path from A to B in your view?
Good job trying to shift the burden of proof. . Just interested though - how many bitcoins do you currently have bitbutter? Got much mining going on?
Conza--please read the conversation more closely, Neilsio and Clayton seem to be claiming that it's impossible for BItcoin to move from use by a small minority to become the dominant medium of exchange. That's a positive claim. One that I'm not seeing any support for so far.
I have more than zero Bitcoins. I'd prefer not to disclose further information about my finances on a public forum. I'm sure you understand.
@Clayton
The government can ensure it remains in black/grey-market status without breaking a sweat.
Legalistically, sure, a gov could pass a law. But can a government prevent a potentially competing currency like Bitcoin from becoming dominant? How do those chances change if there's a collapse of fiat money? I don't see how anyone could claim to know the answers to these things.
Thank you bitbutter in helping to unravel the core of the issue. Praxeology is about deduction, rather than induction. About definite logical connections rather than probabilistic estimates. Although the most eloquent Bitcoin opponents in the beginning claimed that their arguments are based on praxeology, they in the end admitted that they are not.
More than a year ago, I asked on the Mises Blog comments about the relationship between Bitcoins and the regression theorem. However, I could not comprehend why the regression theorem is supposed to be based on deduction. My complaints were dismissed so I just thought I do not understand it correctly, so I kept thinking. But the recent media publicity brought up more debate, yet still no proper address of my complaint. Eventually, it turns out I was right all along: the regression theorem is not a praxelogical argument. It's mixing together several things: the network effect, historical facts, and, admittedly, some praxeological roots.
I also find it amazing how the historical development of Bitcoin (i.e. that it is not widespread sufficiently for the network effect to kick in after 2.5 years of being launched as an open source project) is used by Austrians as "evidence". As if the gold standard emerged fully matured overnight and magically the whole world scrapped whatever they had before switched to it. We've had 40 years of SWIFT, 3 years of SEPA and what are the results? Bank transfers are still crap. Western Union and paypal being able to make profit is evidence enough of the crapiness of the projects. And there's big companies and governments behind them, I might add.
Now I can finally rest, the curiousity of my falsificationist mind satisfied.
Eventually, it turns out I was right all along: the regression theorem is not a praxelogical argument. It's mixing together several things: the network effect, historical facts, and, admittedly, some praxeological roots.
You have seriously missed the boat. And it's all here, staring you in the face.
Let me quote a bit of I Ching:
For youthful folly it is the most hopeless thing to entangle itself in empty imaginings. The more obstinately it clings to such unreal fantasies, the more certainly will humiliation overtake it. Often the teacher, when confronted with such entangled folly, has no other course but to leave the fool to himself for a time, not sparing him the humiliation that results. This is frequently the only means of rescue. When ignorance is fed by stubbornness the fool arrives to a dead end, losing touch with reality.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
baxter: 4. Assuming BitCoins are in no government's interest, do this on a worldwide basis.
4. Assuming BitCoins are in no government's interest, do this on a worldwide basis.
That's quite an assumption. It's also easy enough to show that Bitcoin is in some governments' own interests. At the moment, I would have to say that it's in the interests of Iceland for monetary reasons, as well as because their geography is ideal with regard to distributed citizen mining. Bitcoin might also be in the interests of many other small governments, if Bitcoin is dramaticly counter to the interets of the United States. Although it's unlikely that any government in this group is going to come out an openly support Bitcoin, or pass laws that legitimize it, many are unlikely to enforce the laws that the US imposes upon them via political pressure. Just considering the huge monetary advantage that the US wields by the fact that the US FRN is the only international reserve currency, just about every other government can be said to have some degree of interest in the success of Bitcoin.
Humans care about goods, not about currency for the sake of currency. Just because a tiny group of people cares about currency for the sake of currency doesn't mean that makes it a reliable medium of exchange for people outside that group.
The Somali shilling is not widely used as tissue paper, and is not widely used for fire starting. It is a paper currency entirely backed by the cost it takes to create, print, and transport. Clearly Humans care about currency for the sake of currency, otherwise the Somalis would have stopped using it 20 years ago.
1 million times 0 is still 0.
