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Bitcoins *prove* Mengerian account of money creation?

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Wheylous Posted: Wed, Jan 4 2012 9:42 PM

I'm rereading http://mises.org/daily/5598 and its linked articles to remind myself of Menger and Mises's work on the theory of money, when I came to a possible idea.

Menger said that money must at first be a commodity (for however short a time) before it can settle into some sort of equilibrium as a widely-used medium of exchange.

Some people say "but Bitcoin! That was simply created and it's money!"

My idea: well, Bitcoin was actually being used not as money but as a way to make money initially. People were trading it like a stock, not as money. As such, it was being used as a commodity, not money. Indeed, if it ever does become money, it will be because it was first used as a stock.

 

Am I misunderstanding the meanings of stock and commodity or might I be correct?

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Agreed. More reason Graeber and other an-coms are full of crap.

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Phaedros replied on Wed, Jan 4 2012 10:14 PM

Aside from the fact that they omit historical data, yes they are.

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Clayton replied on Wed, Jan 4 2012 10:14 PM

Bitcoin isn't important enough to prove anything. Bitcoin market cap is under $100m. I work for a company that has a hundred times that much cash on hand.

Clayton -

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Phaedros replied on Wed, Jan 4 2012 10:29 PM

It doesn't matter how important or big it is.

Tumblr The welfare of the people in particular has always been the alibi of tyrants. ~Albert Camus
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Wheylous:
My idea: well, Bitcoin was actually being used not as money but as a way to make money initially. People were trading it like a stock, not as money. As such, it was being used as a commodity, not money. Indeed, if it ever does become money, it will be because it was first used as a stock.

I think that the people who interpret the origin of money as commodity and use this as a "refutation" of Bitcoin use an overly narrow interpretation of Menger (and Mises).

First of all, it is not clear why it must praxeologically start as a commodity that is used in a physical exchange. Economy does not only consists of goods, but also of services. It does not only consist of exchange of property (Title Transfer Theory of Contract), but also of alterations of existing property (services). All the Austrian Bitcoin detractors that I talked to ignore this. According to their logic, Western Union and Paypal could not exist either, since they do not sell any goods that can be consumed. They only provide a service, which would not exist without actual money, therefore, according to their logic, they have no value and will collapse. The absurdity of this claim is clear to anyone who spends more than a couple of seconds  thinking about it. Bitcoin is primarily a service. It does what money is supposed to do: reduce transaction costs. And as long as it does it, it will continue to exist. Of course, it has plenty of other "soft" features, such as predictable degressive supply, decentralisation, is form-invariant and so on, but the ability to decrease transaction costs is the decisive one, just like with all money.

Second of all, in all the sources that I could find (Mises, Rothbard, Hoppe), the author says that the regression theorem backtracks to commodities under barter. In other words, the requirement of being a commodity does not address a situation where money already exists, and is displaced by other money. On the contrary, because Mises tried to explain how money substitutes come to be, even though they are not commodities, by "piggybacking" on the prior money, the claim that new money must also be a commodity is directly contradicted. Since Bitcoin is highly liquid (freely trades against fiat money on multiple exchanges), and can be used as a medium of exchange, it is already past the threshold of "origin of money". We can debate whether the regression theorem is correct or not, but from the perspective of Bitcoin, it's irrelevant, because empirically, it exists. Some claim that money substitutes become money substitutes because

  • they are refundable at par
  • they have zero maturity

However, upon closer examination (e.g. "Austrian Definitions of Money Supply" by Rothbard), he randomly admits that neither of these two are necessary and allows for imperfect exchange ratios and higher than zero maturity. So there should be no objection to Bitcoin from this point of view either.

And to the "objection" of Cayton (and before that, Smiling Dave) and other opponents of Bitcoin, that "it's not enough", unless they can produce a source which says that money must appear by the snap of fingers with a huge market capitalisation as if by magic, they should think about their "arguments" more carefully. In fact, what they are saying is much more like the statist view of money. It's not how markets work.

Of course, none of this proves that Bitcoin is money, or that it ever will be. It just explains that many people do not actually understand what the Austrians actually write about money. I sometimes have my doubts that they actually read the stuff.

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Wheylous,

Nope, commodity [in this context especially] means something you can take home and use, not something whose only use is that you pass it off to the next sucker.

I suggest you go to my website and do a search for regression theorem, and/or bitcoin.

I mean this in the nicest way possible, but Pete is only trying to cloud a clear issue.

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I see Smiling Dave is still stuck in his zealot mode, characterised by complete ignorance of confronting opponents' arguments.

Just to reiterate the points with which you bore others:

  • ignorance of transaction costs (i.e. the reason why money comes to being and why Bitcoin has an advantage over fiat and/or gold)
  • ignorance of parts of economy that provide services rather than goods (which leads to the conclusion that Paypal and Western Union are valueless and will collapse)
  • ignorance of the fact that we already do have money, so new money does not need to be a commodity (e.g. money substitutes). This point alone shows that you have no clue about what you're talking about. If your argument was true, there would be no money substitutes.
  • stuff that you just make up, like that money can only come to being if it never has fewer users than some arbitrary number

Or to put it short, http://www.youtube.com/watch?v=5KT2BJzAwbU.

 

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Pete,

1. Bitcoin has many advantages over fiat and gold, but it has one missing ingredient that overrides every possible advantage. Just as a virtual wife on a computer screen is superior to a real flesh and blood wife in many ways [never needs gifts, eats nothing, never grumpy, etc etc], but has one missing piece that precludes her from being a wife [not flesh and blood], so too bitcoin has many adavantages, but it just is not and cannot become and never will be money, for the reason Mises spelled out in the regression theorem.

2. Bitcoin is not a service. A service means a human being working for you. Labor is something that one could argue has intrinsic value, meaning that many people might be willing to exchange their products for binding commitments of someone working for them. But, and I don't see why you don't grasp this simple idea, bitcoin has no intrinsic value. If a person has a bitcoin the only thing in the world he can do with it, the only only only thing, is pass it off to the next sucker. Which is exactly what Mises proved precludes it from being money.

3. Bitcoin is not a money substitute. A money substitute is something I will accept in leiu of money, because someone has legally commited himself to exchanging my money substitute for his money on demand. But no one on Earth has legally comitted himself to exchanging bitcoins for anything.

4. You misquote me. [As an excercise, show me where I ever said such a thing. You won't find it.] Of course a money can get off the ground initially by only one person in the Universe accepting it. But at that stage it is not a money.

