The Renaissance ideal of measured serenity contains clear stylistic distinctions from the anxious modern despair depicted in Munch’s autobiographical expression ‘The Scream’, which was formed from his own nature piercing experience while out on a walk with friends.
It’s said Munch soon abandoned this artistic approach after becoming uncomfortable with the distortion — remarking it could only have been painted by a madman.
Indeed, Munch had a familiarity and horror of insanity, which affected his sister Sarah.
The Game Theoretical Transition in Bargaining
John Forbes Nash Jr is often referred to as the godfather of non-cooperative game theory. His earliest works in the field pointed to how money serves as a utility in bargaining, evolving into equilibria, explaining how rational and self-interested agents participate in a game: the Nash equilibrium is said to stabilise where players can’t unilaterally gain from deviating their course.
Nash’s game theory is believed more applicable to larger scale scenarios which involve nation states, corporations or institutions because of their increased calculating ability — and in the latter stages of his career, Nash worked on a theoretical Ideal Money, observing that [money] isn’t always thought of rationally.
In this light, Nash believed there would be tremendous value from the convenience of an internationally stable standard money unit.
The Central Bank Condition
To the Central Bank and their operations, despite Nash’s recognised contribution to economics in respect of game theory, the Ideal Money is largely — if not entirely — irrelevant.
This is because Nash’s view of an ideal rate [of inflation] — zero — is extraneous to how central banks view inflation: as an endogenous variable which is difficult to completely understand and therefore difficult to precisely measure, so error is built in to an inflation target of a general price level, which is communicated to the public in a way which is relatively easy to digest.
Central banks like this method because it gives them flexibility in normalising and stabilising financial markets.
In the way each sovereign central bank or monetary union targets an internal balance — allowing their currencies to float freely against each other — a Nash equilibrium is established: inflation targeting is the accepted macro monetary economic practice the world over and a central bank would struggle to unilaterally gain in deviating from it.
The stabilisation of a Nash equilibria — where there’s no unilateral benefit to a player changing behaviour in relation to others — isn’t static to the point a game stops: the creation of a new equilibria is always latent, the nature of which may not be clear, especially in relation to the game’s stability.
Bitcoin paints this picture ideally in relation to money: while Bitcoin isn’t considered a macroeconomic variable directly affecting of central bank operations, it’s still something central banks assimilate in their communications.
It’s also something they view as highly volatile in relation to other assets in which they deal.
Long standing multilateral cooperation is a difficult objective to meet because of communication and trust problems between nations, essentially the classic nascent scenario of a non-cooperative game, and in this instance, akin to contract incompleteness on an international basis.
This can be considered one of the reasons why internal balance management — inflation targeting — has evolved: central banks can observe the behaviour of consumers in relation to the money they’re managing and communicate that effectively while adjusting strategy in accordance with their mandate.
This works well most of the time, but there are wider themes which mean agencies such as the International Monetary Fund and Bank of International Settlements mediate where common issues between sovereigns — such as global warming — exist or to promote cooperation generally on a proactive basis.
Insanity as a Macroeconomic Variable
One such common theme is the dementia problem affecting an aging population in developed nations, to the extent it’s verging on an epidemic.
A real problem because it typically affects those in retirement whose pensions are often half that when earning a working income, and where care costs greatly exceed such income, it causes governments problems in addressing who foots the bill in the event of financial distress.
This is compounded by the fact relatively little is known about the brain or why this problem occurs.
Bitcoin as a Transition to Multilateral Cooperation
It’s observed the volatility which exists in between the creation and stabilisation of a Nash equilibrium, exists in a language game, as agents gain understanding from the actions of others as they move toward a common position.
Where central banks and supranational agencies mediate trust in markets, Bitcoin represents a money which has removed such mediation through peer to peer settlement: Satoshi rendering money into a game theoretical scenario on a trustless basis (math), relevant to limitations of central bank verbal reasoning (words) on issues like dementia.
On the flip side — and with such mediation — comes the benefit of pragmatism: a feature of inflation targeting is it’s assumption an economic reality can’t exist apart from language.
Satoshi therefore created a Nash equilibrium between trustless money (Bitcoin) and trusted money (central bank issuance), now ripe for rendering stable in a language game.
By placing the world onto a de facto singular standard, the stabilisation of Bitcoin could only occur in the transition to a new multilateral money standard where trust is material in temperance.