What’s eating Frances Coppola (part 2)
A well known Ludwig Wittgenstein saying addresses the pointlessness of immortality in that immortality — should it exist — is said not to solve any problem. An economist and writer such as Frances Coppola would no doubt say the same about bitcoin, in that she believes it solves no problem beyond “hoarding wealth” for its own sake.
Ms Coppola spends time on Twitter expressing her chagrin (toward bitcoin), which has been analyzed before, but in light of continued protests, is being re-examined — for every one person burning in hell, is another sun tanning on the beach.
Lust for digital gold
Ms Coppola’s profile on twitter used to say “always right, never believed” — which for an economist is an unusual thing to say — economics is regarded as such an inexact science that the main aim of the game must be to be believed irrespective of any actual basis (similar to how the SAS official motto is “who dares, wins” but the unofficial motto among the ranks is “who cares who wins!?”).
However in the interests of dialogue, some concessions might be made to Ms Coppola — it might be true bitcoin is latently worthless, and it might also be true bitcoin wastefully consumes energy, it might be true it’s a casino and bubble which exists to draw in more “suckers” to the benefit of early players, and it might also be true it’s a scam and the money of criminals.
Yet all of these criticisms ignore one fundamental point: bitcoin holds monetary value, and this value is reflective of the anticipation and expectation buyers have for bitcoin in the market.
The category of player known as “the bitcoiner”, might even talk up their prospects for the bitcoin — there isn’t anything irrational about that — and they might even indulge in public relations and social media campaigns to do this, and start silly memes, yet all of this is part and parcel of any kind of monetary system — for example, central banks engage in linguistic gymnastics known as forward guidance.
The logic of bitcoin
Bitcoin is a probability based system in its characteristic function distribution. It’s also an axiomatically based system: it satisfies requirements for Pareto optimality, and its inflation schedule is clearly defined so that bitcoiners can form the type of anticipation in its performance that makes them shout “moon!”.
It’s observed too that bitcoin was published as a whitepaper and monolithic code by an academic type, not a seasoned engineer. Note also, reference in bitcoin to William Feller, a Princeton University academic of Croatian-Austrian origins, and his work “An introduction to probability theory and its applications, 1957.”
The influence of Austrian economics (in bitcoin) is clear through its mimicry of the gold mining process, where Austrian economics is associated with advocating what was once known as the gold standard.
This is probably why bitcoin proves antagonistic to modern economists, because whether the Austrian economists such as Ludwig von Mises would have approved of the type of game theory which was around Princeton University in the 1950’s is not known, but what’s true is many of the early Princeton game theorists such as Oskar Morgenstern and John F Nash Jr. were influenced by, and approved of, Austrian economics — which has subsequently assumed almost pariah status among contemporary economic thinking.
The 80:20 Power Law
The probability distribution of the bitcoin supply schedule makes itself known in what is called a “long tail” affect, and this can be shown making manifest John F Nash Jr.’s idea of an Asymptotically Ideal Money of reliable divisibility.
In this way, bitcoin has subjected all of the world’s major currencies to this law:
This also applies to the energy requirements of bitcoin, in that bitcoin is said to need the electrical consumption of a sizeable country to power its network — yet if the outcome is to power a global monetary network from the same energy required of just one country, this would seem an acceptable and logical trade off (in the satisfaction of 80:20 Pareto conditions for optimization) where one person isn’t benefitting to the detriment of others.
In the end, modern economists are never going to agree on bitcoin as a formal policy. They might however, realize there is much more to this phenomenon than meets the eye, and if they ever decide to fight fire with fire, could work out a way of a supranational currency forming to subject bitcoin itself to the 80:20 power law (bitcoin) has subjected all major currencies to, so that contracts between such nations and enterprises can index this kind of inflation, with the determined point of representation in such contracts going beyond the realm of public relations, book selling, and indeterminate grammar.