It is only a money, by definition, when A LOT of people will accept it in exchange for anything they have. I did not make this up. Any Econ 101 student, even a marxist or keynesian, will concur.

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Smiling Dave,

  1. The requirement that money is also a commodity is, according to Austrians, only necessary when money emerges from barter. It is not necessary when new money replaces other money (such as money substitutes or government fiat money). While it is possible that in some situations, some Austrians omitted these conditions in their claims, every one of them makes another claim where they refer to commodity during barter, and confirm that once money exists, it is not necessary that money has commodity use anymore. This is claimed by Mises, Rothbard and Hoppe. I already said this, you ignored it.
  2. The concept of intrinsic value contradicts the subjective value principle of Austrian economics. I already said that several times, yet you repeat your erroneous claim. That Bitcoin is a service is empirically proven, and the existence of Paypal and Western Union (which compete with Bitcoin on this level) proves that there is a demand for such a service, i.e. an analogy. Furthermore, several Austrians made claims like "money is neither production nor consumption good" and "money is not demanded for consumption, but for exchange". So again, once we get rid of the problem of origin of money (which, both theoretically and empirically, is already in the past), the argument of "no value" becomes irrelevant.
  3. I did not claim that Bitcoin is a money substitute, but that money substitutes are example of non-commodity money, i.e. refuting your argument that non-commodity money cannot emerge (on a free market, presumably). So you mix two things. Furthermore, while it is claimed by some Austrians (and non-Austrians) that money substitutes come to existence because the issuer legally obliged himself to exchange it on demand at par, they otherplaces admit that not all substitutes fulfill these requirements. Rather, I submit that money substitutes come to existence becasause they decrease transaction costs (writings by Hoppe, Selgin, Black and probably others I forgot, support this claim). I also emailed about this particular argument with Schlichter and Kinsella and they do not seem to object. The fact that money substitutes sometimes have a fixed exchange rate, and zero maturity, however, is, according to Austrians, not a necessary condition for their existence. Historically, it might have been typical, but it's not even a common one nowadays, for example you can't redeem your fiat in anything, and if you want to withdraw large amount of cash, you need to inform the bank in advance. So again, money substitutes are an analogy to Bitcoin.
  4. You made several times derogatory statements regarding the number of users and market capitalisation of Bitcoin in the context of "disproving" the viability of Bitcoin. I tend to agree with you that Bitcoin is, currently, not money, but I disagree that it is not a medium of exchange, because it empirically is, if not for any other reason then because I use it that way and obviously the counterparties too. You use medium of exchange as a synonym for money, which is misleading. Medium of exchange does not have a requirement for "general acceptance", merely needs to be distingiushed from barter.

Putting 2 and 3 together, as long as Bitcoin has lower transaction costs than the alternatives, and freely trades against fiat, it will continue to exist. Whether it evolves into money is another thing.

By your own definition, gold is not a money either. What you maybe do not realise is that, unless the banking system collapses (which is quite likely) or there are significant changes to the legal system favouring gold, gold will never become money, because the banking system, particularly one based on fiat, has lower transaction costs than physical exchange. Even if the fiat system collapses and is temporarily replaced by barter and gold evolves into money at the beginning, Bitcoin can still displace it aferwards, because it still will decrease transaction costs.

So, you ignored two points (origin of money and origin of value) and misrepresented other two (money substitutes and size of economy). Well done, I expected nothing less.

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1. bitcoin is not a money substitute, nor is it govt fiat money. Your statement that "once money exists it si not necessary that money has commodity use anymore" is mistaken. You think that Mises et al meant that once any money at all, say gold coins, exist, then the door is open for bitcoins and other useless garbage to be money. That is not what they meant at all. They meant that once a particular thing is used as money [because it is a commodity or reedemable on demand for a commodity] for a while, then that particular thing that used to be a commodity does not have to remain a commodity. For example, if paper money is redeemable for gold on demand fro a while, thus becoming acceptad as money, it can remain so even after its connection to gold is broken. That is what they are talking about. Not about a country having a money and somebody wanting to foist useless bitcoins on them from scratch.

You see the flaw in your argument. Bitcoin never was a money, nor a commodity, so there is nothing to talk about.

2. The concept of intrinsic value contradicts the subjective value principle of Austrian economics.

So you say. But Ludwig von Mises, who knew a little about Austrian Economics, disagrees. Here's what he has to say in the theory of money and credit. I inserted one little phrase in brackets of my own, which I think everyone will spot right away, but all the rest is Mises, word for word:


The Necessity for a Value Independent of the Monetary Function
before an Object can serve as Money

 
If the objective exchange-value of money must always be linked
with a pre-existing 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 [like those stupid bitcoins] and a confirmation of Menger's hypothesis concerning the origin of the use of money.
 

This link with a pre-existing exchange-value is necessary not only
for commodity money, but equally for credit money and fiat money.'
No fiat money could ever come into existence if it did not satisfy this
condition.
..

You see, "intrinsic value" and "OBJECTIVE exchange value" are two ways of saying the same thing [as is evident from the Mises quote, which contrasts things with objective exchange value with "intrinsically valueless" things], and neither contradict the Austrian principle that all value is subjective.

For some people, that might be a real head scratcher. Either value is subjective or objective, right? It can't be both, right? How could the mighty von Mises have missed the boat so badly, writing all over the place that all value is subjective, and right here, when talking about things like bitcoin, he suddenly says money has to have objective [not subjective] value? How could he belittle something as "intrinsically valueless", when all value is subjective? Didn't von Mises know anything?

For those of you who want to know the answer, you will have to hit the books. Read the article "Bitcoin Takes a Beating" on my website. When you have digested carefully what Mises said there, and really undestand it, you will finally get a] why bitcoin is not now and never will be money and b] why Mises is not contradicting himself.

I have led the horse to water. Now he has to drink.

4. Money sustitues are not an "analogy" to bitcoin. It is like saying a virtual wife is an analogy to a flesh and blod wife. Money susbtitutes have to be redeemable for something. Bitcoin is redeemable for nothing. The Mises quote above, especially the last paragraph, will show those thirsty for enlightenment why fiat money, even in the decrepit state it is in today, is way way different than bitcoin. Study well, ye seekers of truth.

5. I am glad we agree that bitcoin is not a money now. If you insist on saying that two idiots using beany babies to trade with make beany babies a medium of exchange, which seems to be one use of the phrase [though I have quoted in the forum mainstream articles that say otherwise], that's fine with me. We can agree that some fools are currently buying things with bitcoin. We can agree that that doesn't make it a money, contrary to what Mike Suede asserts. I'm glad we both disagree with him. 