A possible use makes it non-zero. I have no use for gold as jewlery, gold fillings, or electrical conduction. Yet I own gold.
Possible use neither makes it a reliable medium of exchange. Clayton explained well what requirement a good has to be suitable as a medium of exchange and it's the opposite of no use / possible use.
and yet this is exactly what you are claiming gives gold it's value. A Possible use as jewlery or electrical conduction, even though most people no longer use it for that.
Let's go back to water and robinson curuso for this. He has 10 gallons of water. He can use it for drinking, or bathing. He choses drinking because he get's greater utility from that, but the fact that he doesn't use it for bathing doesn't mean that the water isn't worth the amount of bathing he could use it for if he couldn't drink the water for some reason.
Let's go to bitcoin. I could use it to exchange for server subscription, or captcha. I'm sure you can figure out the rest of this paragraph.
So I think this is your main objection. RIGHT NOW, people are not using bitcoin for captcha, nor do they have the ability to because nobody has developed a method for doing that. Which leads us to future valuation. You seem to be claiming that potential future valuation can't be a basis for current valuation. This in and of itself is a denial of the valuation of capital goods. Bitcoin is not substantially different from the valuation of capital goods because the consumption goods created by it may be substantially lower in value than the estimated value of the goods when the capital project was started. Similarily, bitcoins captcha potential value my not be reached by the time speculators have speculated it would. This is no different than the failure of valuation of the capital good. This however doesn't deny that the capital good has some value, but just not as much as predicted. It may very well be that bitcoin is over valued, but it's a non sequitur to say it has no value due to that.
I'm probably the most senior member here in favor of bitcoin (at least arguing that it's not praxiologically certain to not be a money). I just want to clarify, I own precisely .04 bitcoins, which I got for free from bitcoin faucet, and bitcoin bonus.
Although the most eloquent Bitcoin opponents in the beginning claimed that their arguments are based on praxeology, they in the end admitted that they are not.
I have made no such admission. I would elaborate but I just typed a fairly long response and my browser took a dump... feeling a bit discouraged.
Clayton -
The Somali shilling is perhaps the world's greatest example of the regression theorem. It is valuable today because it was valuable yesterday and so on back to the days of the Barre regime. It is this memory that gives it value. And please note that its value is insanely small, it is only used in Somalia because people there are so incredibly poor.
Sam Armstrong:I have no use for gold as jewlery, gold fillings, or electrical conduction. Yet I own gold.
This is a very good point. There is no necessity that a medium of exchange has a non-monetary value to everyone, it is sufficient that it has such a value for some.
While I agree with you Peter, I will be deeply saddened if that is the point most people take from that post. I believe this paragraph is the crux of the objection.
Why are people buying bitcoins? Is Mises rolling in his grave over this 'mystery'? No.. It's actually very simple:
Latest comment on my video:
"What does all this talk about apples and oranges has to do with Bitcoin currency? Then he talks about gold. Blah, blah, blah. Then he talks about dollars. He suggests that dollars are backed up by something. Dollars are backed up by absolutely nothing. His monologue is boring, long-winded, and tedious. I had to slap myself the entire time to keep myself awake while he spoke. It was just so boring. Who gives a rat's ass about legal tender laws?—like any of us are going to obey legal tender laws."
People buy it without regard for facts or logic. And then other people interpret those actions as evidence for their (lasting) value.
Nielsio,
people's irrationality does not disprove economic laws. If you claim that people are acting in spite of your predictions, that only means that your predictions are flawed.
Furthermore, the commenter is correct. Your (not only you but other bitcoin detractors' too) obsession with the obscure term "money" is the irrational aspect of the debate, not the actions of bitcoin enthusiasts. It's like mumbling mantras. I have repeatedly, for over a year, asked for the praxeological connection between the term "money" and bitcoin, and have not received any meaningful reply.
On the empirical level, I have repeatedly shown how government intervention created a market gap, which is not being filled by any of the other encumbents and how bitcoin is specifically designed to fill that gap. Again this has met with ignorance.
In summary, the debate is a waste of time, since there is no debate. On one side there are people obsessed with the past, on the other people obsessed with the future, and their arguments fail to meet.
Explain how Bitcoin qualifies as money more than anything else, like toilet paper and World of Warcraft gold.
