Economics, Bitcoin, Nash, and Szabo
Daylight saving time began this morning in the United Kingdom, meaning an extra hour in slumber. As is normal, it didn’t take long for the mind to start slowly turning over Bitcoin — and so, with more time than usual — I decided to reflect on recent thoughts.
Nash
The blog’s banner image is taken from an interview ten years after John Nash was awarded a Nobel prize in economics for his work in non-cooperative game theory.
I’m picking out a few salient moments (which I have also paraphrased for the viewer who doesn’t want to watch the clips). At this particular point in the interview, Nash talks about how he regards economics:
“I don’t think exactly like a professional economist. I think about economics and economic ideas, but somewhat like an outsider.” John Nash
And then here:
“There are a lot of trends in economics and what seems fashionable now and the general opinion might be quite different in twenty years or so…people starting a career should be prepared for changes…try to learn things that are good for all time…of unquestionable scientific value”. John Nash
Slight humour here followed by an observation:
“The first world, third world. What happened to the second world? …there are some opinions more scientific..” John Nash
And finally, in context of to how Szabo regards economics:
“I only took one economics course and was taught by someone from Austria…a different school…” John Nash
Szabo
The following tweets give some indication as to Nick Szabo’s general outlook on economics:
And then a deeper starting point to Szabo’s work, here:
An interlude in this thread, here:
Szabo concludes on his point, here:
And there is a slight irony in this observation:
The Economics of Bitcoin
It is general opinion Bitcoin is too inelastic and costly to be used as everyday money, but provides a cryptographic base free of government or bank interference which will allow it to one day eventually ‘scale’.
The title of the white paper has led many to take literally the idea of cash in this regard — pitting Bitcoin’s stateless cash in direct opposition to a fiat equivalent, with an emphasis on transaction capacity and fees.
Szabo’s unimplemented forerunner bitgold has led many to believe he is Satoshi, due to the similarities between both technologies: Szabo does at least offer a use for Bitcoin as a collectible, which has morphed into hodl.
This viewpoint is more prevalent among the Bitcoin community, who have come to be coined maximalist. One such advocation found here:
This generally disregards the Nash view — or context — of Bitcoin being a gold like and non-sovereign standard for sovereign monies. In wider context of Nash, it can be seen as a natural part of his work found in the Bargaining Problem (1950), Nash Equilibrium (1951) and Parallel Control (1954). It can, too, be seen in the context of Ideal Money, which was the focus of Nash’s work in the autumn years of his life — and which Bitcoin can be viewed as the white paper implementation [thereof].
That nature being Nash as a brilliant mathematician having an early interest in cryptography and realising encryption would outpace decryption through the use of computers and machine thinking. There is a scaling insight in Parallel Control which can be viewed in light of trust optimising technological application through contemporary money.
In context of cash, this scaling insight can be easily evolved: that Bitcoin was designed as Nash Equilibrium in the money markets between nation peers; and that equilibrium isn’t static in this regard — indeed, it explains why Central Bank buying of Bitcoin could spark the next bull cycle.
And this is an observation [for which] Szabo won’t make comment — nor that Nash won his Nobel prize because of how he introduced science based thinking into economics; or that Nash could indeed be the creator of Bitcoin — and the subsequent paradox of him being divorced from his own mind, as a consequence or cause.