But we seem to disagree on the signifance of the fact that two retards use rocks or used sandwhich bags to trade with. To me, such a fact is of no economic significance. Certainly anyone paying $33.00 for that used sanwhich bag is a sucker. Same with bitcoin.

6. Yes, gold right now is not a money. So what? As for gold never being money because of high transaction costs, I disagree. The technology of the debit card makes it as viable as anything else. But even if bitcoin has ZERO transaction cost, and everything else had a 100% transaction cost, bitcoin would still be just the virtual wife who never nags or spends money. She is still missing the very essence of what a wife is about. Mises explained what the essence of money has, and why bitcoin just doesn't cut it.

7. If you understand what I wrote, you will grasp that I didn't ignore or misrepresent anything.

Good luck to you.

P.S. AJ, are you really going to buy those worthless bitcoins? I have a bridge in Brooklyn for you at a great price, a real steal.

 

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Smiling Dave,

while Bitcoin is neither fiat money nor most likely also not a money substitute, those two are an example of non-commodity money. You simultaneously claim that money must be a commodity, while admitting that neither fiat money nor money substitutes are. So you contradict yourself.

Money substitutes do not require either zero maturity nor redemption at par. Even if we admit that bank notes and checking deposits historically developed under these circumstances, there are plenty of other examples that never had these qualifications. The fact that there is a legal connection is also irrelevant, functionally liquidity has the same effect, for example. Bitcoin exchanges, allowing sales of Bitcoin against fiat, are analogous to banks redeeming money substitutes. This works without legal obligations and without a predefined exchange rate.

Objective exchange value is not intrinsic value. Furthermore, the value of Bitcoin is derived from being a service, like Paypal or Western Union. You yet again fail to address their existence, even though according to your logic, they should not be viable businesses. Your interpretation ignores the concept of services (transactions that do not involve an exchange of goods). Also, once Bitcoin has a price, the "link to the past" referred to by Mises is established, so your argument is also wrong from this perspective.

To my best recollection, I never claimed that Bitcoin is money.

In other words, you continue with your former performances: ignorance and repetition. We're back at the start and you're boring me.

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1. Fiat money was either once redeemable for a commodity like gold, or has a use to the owner of it, paying his taxes. Bitcoin has no use whatsoever. It cannot be used for anything but to pass on to the next sucker. Money substitutes also can be redeemed on demand, or at least were initially , for a commosity. Bitcoin cannot be. That is not a hairsplitting disctinction. It makes bitcoin totally useless, unlike the the others. So that the others are not "examples" of anything related to bitcoin.

2. Zero maturity and redemption at par is not relevant here. Bottom line, you can get SOMETHING for them when the time comes, in a legally binding manner. If you have a bitcoin, nobody has to give you anything for it, ever. Bitcoin does not have functional liquidity. You have to work very hard to find a sucker willing to take your bitcoins, and even then he will only give you a very limited list of things. You still cannot buy a quart of milk with a bitcoin. That is not functional liquidity. And banks redeem money susbstitutes because they legally obligated themselves to do so. Nobdy is legally obligted to accept a bitcoin.

3. Objective exchange value is not intrinsic value.

Yes it is. Explain the difference, please. Also explain why Mises contrasted objective exchange value to "intrinsically valueless". That tells me that intrinsic value and objective exchange value are indeed the same thing. Read the quote carefully, if have not yet done so, and you will see what I mean.

4. Paypal and Western Union are not "services". They are legal obligations someone takes upon himself, the paypal company or the western union company, to cough up real actual dollars to Mr A, who lives far away from you, if you pay them a fee. Nobody legally obligates himself to do anything for you when you get stuck with a bitcoin.

Your ignoring this obvious simple distinction tells me you are either very foolish or ignorant, [beacuse you didn't grasp it] or expect your readership to be [because you did grasp it but hope everyone else is stupid enough not to].

5. I explained services earlier. What flaw did you see in my reasoning?

6. Also, once Bitcoin has a price, the "link to the past" referred to by Mises is established,

"Having a price" does not mean that mountgox sets the price at whatever it is today. A price for money is when EVERYONE, [not a trivial handful of people, such as a few thousand scraped together from around the world] is willing to use it and exchange it at that price. Contrast this with bitcoins, where over 99% of humanity correctly see it as a useless and valueless and will not give you anything for it.

You see, when you admit that bitcoin is not now and never has been a money, you are at the same time admitting [though you do not realize it, apparently] that it does not now and never has had a "price", in the sense required by Mises in his work.

7. I am glad we agree that bitcoin is not a money. Help me convince the other bitcoin fanatics who insist that it is.

8. If I bore you, I'm sorry you feel that way. Can you think of what you can do about it? [Hint: Don't read my posts. I don't write them in hopes of convincing you, but rather in hopes of explaining to others why you are in error, and to save them a little money by avoiding the bitcoin scam.]

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AJ replied on Wed, Jan 11 2012 7:28 AM

Sure I'll buy bitcoins, Dave, because there is a very cheap but high-quality web design service in India that accepts bitcoins. The others want cash or credit, and I don't want to deal with the fees and inconvenience. They may be suckers, but what do I care? Once BTC transactions are as fast as email, the odds of a collapse in BTC in the few milliseconds it takes for the transaction to go through are exceedingly remote. As a consumer, it simply seems a wise choice, whether we call it money or schmoney.

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Autolykos replied on Wed, Jan 11 2012 8:27 AM

Smiling Dave:

2. The concept of intrinsic value contradicts the subjective value principle of Austrian economics.

So you say. But Ludwig von Mises, who knew a little about Austrian Economics, disagrees. Here's what he has to say in the theory of money and credit. I inserted one little phrase in brackets of my own, which I think everyone will spot right away, but all the rest is Mises, word for word:


The Necessity for a Value Independent of the Monetary Function
before an Object can serve as Money

 
If the objective exchange-value of money must always be linked
with a pre-existing 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 [like those stupid bitcoins] and a confirmation of Menger's hypothesis concerning the origin of the use of money.
 

This link with a pre-existing exchange-value is necessary not only
for commodity money, but equally for credit money and fiat money.'
No fiat money could ever come into existence if it did not satisfy this
condition.
..

You see, "intrinsic value" and "OBJECTIVE exchange value" are two ways of saying the same thing [as is evident from the Mises quote, which contrasts things with objective exchange value with "intrinsically valueless" things], and neither contradict the Austrian principle that all value is subjective.