2 pages later and still no reply. The Bitcoin theory of money seems to be, we put "coin" in the name; therefore, it is money.
@Caley
The answer's been provided for you several times over already. I'll try to put it a different way:
Imagine that bitcoin was widely in use, all over the world, for a long time already. Would it matter if it didn't match any given definition of money? I don't see that it would.
The answer has not been provided already. What you tell me to imagine is what is to be proven by comparing to other things that have not attained that status. Assuming what is to be proven is not the asnwer. Right now Bitcoin is basically the same as WoW gold. Wow gold supply is limited by the game mechanics. Wow gold is traded for dollars. The only difference so far between WoW gold and Bitcoins with respect to prospect of attaining the status of worldwide acceptance as payment is that Bitcoin's PR group tells us that it will , whereas Blizzard has never made such a claim since 2004. What is going to make Bitcoins succeed in the next 7 years where WoW gold (and everything else) failed?
Nice to imagine but the reality is it will never become widely used all over the world for a long time because it is just another type of unsound 'money' dreaming of competing with our current unsound 'money'..
While I aplaud the efforts of the bitcoin community to 'fill the gap' and educate others in the flaws of our current money system, in the end (when the current system fails), it will never compete with sound monies beacuse billions more people value specie more than bits.
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
Toilet paper has a very low value to weight/volume ratio.
Wow gold is inflationary, costs money at the very beginning before you can even accept any (you have to buy the Wow software), and has no ability to be traded outside of playing the videogame.
Each of those 4 problems are overcome by bitcoin.
I do not offer this as "proof" but as potential reasons why bitcoin would succeed where WoW gold has failed.
Edit: That costs money at the beginning before you can accept it litterally just changed today.
lewrockwell.com says bitcoin is a commodity, that Mises had it all wrong, not to follow his authority blindly:
...And who says that money MUST emerge from a commodity? (von Mises I know [Menger too], but what makes that pronouncement authoritative?)...
...I add this. It seems to me that a bitcoin is a newly-produced commodity or good. In the same way, those persons who discovered a rock and got gold out of it produced a new good or commodity by extracting the gold. Marketability is a quality of a good that is subjectively assessed by those in the market. It seems that bitcoins possess it. People can recognize it and transport it at almost zero cost...
As you seem to follow his take blindly.
Correction: Michael S. Rozeff says, not lewrockwell.com. I'm sorry, did he provide an argument against Mises regression thereom? Did he address the arguments, besides pointing out "ohh you guys an appeal to authority maybe?", no. It's not WHO, it's WHAT... and that is reason. It seems to me that Rozeff needs to go back to the basics.
Regression theorem. The theorem by which Mises applies the subjective theory of value to the objective-exchange value, or purchasing power of money. Objective-exchange values of all other goods and services are explained by the subjective theory of value, whereby the values are traced to the ultimate subjective use values of the marginal consumers who value such goods and services for their objective-use values which they expect to consume. This is not true for money because (1) money is not consumed in its use and (2) the subjective and objective use values of money coincide and are equal to its objective-exchange value, the estimated value of the goods and services for which it can be exchanged. Mises explains the origin of the objective-use value of money by tracing it back step by step from the point at which it is being valued to the point where the monetary good served only non-monetary uses, an essential point preceding the first use of anything as money. At this point, its objective-exchange value is explained by the general theory of subjective value and marginal utility. HA. 408-11,426,610-11; M. 97-123; also PLG. 141-67. See also Murray N. Rothbard's Man, Economy and State (Princeton, N. J.: Van Nostrand, 1962; Los Angeles: Nash Publishing, 1970).
Does bitcoin do this? No. Does it matter that it doesn't? Yes. Ask yourself why... when you make the claim that it is FREE MARKET money, maybe you should consider the fact that we're not in a FREE MARKET ENVIRONMENT... and whether bitcoin is not in fact a by-product / reaction to that of the state.
An answer I am yet to still recieve a response to.
I bought $100 worth of bitcoins a couple of months ago and have seen them rise and fall dramatically since I bought them. I sold a few near their peak and made my initial investment back but I've also bought a few illegal things on Silk Road and paid for a couple of pages of translating services for my business. Besides that I entered a bitcoin lottery and have done a few other small transactions with bitcoins. All I can say is that they are great! The bitcoins are sent immediately and anonymously for no fee. I prefer this system to paypal or anything similar hands down.
