Thanks Vinny, I enjoyed this and generally agree with your outlook.
At the same time, a few things:
- The “invisible hand.” This is one of the most abused terms in economics. Adam Smith first used this term in a work of moral philosophy, and not with respect to economics in ‘The Wealth of Nations.’ He was referring to the behavior of a landlord who redistributed assets to the poor in order to improve public well-being. It was therefore an act of moral intervention, exactly the opposite of how it is used today. He later wrote ‘The Wealth of Nations’ before economics became the stand-alone discipline it is today. If anything, we are now discovering that economics divorced from morality and politics can be dangerous. Modern application of economics attempts to emulate mathematics or physics while its consequences are played out in the real flesh and blood world of people and politics. It’s why we have begun to see sub-disciplines such as ‘behavioral economics’ crop up: an attempt by a profession to reconnect with a real world where game theory and rational choice theory cannot explain human choices. Eventually, economics and the institutions that lord it will return to being what it actually is, a sub-set of anthropology. Until then, it’s time for us as individuals to put terms like the “invisible hand” back in their box.
- I’ve listened closely to John McAfee speak about Bitcoin’s security-related issues. These seem to be totally absent from the discussions to date. So I want to put aside the Core vs. BU arguments for the time being and concentrate on privacy and security. If indeed it is the case that every mobile device is a honey pot for hackers, then this means that there are few if any ways to hold and use bitcoin today that are free from theft (bar cold storage, which is even less likely to encourage mass adoption). McAfee is claiming that it is only a matter of time before there is a mass, multi-billion dollar theft of bitcoin from hundreds of thousands of individuals and companies. He appears to be committed to Bitcoin, and is making a substantial investment into it. He is doing so with security front and centre, which can only be a good thing, surely. While his bedfellows may not be to everyone’s liking, we ought to acknowledge that the privacy and security issues he’s raising need to be taken seriously.
- The whole Core vs. BU debate illustrates some basic misconceptions about Bitcoin as a social project. On paper Bitcoin is decentralized, peer-to-peer, etc. Or can be. But in the real world centralization is always in play: inherited control of power and assets, first-mover advantage, and so on, stack the odds in favor of the few. Whether this translates into public benefit depends on the good will of the few, and that cannot always be guaranteed. Nor is it surprising to find libertarians and free-marketeers acting to capture a market in order to liberate it. Social and economic history is conclusive on this point: there is no such thing as a free market. Only polemicists and ideologues say there is. Asymmetries of information, access, power, etc. do away with it from the get-go. What happens next is that those with initial advantage ‘compete’ their way to the top and accumulate more power. States therefore exist because of market failure. Yes, states can then over-reach and stymy entrepreneurship, but that is a separate issue altogether. Inside this muddled thinking, there is a real risk of elite capture of the Bitcoin experiment. The so-called Bitcoin “community” doesn’t seem to recognize that it needs common principles to guide how it functions. That is, to achieve common goals or to resolve conflicts. Code and cryptography are as useful — or as useless — as general equilibrium theory. Great for modeling until reality bites. That’s when we need some sort of social contract for Bitcoin in which everyone has a say.
Anyway, just some thoughts. Like you, am also going to be on the sidelines until we can get over this sticky wicket. Best, — Hannan