For some people, that might be a real head scratcher. Either value is subjective or objective, right? It can't be both, right? How could the mighty von Mises have missed the boat so badly, writing all over the place that all value is subjective, and right here, when talking about things like bitcoin, he suddenly says money has to have objective [not subjective] value? How could he belittle something as "intrinsically valueless", when all value is subjective? Didn't von Mises know anything?

For those of you who want to know the answer, you will have to hit the books. Read the article "Bitcoin Takes a Beating" on my website. When you have digested carefully what Mises said there, and really undestand it, you will finally get a] why bitcoin is not now and never will be money and b] why Mises is not contradicting himself.

I have led the horse to water. Now he has to drink.

I think the terminology Mises used there in The Theory of Money and Credit (1912) - assuming the English translation is accurate - is mistaken. I understand the point of Mises' statement, however: money must come from (or be in the form of) something that people already valued to some extent before using it as money. That is to say, whatever came to be used as money must have been imputed some value beforehand by people. At the very least, then, I have a terminological dispute with both you and Mises using phrases like "objective exchange-value" and "intrinsically valueless".

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Non parit potestas ipsius auctoritatem.

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Smiling Dave:

1. Fiat money was either once redeemable for a commodity like gold, or has a use to the owner of it, paying his taxes.

In other words, you admit that it is not necessary that money is a commodity, but there are exceptional circumstances. This disqualifises the core of your argument.

Smiling Dave:
Bitcoin has no use whatsoever. It cannot be used for anything but to pass on to the next sucker.

As I explained countless times, if not for anything else, Bitcoin can be used to decrease transaction costs of fiat money payments. Various Austrians say that money evolves because it decreases transaction costs, and also use this to explain why money substitues emerge. So, another fail.

Smiling Dave:
Money substitutes also can be redeemed on demand, or at least were initially , for a commosity.

Not all money substitutes can be redeemed, or were redeemable, for a commodity.
 

Smiling Dave:
Bitcoin cannot be.

Bitcoin can be traded freely on the exchanges. So it can, the only thing is that it does not have to.
 
Smiling Dave:
That is not a hairsplitting disctinction.
You have failed to establish what this distinction actually is.

Smiling Dave:
It makes bitcoin totally useless, unlike the the others.

This is a non-sequitur.
 

Smiling Dave:
So that the others are not "examples" of anything related to bitcoin.

Another non-sequitur.
 

Smiling Dave:
2. Zero maturity and redemption at par is not relevant here. Bottom line, you can get SOMETHING for them when the time comes, in a legally binding manner.

I repeat, this is not necessarily true. There are situations where the issuer can refuse redemption (suspension of specie payment clauses, account freeze, for example), and there is also the risk of default.

Smiling Dave:
If you have a bitcoin, nobody has to give you anything for it, ever.

We have established that the legal obligation to redeem in specie is not a necessary condition. Furthermore, Bitcoin freely trade on the exchanges, so the lack of legal obligation is irrelevant.

Smiling Dave:
Bitcoin does not have functional liquidity.

On the contrary, this is precisely what it has. What it does not have is "legal liquidity".
 

Smiling Dave:
You have to work very hard to find a sucker willing to take your bitcoins,

Again, exchanges show that this is not a problem. You can sell your Bitcoins 24/7. In fact, the exchanges are far superiour to banks, which are only open at limited times and place arbitrary limits on how much you can exchange.
 

Smiling Dave:
and even then he will only give you a very limited list of things.

As long as this "very limited list of things" includes fiat currencies, there is no problem. Furthermore, as I already explained in the past, the number of merchants accepting Bitcoin is growing, service providers allow you to use Bitcoin as a pure medium of exchange (similarly to, say, credit cards). For some reason, this is "not enough" for you, without coherently explaining what "is enough", for example, since national currencies are also not universally accepted, but mostly only within their territory.
 

Smiling Dave:
You still cannot buy a quart of milk with a bitcoin.

According to the Bitcoin trade wiki, WaterKefir accepts Bitcoin. Also, while it was still operational, Bitcoinworldmarket did sell milk. Furthermore, I can find plenty of merchants that do not accept a particular fiat currency either. Double fail.
 
Smiling Dave:
That is not functional liquidity.
Liquidity does not mean that an arbitrarily chosen guy accepts the good. It means that you can sell it at the market price with minimum hassle. And you indeed can.
 
Smiling Dave:
And banks redeem money susbstitutes because they legally obligated themselves to do so.
Again, the legal obligation is not a necessary requirement, and furthermore, it's not even practically usable in many cases. Compared to that, Bitcoin excels.
 
Smiling Dave:
Nobdy is legally obligted to accept a bitcoin.
Again, legal obliation is not a necessary requirement. Liquidity is. And you can sell your Bitcoins freely.
 
In general, I see you are mixing two things: the motivation of people to accept Bitcoin as a medium of exchange, and the motivation of people to change Bitcoin to fiat. Those are two separate situations, but can occur simultaneously, for example if a payment provider, such as Bit-Pay, abstracts from this distinction and provides a unified frontend.
 
Smiling Dave:
Yes it is. Explain the difference, please.
Intrinsic value is an idea that value is determined by the characteristics of the object in disconnect with the subjective utility of the consumers. This contradicts the Austrian school.
 
Objective exchange value refers to the origin of money from a barter situation, and the link to that.
 
In fact, Mises says:
Mises:
... obligation of conversion being de jure or de facto assumed by anybody, and nobody having any grounds for hoping that such an obligation ever would be assumed by anybody.
So he acknowledged at least that it's important that the conversion be actually practicable. He might have assumed that absent an apriori legal obligation, there would be no incentive to do this. However, in case of Bitcoin, there is.
 
Smiling Dave:
Also explain why Mises contrasted objective exchange value to "intrinsically valueless".
Maybe Mises ignored the value of services just like you, but unlike you, he acknowleged that a link to a prior money can make the new money work.
 
Smiling Dave:
That tells me that intrinsic value and objective exchange value are indeed the same thing. Read the quote carefully, if have not yet done so, and you will see what I mean.
The easiest explanation is that you are ignoring that services and other non-goods can have value. There are plenty of examples of virtual goods whos only value is in being a catalyst. The best example is language. I already said this long time ago.
 
Smiling Dave:
4. Paypal and Western Union are not "services". They are legal obligations someone takes upon himself, the paypal company or the western union company, to cough up real actual dollars to Mr A, who lives far away from you, if you pay them a fee.
First of all, I do not understand the logical reasoning behind "legal obligation, therefore not a service". This makes no sense. It's probably just another non-sequitur. The second problem is that you fail to comprehend the distinction between the legal and technological framework. Paypal and WU is just a middleman that has the technological means to conduct the transaction. Since the technological framework belongs to the provider of this service, he needs to enter into a contract with both of the other parties in order to facilitate this.
 