Long term viability? Who knows, but the bitcoin economy is a free market haven.
Why goods attain prices:
So it's actually on bitcoin sellers and promoters to come up with a theory why it is not faulty speculation.
Excluding the promotion as a reason.
@Nielsio
We're asked to show why a money good requires commodity value. From the above theory, having no commodity value it follows why speculation above 0 will lead to losses.
The focus on non-trade value (to the exclusion of very real value that _is_ related to trade) is what's throwing you off here imo. If a good is valued _very highly_ by only (say) one hundred people wanting to trade it amongst themselves, because of its characteristics that make it very good for trading, it's not clear why using this good as a medium of exchange is a bad idea.
The context of this thread is relevant: If a person says 'Don't buy bitcoins', and implies that there's a chain of correct reasoning to support the view that this currency will inevitably fail, the burden is on them to show this correct chain of reasoning.
If a Bitcoin enthusiast was saying 'Buy Bitcoins!' and was implying that a chain of correct reasoning made them a great bet, the burden would be on them.
I think bitbutter makes valid points. My question is, does a money really have to have non-monetary value, and if so, why? Niels' example implies that someone at some point wants to consume gold. But how many E's exist?
And what's more, that chain doesn't seem to make much sense.
1) You're suggesting that using gold for the purpose of putting it in some other product that is intended to be sold counts as "consumption." I thought a good that is used in the production of some other good which is intended to be sold is a producer good...which is not consumed.
2) You're suggesting that E knows he will sustain a loss if he tries to use the gold in a product he plans to sell. So...why would he buy it? You're suggesting he won't...he will offer a lower price than the current market price for gold. But obviously the current market price for gold is the market price for a reason...
3) This leads me to wonder, how can you conclude that D is "forced" to sell at a low price and suffers a loss. Why is it that E gets to command a lower price so that he can avoid a loss and D is "forced" to sustain a loss?
John James,
1. I'm saying that as far as the explanation goes, both end-user consumption and producer consumption (transformation) can be used. B, C and D don't do anything to the product, E does.
2. & 3.
I believe this should explain very well the relationship between consumption prices and producer cost prices:
The Economics of Deflation (by Jörg Guido Hülsmann)
Start at 20m25s. (or use this external link)
He speaks to my point. 21:50: "If they don't go down with that price it means that they have a better employment for their property than the terms offered by the entrepreneur."
You told me D was "forced" to sell at E's low price. Hulsmann says it's possible for them to have other opportunities. And obviously, if the price is actually high as you say it is, then D can find a buyer in someone else who doesn't anticipate lower prices. Or he could just sit on his gold and not sell it...just like the worker could either sit at home and not work, or go work for some other entrepreneur.
D only has no other selling alternative when everyone else anticipates the same way E does. But you haven't given any reason that everyone would anticipate a lower exchange rate for bitcoins.
But what's more, I don't think I got an answer to my initial question: does a money really have to have non-monetary value, and if so, why?
does a money really have to have non-monetary value, and if so, why?
It does, because otherwise it's price, say $17 per bitcoin, is basically a fad. Meaning that's what people are willing to pay now, but there is no guarentee they will be willing to pay that tomorrow, because there is no reason for that price. Why is the price $17, and not $10, or ten cents?
People sense this, and at some point will start to worry. They will want to unload their bitcoin for something substantial. They will refuse to accept it as payment. Sooner or later, everyone will lose faith in the other person being foolish enough to accept a bit coin in exchange for $17 worth of hard work and tangible goods. They themselves will also not be willing to accept a gamble in exchange for their hard work. The downward spiral will begin.
This insight is related to Mises regression theorem.
http://smilingdavesblog.blogspot.com/2011/06/bitcoin-takes-beating.html and
http://smilingdavesblog.blogspot.com/2011/06/bitcoin-and-bitclothing.html
and the comments there lay it all out.
Before an economic good begins to function as money it must already possess exchange value based on some other cause than its monetary function. But money that already functions as such may remain valuable even when the original source of its exchange value has ceased to exist. Its value then is based entirely on its function as common medium of exchange.