Similarly, a transaction provider such as Bit-Pay can facilitate the transfer of dollars or forex. The technological framework, to a large extent, does not belong to him. It's provided by the Bitcoin network and the exchanges. If you can use this framework without the middlemen such as Bit-Pay, you eliminate the legal connection to the middlemen too. And once you're happy holding Bitcoins for longer than the transaction itself, the whole issue evaporates.
 
Smiling Dave:
Nobody legally obligates himself to do anything for you when you get stuck with a bitcoin.
Once again, the legal obligation is not a necessary requirement. It is one of the ways of achieving liquidity, but not the only one.
 
Smiling Dave:
Your ignoring this obvious simple distinction tells me you are either very foolish or ignorant, [beacuse you didn't grasp it] or expect your readership to be [because you did grasp it but hope everyone else is stupid enough not to].
I already said several times that the legal obligation is not necessary. You ignore it and instead retort with an ad hominem.
 
Smiling Dave:
"Having a price" does not mean that mountgox sets the price at whatever it is today.
You demonstrate the lack of knowledge of basic facts. Mt. Gox does not set the price, it's an exchanage that facilitates trade. Other exchanges do this too, and their prices tend to synchronise, if not for any other reason then due to arbitrage.
 
Smiling Dave:
A price for money is when EVERYONE, [not a trivial handful of people, such as a few thousand scraped together from around the world] is willing to use it and exchange it at that price.
No currently existing money is accepted universally, rather they are mostly limited to country territories. Furthermore, since I do not claim Bitcoin is money anyway, it's irrelevant. Double fail.
 
Smiling Dave:
Contrast this with bitcoins, where over 99% of humanity correctly see it as a useless and valueless and will not give you anything for it.
Congratulations, you now proved that money does not exist, since there is no such thing that is accepted by 99% of humanity.
 
Smiling Dave:
You see, when you admit that bitcoin is not now and never has been a money, you are at the same time admitting [though you do not realize it, apparently] that it does not now and never has had a "price", in the sense required by Mises in his work.
(emphasis added) To my best recollection, I never claimed that Bitcoin is money. So stop making misleading statements. Furthermore, you apparently do not realise that your interpretation of Mises leads logically to the conclusion that, at least since 1971 when Nixon went off gold standard, money does not exist. Well done.
 
Smiling Dave:
7. I am glad we agree that bitcoin is not a money. Help me convince the other bitcoin fanatics who insist that it is.
Merely because you're 99% wrong rather than 100% does not give you any particular edge in getting traction for your arguments.
 
Smiling Dave:
8. If I bore you, I'm sorry you feel that way. Can you think of what you can do about it? [Hint: Don't read my posts. I don't write them in hopes of convincing you, but rather in hopes of explaining to others why you are in error, and to save them a little money by avoiding the bitcoin scam.]
You bore me because you are unwilling to confront arguments. And because I'm stubborn, I'll continue confronting yours until either we arrive at a mutually agreed upon conclusion, or you shut up.
 
You fail to explain why Bitcoin is a scam. But that's just the proverbial cherry on the top of the big pile of errors you committed.
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Autolykos:
I think the terminology Mises used there in The Theory of Money and Credit (1912) - assuming the English translation is accurate - is mistaken.

A very interesting point. Let's look at what the original German says:

 

Mises:
Aus der Tatsache, daß der objektive Tauschwert des Geldes stets einer Anküpfung an ein auf dem Markte zwischen dem Gelde und den übrigen wirtschaftlichen Gütern bereits bestehendes Austauschverhältnis bedarf, da das wirtschaftende Individuum anders schlechterdings nicht in der Lage wäre, ein Werturteil über das Geld abzugeben, folgt weiter, daß das Geld nur ein solches Object in Verwendung genommen werden kann, welches in dem Augenblicke des Beginnes seiner Tauschmittelfunktion bereits auf Grund anderweitiger Verwendung objektiven Tauschwert besessen hat. Darin liegt eine Zurückweisung jener Theorien, welche die Entstehung des Geldes auf ein Übereinkommen zurückführen, in dem sich die Menschen dazu verstanden hätten, an sich wertlosen Dingen durch eine Fiktion imaginären Wert beizulegen, und eine Bestätigung der Mengerschen Hypothese vom Ursprunge des Geldgebrauches.

So just like I said, he's not saying anything about services, and he's not talking about intrinsic value but imaginary value. The value of services is not imaginary. It's just ignored by the Bitcoin detractors.

 

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...I have a terminological dispute with both you and Mises...

I'm OK with that. I hope you are equally ok with my using the terms the way Mises used them, and not the way you do.

I do find it odd that a student of a school of thought should claim the right to set terminology in opposition the founder.

For example, in basketball, the professionals use a phrase "top of the key" to denote a certain part of the court. It would be odd for a fan to say that the terminology is "wrong", because a key is a small object used to open locks, not a position in space. Those who founded the discipline [Mises]  get to set the terminology.

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Pete,

If you are sincere, please be professional. Meaning go the accepted path of intellectual dispute, to wit:.

Summarize my understanding of the regression theorem, and why I think bitcoin violates it, in a manner that I agree with. Thus we will both start on the same page.

Then show why either Mises is wrong [as some have claimed here], or my understanding of him is wrong [as many have], or why although Mises and I are both right, my conclusion that bitcoin violates the regression theorem is flawed [have yet to see that one].

When time permits, I will summarize my uderstanding of your position, and why I think you missed the boat.

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AJ,

My faith in humanity has been restored. TY.

Sure, in the situation you describe, go for it.

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Autolykos replied on Wed, Jan 11 2012 10:21 AM

Smiling Dave:
I'm OK with that. I hope you are equally ok with my using the terms the way Mises used them, and not the way you do.

Obviously, since I said that I at least have a terminological dispute here, I'm not okay with it.

Smiling Dave:
I do find it odd that a student of a school of thought should claim the right to set terminology in opposition the founder.

For example, in basketball, the professionals use a phrase "top of the key" to denote a certain part of the court. It would be odd for a fan to say that the terminology is "wrong", because a key is a small object used to open locks, not a position in space. Those who founded the discipline [Mises]  get to set the terminology.

As I said before, I think the terminology used by Mises in that part of The Theory of Money and Credit - namely the phrases "objective exchange-value" and "intrinsically valueless" - is mistaken. I think it's mistaken because, at least on first glance, it seems to contradict the Austrian school of economics' position that all value is subjective. However, I think the phrase "intrinsically valueless" is more at fault here than "objective exchange-value".

You can find this to be odd all you want. It makes no difference to me. But you're mistaken that Mises founded the discipline, if by "discipline" you mean "the Austrian school of economics". That was founded by Carl Menger.

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Smiling Dave,

Smiling Dave:
If you are sincere, please be professional.

I find it absurd that you bring this up, after consistently failing to address my points, and for the months you've been trolling, scarcely making a coherent point yourself.

Smiling Dave:
Summarize my understanding of the regression theorem, and why I think bitcoin violates it, in a manner that I agree with. Thus we will both start on the same page.

I don't know what your understanding of the regression theorem is, because you provided several contradictory claims with respect to it.

The regression theorem, according to my interpretation, says that if there is barter, only goods that are already exchanged in barter can become money, and non-commodity money can only evolve if there already is (other) money.

Smiling Dave:
Then show why either Mises is wrong [as some have claimed here], or my understanding of him is wrong [as many have], or why although Mises and I are both right, my conclusion that bitcoin violates the regression theorem is flawed [have yet to see that one].

Bitcoin does not violate the regression theorem as stipulated by me, because money already exists, i.e. we are not in a barter economy. However, there are zilions of other interpretations of the theorem, and various other claims which consist of mixing the regression theorem with arbitrary implicit assumptions. Some are at odds with Bitcoin, some are not.

Smiling Dave:
When time permits, I will summarize my uderstanding of your position, and why I think you missed the boat.

How about instead you actually address the arguments I'm making?
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Autolykos replied on Wed, Jan 11 2012 10:39 AM

Peter Šurda:
A very interesting point. Let's look at what the original German says:

Mises:
Aus der Tatsache, daß der objektive Tauschwert des Geldes stets einer Anküpfung an ein auf dem Markte zwischen dem Gelde und den übrigen wirtschaftlichen Gütern bereits bestehendes Austauschverhältnis bedarf, da das wirtschaftende Individuum anders schlechterdings nicht in der Lage wäre, ein Werturteil über das Geld abzugeben, folgt weiter, daß das Geld nur ein solches Object in Verwendung genommen werden kann, welches in dem Augenblicke des Beginnes seiner Tauschmittelfunktion bereits auf Grund anderweitiger Verwendung objektiven Tauschwert besessen hat. Darin liegt eine Zurückweisung jener Theorien, welche die Entstehung des Geldes auf ein Übereinkommen zurückführen, in dem sich die Menschen dazu verstanden hätten, an sich wertlosen Dingen durch eine Fiktion imaginären Wert beizulegen, und eine Bestätigung der Mengerschen Hypothese vom Ursprunge des Geldgebrauches.

So just like I said, he's not saying anything about services, and he's not talking about intrinsic value but imaginary value. The value of services is not imaginary. It's just ignored by the Bitcoin detractors.

Actually, from my understanding of German and what Google Translate tells me, the English translation of (at least) that passage of Mises' Theory of Money and Credit is accurate. The phrase "der objektive Tauschwert des Geldes" translates as "the objective exchange-value of money", and "an sich wertlosen Dingen durch eine Fiktion imaginären Wert beizulegen" translates as "resolve imaginary worth to inherently worthless things through a fiction". (German syntax is the biggest sticking point. In the latter phrase, the translation of the sub-phrase "imaginären Wert beizulegen" belongs at the beginning of the English translation.)

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TY Autolykos for exposing the the latest evasion for what it is, hiding behind a language many here do not understand. Turns out that the translation of the first three chapters of the book, to which Mises himself added an English fourth chapter in later years, accurately reflects his ideas.

BTW, in Appendix A of the book, Mises clearly lays out his opinion that value is subjective. So it's not like subjective theory of value was something he didn't know about or agree with when he wrote the book. The mystery deepens, hey? How could he let slip such an egregious error, that even a child wouldn't make?

But of course, the answer lies in context. "Intrinsic" can mean many things, depending on the context. When speaking about "that which is not a subjective appraisal of the worth of an object", we can fairly employ the phrase intrinsic value, if only to deny it's existence. When speaking about the value a commodity would have that is distinct from, and prior to, the added value it gets when being used as a money, it is not a distortion of English to call that "intrinsic value" as well, in that context. And though the phrase means two different things in two different places, well that's life. A basketball player may well say "I dropped my [house] key at the top of the key."

BTW, the usage is ingrained into the literature by now. In another thread, I quoted prominent Austrians who talk about intrinsic value with no shame.

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The regression theorem, according to my interpretation, says that if there is barter, only goods that are already exchanged in barter can become money, and non-commodity money can only evolve if there already is (other) money....Bitcoin does not violate the regression theorem as stipulated by me, because money already exists, i.e. we are not in a barter economy.

I thought so. Yes, you misunderstood it, all right.

A careful reading of the appropriate section of either HA or Money and Credit will show how wrong you are. I have laid out what he means in my blog. The interested reader can either go there ["Bitcoin Takes a Beating"], or read the source material himself [which I quote in full in that article], and see which interpretation satisfies him more. So I have nothing further to say about this point, Mises having laid it all out, and me as well.

However, there are zilions of other interpretations of the theorem, and various other claims which consist of mixing the regression theorem with arbitrary implicit assumptions. Some are at odds with Bitcoin, some are not.

Some misinterpretations are happy with bitcoin. The correct interpretation is at odds with bitcoin.

Well I'm glad we cleared the air here. TY, Pete.

 

 

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Autolykos:

Actually, from my understanding of German and what Google Translate tells me, the English translation of (at least) that passage of Mises' Theory of Money and Credit is accurate. The phrase "der objektive Tauschwert des Geldes" translates as "the objective exchange-value of money", and "an sich wertlosen Dingen durch eine Fiktion imaginären Wert beizulegen" translates as "resolve imaginary worth to inherently worthless things through a fiction". (German syntax is the biggest sticking point. In the latter phrase, the translation of the sub-phrase "imaginären Wert beizulegen" belongs at the beginning of the English translation.)

 
The German version emphasises imagination, it's not as apparent in the English one. Furthermore, as I said, Mises neglected to address money as service. From this neglect, some people incorrectly deduce that it does not exist.
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Smiling Dave:
I thought so. Yes, you misunderstood it, all right.

 

Whether this is correct or not, it still fails to address that you have not presented a coherent alternative.