Before it was usual to acquire goods in the market, not for personal consumption, but simply in order to exchange them again for the goods that were really wanted, each individual commodity was only accredited with that value given by the subjective valuations based on its direct utility. It was not until it became customary to acquire certain goods merely in order to use them as media of exchange that people began to esteem them more highly than before, on account of this possibility of using them in indirect exchange. The individual valued them in the first place because they were useful in the ordinary sense, and then additionally because they could be used as media of exchange. Both sorts of valuation are subject to the law of marginal utility. Just as the original starting point of the value of money was nothing but the result of subjective valuations, so also is the present-day value of money.
If the objective exchange value of money must always be linked with a preexisting market exchange ratio between money and other economic goods (since otherwise individuals would not be in a position to estimate the value of the money), it follows that an object cannot be used as money unless, at the moment when its use as money begins, it already possesses an objective exchange value based on some other use. This provides both a refutation of those theories which derive the origin of money from a general agreement to impute fictitious value to things intrinsically valueless and a confirmation of Menger's hypothesis concerning the origin of the use of money.
Smiling Dave:It does, because otherwise it's price, say $17 per bitcoin, is basically a fad.
Do you have some way to prove this?
Meaning that's what people are willing to pay now, but there is no guarentee they will be willing to pay that tomorrow, because there is no reason for that price. Why is the price $17, and not $10, or ten cents?
I'm sorry...is there a guarantee that someone will be willing to pay anything for anything tomorrow? What is the reason for any price? And why is the price of anything what it is?
Of course I know the answer to these questions...they are merely rhetorical to illustrate the fact that what you are saying is no more a proof about bitcoin than simply saying "it won't work because Mises said so." (which is another point I'll get to shortly)
I read through both of your blog entries and in the regression theorem you go through all that language and explanation, and finally, when faced with the question of why despite all of the theorizing and (the apparent fact of Mises being an infallible master) would anyone start trading real world goods and services for bitcoins your answer is nothing more than "well, they just don't know any better."
This is in addition to (and probably because of) the fact that you are interpreting the regression theorem to be "forward looking", which I'm not so convinced it is. As far as I can tell, the regression theorem was created as an explanation for the origin of our current money...not as a description of the exclusive means by which money may arise. It seems to me that the regression theorem does not prove, or purport to prove, that money can ONLY arise this way, rather it simply provides a solution to the seemingly endless "regression" in an explanation of why the current money has value.
Very good post, dvide.
One or two quibbles.
1. Those sea shells had decorative value to a lot of people, not a small group. Big difference. The way it works is that after a lot of people value it for something else, it becomes useful as money. Key words here are "a lot" and "for something else".
2. The point of arguing abstractly about what will happen is that it has repercussions for today to some people. There are those who think that there is money to be made investing in bitcoin now, on the assumption that demand for it will spread and so they will make money. As a public service, some of us are telling these people to hide their wallets, for bitcoin is a scam that is doomed to failure.
3. Don't know much about namecoins. Maybe you are right. Although again, how many people care about protecting their domain name? I don't. No one I know does.
4. Yes, of course, once the money gets going, it need not retain it's old usefulness. But bitcoin hasn't gotten off the ground yet. It's not like bottled water in Iraq, where everyone is happy to have it. Key word again is "everyone".
5. The key is, the average person thinks, "I worked hard, now I want something in return that will make me happy. Bitcoin doesn't make me happy at all. I cannot eat it or drink it. It will only make me happy if there is a sucker willing to trade for it, even though he gets nothing out of it. I have no reason to think there will be such a sucker. So forget about bitcoins."
How are you going to convince such a person to accept a bitcoin? Answer: You won't. That's why bitcoin is doomed.
John,
1. I think something I wrote to dvide nails it in a way understandable to all.
The key is, the average person thinks, "I worked hard, now I want something in return that will make me happy. Bitcoin doesn't make me happy at all. I cannot eat it or drink it. It will only make me happy if there is a sucker willing to trade for it, even though he gets nothing out of it. I have no reason to think there will be such a sucker. So forget about bitcoins."