Smiling Dave:
A careful reading of the appropriate section of either HA or Money and Credit will show how wrong you are.

What you provide are, exactly as I said, examples of mixing the regression theorem with other arbitrary implicit assumptions, exogenous to the regression theorem itself. Furthermore, again, as I said, if it was true as you present it, fiat money and money substitutes would not exist.

Furthermore, there are other quotes, which contradict this. For example:

Hoppe:
Money must emerge as a commodity money because something can be demanded as a medium of exchange only if it has a pre-existing barter demand ...

Rothbard:
... and so we push the analysis back to the last day of barter.

Rothbard:
But the only way this can happen is by beginning with a useful commodity under barter,...

Murphy:
We can trace the purchasing power of money back through time, until we reach the point at which people first emerged from a state of barter. And at that point, the purchasing power of the money commodity can be explained in just the same way that the exchange value of any commodity is explained.

Shostak:
The commodity had an exchange value in terms of other commodities, i.e., its exchange value was established in barter.

I therefore conclude that your interpretation is erroneous. The alternative is that the heavyweights (Mises, Hoppe, Rothbard, Murphy, Shostak) contradict themselves. I'd bet on them being right, if not for anything else, than at least because I emailed with Hoppe and Murphy and unlike you they provide coherent replies.

Are you going to confront these errors, or chicken out as you do usually?

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Pete,

Bet you think you really nailed me, hey? All those quotes about barter seem to disprove me 100,000%, you think.

Sorry, Pete, your confusion lies in this. Say there is a country that has the following law: In order to marry a woman, you have to be engaged for six months first. Pete gets engaged to Girl A for six months, then goes to the registrar to marry Girl B.

"No can do. You weren't engaged for six months," says the justice of the peace.

"Sure I was," says Pete. "Here's the paperwork to prove it."

"You dumbkopf. You were engaged to Girl A. So you cannot marry Girl B."

All those learned quotes you found are talking about THE SAME THING being used first in barter, then as money. In other words, if gold was first WIDELY USED in barter, then gold, AND ONLY GOLD, can then become money and be used as a medium of exchange. The reason is because now people have a good idea what they will get for that gold. But if gold was used in barter, then used tea bags cannot suddenly become money or mediums of exchange. Nor can bitcoin. Because the used teabags and the bitcoins do not have a widely, commonly recognized value [=price], so they cannot be mediums of exchange. Read my blog again to get why.

Once again, I leave it to the reader to see which interpretation is the correct one. Examine the sources. Do the research.

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Smiling Dave,

Smiling Dave:
All those learned quotes you found are talking about THE SAME THING being used first in barter, then as money. In other words, if gold was first WIDELY USED in barter, then gold, AND ONLY GOLD, can then become money and be used as a medium of exchange.

First of all, I'd like to point out that you have still not provided a coherent interpretation of the regression theorem.

Second, your argument, as phrased, does not actually address my point, because it does not contain an explanation what happens in a monetary, non-barter, situation. The implication which would allow this to serve as an address of my argument, such as refuting or confirming it, is absent.

Third of all, even it was a refutation of my argument, it would still contradict your prior claims about money substitutes and fiat money being consistent with the regression theorem.

 

 

 

Smiling Dave:
Once again, I leave it to the reader to see which interpretation is the correct one. Examine the sources. Do the research.

I applaud you for your bold proclamation. Obviously, I hold the opinion that the errors you committed are obvious to anyone. It's not that your knowledge of economics is lacking, you fail at elementary logic.
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Ramon replied on Wed, Jan 11 2012 5:20 PM

Bitcoin is essentially a form of communication in which a peculiar set of emergent properties arise (e.g. anonymity, self-management, etc). Its constituent components were not money either (cryptography, triple-entry accounting, electronic networking), yet there is a significant sum of wealth from contemporary monetary systems accumulated within the intangible and "non-monetary" Bitcoin system. For that matter, real estate mortgages weren't "money" and yet they were effectively treated as such.

How is money addressed as a form of communication? At what point is something considered empirical according to the ivory tower?

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Autolykos replied on Wed, Jan 11 2012 5:38 PM

Peter Šurda:
The German version emphasises imagination, it's not as apparent in the English one.

Can you please explain how it emphasizes imagination?

Otherwise, the phrasing still runs counter to your interpretation of it. You claimed that Mises was not talking about intrinsic value at all, just about imaginary value. However, Mises uses the German phrase "an sich wertlosen Dingen", which in English means "inherently/intrinsically worthless things" or (even more accurately) "things that are worthless in themselves".

Peter Šurda:
Furthermore, as I said, Mises neglected to address money as service. From this neglect, some people incorrectly deduce that it does not exist.

That's irrelevant to my refutation of your claim. Since you bring it up, though, I'll say that it seems to me like Mises considered money to necessarily arise from direct commodity exchange.

Anyways, how is Bitcoin a service? If you're going to say it's a service, can you logically say it's a money substitute at the same time? If you're going to say it's either one of those things (hint), can you logically say it's money itself at the same time?

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Autolykos replied on Wed, Jan 11 2012 5:44 PM

Smiling Dave:

TY Autolykos for exposing the the latest evasion for what it is, hiding behind a language many here do not understand. Turns out that the translation of the first three chapters of the book, to which Mises himself added an English fourth chapter in later years, accurately reflects his ideas.

BTW, in Appendix A of the book, Mises clearly lays out his opinion that value is subjective. So it's not like subjective theory of value was something he didn't know about or agree with when he wrote the book. The mystery deepens, hey? How could he let slip such an egregious error, that even a child wouldn't make?

But of course, the answer lies in context. "Intrinsic" can mean many things, depending on the context. When speaking about "that which is not a subjective appraisal of the worth of an object", we can fairly employ the phrase intrinsic value, if only to deny it's existence. When speaking about the value a commodity would have that is distinct from, and prior to, the added value it gets when being used as a money, it is not a distortion of English to call that "intrinsic value" as well, in that context. And though the phrase means two different things in two different places, well that's life. A basketball player may well say "I dropped my [house] key at the top of the key."

BTW, the usage is ingrained into the literature by now. In another thread, I quoted prominent Austrians who talk about intrinsic value with no shame.

I searched the forum for "smiling dave intrinsic value" and found this post of yours from about a year ago. Here's what I think is relevant:

Smiling Dave:
By intrinsic value I mean this: assume the object was declared illegal to be used as payments of any kind. Would people want that object for some other purpose, enough to pay something for it? If no, that is what I mean by not having intrinsic value. Where I live, leaves are piled up in the street, free for anyone to take, but nobody does. Certainly no one will pay for them. So that where I live, leaves have no intrinsic value. Dollar bills, if declared illegal to use as money, would probably be dumped in the streets, too. So they too, have no intrinsic value.

I see what you (and presumably Mises) mean now by "intrinsic value". You're not using it to mean "value that inheres in an object", but rather "value that people impute to an object for non-exchange uses". Maybe the ambiguity comes from the original German, namely the phrase "an sich", which is usually translated into English as "in itself".

So I think I can accept this usage of "intrinsic value", given the context. My preference would still be for one or more other phrases to be used in its place, but that's just me.

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This is a good opportunity to reply to someone who shall remain nameless, who once pompously wrote here:

But the key point is, once again, the thing has no intrinsic value.
Nothing has intrinsic value. The notion of intrinsic value is entirely incoherent to anyone with a basic understanding of economic theory. I don't know much about bitcoin,..

This Person who Shall Remain Nameless is fond of quoting Mises' Money and Credit, ignoring Mises' other, later, more mature works. So said Person has just been hoisted on his own petard. Mises in Money and Credit had a "basic understanding of economic theory" I daresay, and yet there Mises goes, using phrases like "intrinsic value" and "OBJECTIVE exchange value".

Put that in your conceited pipe and smoke it, Person.

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Ramon, could you restate your post in street English, please?

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Autolykos replied on Wed, Jan 11 2012 8:27 PM

Smiling Dave:
This is a good opportunity to reply to someone who shall remain nameless, who once pompously wrote here:

But the key point is, once again, the thing has no intrinsic value.
Nothing has intrinsic value. The notion of intrinsic value is entirely incoherent to anyone with a basic understanding of economic theory. I don't know much about bitcoin,..

This Person who Shall Remain Nameless is fond of quoting Mises' Money and Credit, ignoring Mises' other, later, more mature works. So said Person has just been hoisted on his own petard. Mises in Money and Credit had a "basic understanding of economic theory" I daresay, and yet there Mises goes, using phrases like "intrinsic value" and "OBJECTIVE exchange value".

Put that in your conceited pipe and smoke it, Person.

In fairness, most people, when they see the phrase "intrinsic value", apparently think of the notion of value inhering in an object - in other words, value that is independent of any human mind. The Austrian school of economics' use of "intrinsic value" (if not also "objective exchange-value") seems to be quite non-standard in this regard.

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Ramon:
Bitcoin is essentially a form of communication in which a peculiar set of emergent properties arise (e.g. anonymity, self-management, etc). Its constituent components were not money either (cryptography, triple-entry accounting, electronic networking), yet there is a significant sum of wealth from contemporary monetary systems accumulated within the intangible and "non-monetary" Bitcoin system. For that matter, real estate mortgages weren't "money" and yet they were effectively treated as such.

How is money addressed as a form of communication? At what point is something considered empirical according to the ivory tower?

I already complained to various "intrinsic valuers" long in the past, e.g. here, about counterexamples such as language. They simply assert that abstract concepts cannot have value, even though they use language to formulate that argument, thus contradicting themselves.

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Autolykos:
Can you please explain how it emphasizes imagination?

The German "imaginären Wert beizulegen", is, in my opinion, best translated as "assign imaginary value".

 

Autolykos:
Otherwise, the phrasing still runs counter to your interpretation of it. You claimed that Mises was not talking about intrinsic value at all, just about imaginary value. However, Mises uses the German phrase "an sich wertlosen Dingen", which in English means "inherently/intrinsically worthless things" or (even more accurately) "things that are worthless in themselves".

Again, in my opinion, the best translation would be "things worthless as such". That's a bit more neutral than "intrinsical", even though "inherent" is probably still acceptable.
 
The German version sounds like Mises was addressing the idea that people make up value without a rational basis. You might get these subtleties if you're more familiar with the German language.

Autolykos:
That's irrelevant to my refutation of your claim.

It's merely a counterexample to show that even if you choose to disagree with me on the translation and interpretation, it still fails to address the situation we're dealing with.

 

Autolykos:
Since you bring it up, though, I'll say that it seems to me like Mises considered money to necessarily arise from direct commodity exchange.

... if under barter (according to my interpretation). My interpretation is further supported by people claiming that the regression theorem explains money substitutes and fiat money, even though they are not commodities.

Autolykos:
Anyways, how is Bitcoin a service? If you're going to say it's a service, can you logically say it's a money substitute at the same time? If you're going to say it's either one of those things (hint), can you logically say it's money itself at the same time?

I am not claiming that Bitcoin is a money substitute, only that it is somewhat similar to it, because it can "piggyback" on preexisting monetary system through exchanges, which act as forex. Bitcoin is a service in a similar way that banking, paypal and western union are a service. Banks, paypal and western union would not exist without money. They exist because compared to money proper, they decrease transaction costs of payment transactions. Bitcoin does the same thing, with the exception that if you accept them as a store of value in addition to a medium of exchange, compared to fiat/gold, you get rid of money substitutes (or, forex from the point of view of Bitcoin). It's the equivalent of gold being able to teleport between vaults, at negligible time and cost. Bitcoin has plenty of other cool features, but if it did not decrease transaction costs, it would have no chance, similarly as if banks issued clay tablets instead of paper bank notes, they would not be able to compete with money proper either.
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Smiling Dave:
Put that in your conceited pipe and smoke it, Person.

I find it particularly odd that you mention this. You who claim that things have no value even though this is contradicted by empirical data. You who arrogate to yourself the authority to say to others what their values should be. This is the most absurd aspect of the "intrinsic valuers" claims. No that they do insist on a particular representation of the regression theorem. But that they elevate their own subjective opinion into an objective one and present this as Austrian economics.

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Peter Šurda:

Smiling Dave:
Put that in your conceited pipe and smoke it, Person.

I find it particularly odd that you mention this. You who claim that things have no value even though this is contradicted by empirical data. You who arrogate to yourself the authority to say to others what their values should be. This is the most absurd aspect of the "intrinsic valuers" claims. No that they do insist on a particular representation of the regression theorem. But that they elevate their own subjective opinion into an objective one and present this as Austrian economics.

Actually I'm a pretty humble guy.

My humble blog

It's easy to refute an argument if you first misrepresent it. William Keizer

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Smiling Dave:
Actually I'm a pretty humble guy.

Maybe you could then clarify if your assessment of Bitcoin having "no intrinsic value" takes precedence over the assessment of the people using Bitcoin, whose actions indicate that they think it does value?

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