2. The argument is not that Mises said so, therefore it is gospel. The argument is follow his chain of reasoning and see that it is inescapably true.
3. If the regression theorem is not forward looking as well, then it is pointless. The q it comes to answer is how do you get around the circular reasoning. If the bitcoin guys are right, the answer is simple. Who cares how it happened? It happened. It can happen in a million ways. Just like it happened to bitcoin. [Of course it didn't happen to bitcoin at all. Outside of a small group, small enough to fit statistically into the sucker born every minute crowd, nobody uses bitcoins as money].
4. Of course, the regression theorem is saying that its answer is the only answer. Maybe if you show me which step of its chain of reasoning is only one of many possibilities I will understand you better.
5. Oddly enough, every money on the face of the Earth, in all recorded time, fits the regression theorem. That is not proof, of course, but it should give one pause.
1. I don't know, this doesn't seem like a compelling answer to me. When does a pond become a lake? I don't see how you can draw an aribtrary line and say that's why. We also have to remember that Bitcoin was explicitly designed to be money, and we are standing on the shoulders of people like Mises. We already have sufficient theories of money and know all about the utility that money brings. That gives Bitcoin an advantage over things like gold historically, where man at the time was not thinking about money, and was not used to the benefits that using money brings over barter. Perhaps it's true that money spontaneously arose around historical man, due to its other functions, but we already know what money is and how useful it is. And so we can all agree to use a medium of exchange upfront, to enjoy the increased standard of living that it brings. That kind of sounds like a socialist/commune argument, but I don't mean it to be that way; it's just network effects. It's like how we all agree to use PDFs for exchanging documents, instead of some other random file format that nobody else can read.
2. That's fair. The debate is very important, I don't mean to suggest that it isn't.
3. Protecting your domain name seems to be valuable for poker and bittorrent sites lately, but that isn't strictly what I was getting at. Your unique domain name is itself valuable too, by its own merits, even it it isn't liable to get seized. I don't just mean that namecoins are valuable because of their ability protect your domain from seizures (though that is an important consideration of namecoin). So for example, even if all of the other TLDs are taken for a name that I want (dvide.com, dvide.net, dvide.org, dvide.co.uk, etc), I could potentially find that dvide.bit is still available in namecoin. That name would be useful to me even if I don't expect the government to seize dvide.com, if I were to buy that instead. Of course, a .bit name is much less useful now because the whole infrastructure is designed around the centralized DNS system, and so the average person will not be able to do a lookup on dvide.bit anyway. But the fact that it's there means that people can slowly start to make use of it. Local ISPs might begin to resolve the names for you. What's more, when prices establish themselves and find equillibrium, it may well be much cheaper than having to register a name through the centralized monopoly power. Though I'm not sure why namecoin insist on only allowing .bit names at present. And ownership over an authorative global name->value pair can be useful in general, not just specifically for domain names.
4. Yeah, I agree. It's far too early to say that Bitcoin has gotten off the ground yet. I just don't see it as being impossible.
5. That seems to be just begging the question to me. It's only correct if your premise is correct, but we haven't established that yet.
Smiling Dave: 5. Oddly enough, every money on the face of the Earth, in all recorded time, fits the regression theorem. That is not proof, of course, but it should give one pause.
Really? How does the Ithica Hour fit into regression theorem? The Hour does not, and has never, had any other backing beyond it's stated intent; to represent an hour of unskilled labor. Is that a commodity befitting a money? Maybe, but it's certainly not fungible, as an hour of unskilled labor from my 18 year old nephew is more valuable then that same hour from his cronicly unemployed and mostly disabled stepfather. If the Hour regresses back to the US Dollar, then so does Bitcoin after a fashion. If the Hour is simply a dollar proxy, and thus the end of the Hour is inevitable, then I must ask in what timeframe? If the Hour, or Bitcoin, are doomed to failure, but that doom is dependent upon events that are unlikely to occur within my lifetime, why would I care?
1. A fair criteria, I think, is if enough people accept bitcoin that you can buy everything that is in your house right now with bitcoins. That's when the puddle will be a lake.
5. If you think it is begging the question, please tell me how you will convince that person to accept bitcoins. What will you tell him? "No, you want something that won't make you happy?" "No, there are plenty of fools?"
To call them fools and suckers in the first place is where you are begging the question.
What I call them is not germane to the argument. Substitute "respected citizen" if you wish. The question remains, how will you convince the person who worked hard and wants something of value for his work to accept a bitcoin, after listening to his reason for not wanting it?
I admit not knowing about the Hour until you brought it up. It has been around for twenty years, it seems.
The Ithaca Hour has nothing to do with an hour of labor, skilled or unskilled. You get Hours not by working for an hour mowing lawns or doing anything else, but by clipping a coupon from the back of a magazine and mailing it in. It is not clear to me if you have to pay for this magazine, or how much you have to pay for it.
How did these Hours get started? They were given away free at first. Before they were distributed, the guy interested in getting things going found 90 people willing to accept these coupons from the magazine as money. It is not clear what their motives where in agreeing to accept these coupons for their goods and services.
But the fact that 90 people in that small town "formally agreed" in advance to accept Hours means that my point 5 has been answered. Why should Smith accept Hours? Because Jones and Robinson and 87 other people signed a contract [I assume that's what formally agreed means] in advance agreeing that he could take their goods and services in exchange for an Hour.
After all that, to be honest, I am challenged by the Hour system. Thank you for this intriguing information.
More on the Ithaca Hour.
I'm not sure it rates as a currency yet. I wonder what percent of business done in Ithaca and the twenty mile radius around it where Hours are accepted is done in US dollars, and how much in Hours? Their websites say that $110,000 worth of Hours have been issued since inception. Doesn't seem like much. Per capita income is $13,000, population of Ithaca alone, not counting the 20 mile radius, is 30,000 people.
13,000 times 30,000 is $390 million dollars a year. So that all the Hours ever printed make up one three hundreths of a percent of the money earned in one year in Ithaca. Or one six thousanths of a percent of the money earned in the twenty years Hours have been around.
A plaything, not a currency.
But you're saying that the average person will argue back to me, 'It will only make me happy if there is a sucker willing to trade for it, even though he gets nothing out of it.' So, if the argument isn't contingent on the people who agree to accept bitcoins as being suckers in the first place, then I don't really understand what the argument is. Saying 'he gets nothing out of it' is wrong IF (crucially) he can also use it to purchase goods and services that he desires in the future. So it assumes that Bitcoin will crash, but this is the very thing you're trying to establish by making the argument. If money does not need non-monetary utility, which is what we are discussing, then the argument would make no sense. Unless by saying this, you assume that the only way for bitcoin to grow is through the rhetoric (i.e. if I can't convince the average man to accept my bitcoin, bitcoin can't grow, and if bitcoin can't grow, bitcoin is useless).
I don't claim that I will need to convince anybody. I don't buy bitcoins because I expect that I will be able to personally convince somebody else with rhetoric to buy them from me; I expect that I won't need to. Like I've said, the people accepting bitcoins today do so because they already believe bitcoins can work. They might come to this conclusion independently, just by reading the source code for example. So there is already an opporunity to trade in bitcoin amongst people who are already convinced by them. So I can go to a few shops like http://www.belgianflavours.com, who already accept bitcoins, and buy stuff with them. And as more and more people see that bitcoins can function as a medium of exchange, by their example in use, more and more people will naturally begin to see less risk (or more purchasing opportunity) in them, and so they may start accepting them too, without the need for rhetoric. If I thought that they required any hard selling and rhetoric at all to get them off the ground, I wouldn't be arguing in favour of them in the first place, so I don't see what use it is in this debate to try to convince your hypothetical average man to accept my bitcoins.
Of course, you can say that it's all just a hype bubble, and that they're all suckers, as this does explain it too. That's fine, but then we have two competing hypothesis for the growth of bitcoins. An explanation that conveniently accounts for all of the observed phenomena thus far doesn't necessarily mean that it's therefore true. What we are discussing right now is one hypothesis versus the other. A way to falsify my hypothesis will be if bitcoin crashes on its own accord, and for you it will be if the puddle becomes a lake :) So I enjoy following Bitcoin, because honestly I'm not even totally convinced by it myself. It wouldn't totally shock me if it did crash, and I'm happy to accept your explanation if it turns out to be the better one.