Bitcoin And The Multilateral Evolution
By Jon Gulson on ALTCOIN MAGAZINE
The macroeconomic language would regard a misnomer the assertion [that] central banks can’t speak universally: it would be technically more agreeable to observe their forward guidance — the communication tool by which they normalize markets — as limited through lack of multilateral agency.
Some regard central banks as being so coordinated, they’re essentially a singularity; whereas central banks themselves are unconcerned with multilateral cooperation as a formal objective: it’s observed how inflation targeting has stabilized central bank operations [in a Nash equilibrium] but Bitcoin has created a new equilibria through a trustless money [without principals or mediation at settlement] existing in virtual supranational parallel — the internet — to the trusted central bank issuance:
The Creation of Nash Equilibria in Bitcoin
The fly in the ointment for a “cash system” is that ex nihilo money creation — euphemistically known as printing — is…
The Invisible Hand
First introduced in The Theory of Moral Sentiments (1759), Adam Smith’s invisible hand describes the unintended social benefits of an individual’s self-interested actions — an unobservable market force which helps the supply and demand of goods and services find a natural level.
Bitcoin is not generally understood as producing such benefits or of interacting with consumer markets — more so regarded as a purely speculative investment vehicle, where early entrants benefit most in a cartel-like system that doesn’t afford traditional protections:
The Attestation Of Decentralisation
Added to the above detractions [of Bitcoin] providing no meaningful or obvious residual social purpose, is its comparatively sizeable energy requirements, believed environmentally detrimental.
The limits of sovereign central bank operations, in lacking effective multilateral agency, make coordinated action on such shared problems difficult: multilateral agreements or alliances have longevity problems and nations find bilateral arrangements more manageable.
This doesn’t just highlight the limits of central bank language, but verbalized language at large: formal noun constructed English is prone to fragmentation, which can make lasting dialogue difficult.
It’s also regarded concussive — Wittgenstein remarking philosophy is the bewitchment of intelligence by means of language, and if we remove philosophy from this statement and insert economic theory — or even Bitcoin — we may arrive at the same picture!
For Wittgenstein, language was used to clarify the meaning of words afresh and the rules of language were like that of a game: they could change, without explicit reason, but where such change occurs it means the game changes — in the way Satoshi created a Nash equilibrium with Bitcoin.
Wittgenstein also observed there isn’t an underlying reality apart from language assimilation — and where this is co-opted to common understanding, the game stabilizes: language becomes a diachronic transition of verbal and numerical reasoning.
Numerical Logic As The Basis For Coalition Formation
In Ideal Money, John Nash noted through the history [of money] there had never been “too good” a money (one so valuable it wouldn’t circulate) that could be used as an investment channel, but that such a money with a steady and constant rate of inflation could be more or less equivalently [as good].
Alongside Ideal Money, Nash undertook work to computationally discover evolutionary and stable behavior of a triad of bargaining or negotiative players, where success simply became a matter of mathematics:
“I feel, personally, that the study of experimental games is the proper route of travel for ﬁnding “the ultimate truth” in relation to games as played by human players. But in practical game theory the players can be corporations or states; so the problem of usefully analyzing a game does not, in a practical sense, reduce to a problem only of the analysis of human behavior.” John Nash, The Agencies Method For Modeling Coalitions And Cooperation In Games, December 2008
Bitcoin then becomes relevant in light of the limitations of the central bank language game and as a hedge against the traditional financial markets, and why it makes sense for the self-interested consumer to consider as an investment medium:
A Limitation in the Central Bank Language Game
The Renaissance ideal of measured serenity contains clear stylistic distinctions from the anxious modern despair…
The Reprising Of Bretton Woods
On the global level, sovereign nations exist in a game-theoretical scenario:
The volatility of Bitcoin comes from it being a market without forward guidance and therefore more sensitive to wider and more speculative translation or unexpected news:
If the locally optimal scenario is globally sub-optimal, then the Nash equilibria of trustless money (numeric) and trusted money (lingual) can stabilize to be globally optimal.
On the recent 75th anniversary of Bretton Woods, multilateral cooperation is again becoming vogue:
“The architects of Bretton Woods were deeply influenced by events between the two world wars, when multilateralism and the liberal international order broke down amid protectionism, the malfunction of the gold standard, and competitive devaluations.” David Lipton, The Future of Bretton Woods, July 2019
There are everyday problems which would benefit from such cooperation:
The Limitations Of Bitcoin
In the event of a hedge on the scale against the social contract and traditional structures, where verbalized relationships are open to translation complexities — and which produces an episode of hyperbolic growth of Bitcoin against the major currencies — this wouldn’t be an end in itself.
Nash equilibria are affecting because it isn’t static: if such a convergence toward the Bitcoin standard were to occur, it could be as short-lived as it would be dramatic.
Sovereign nations won’t cease to exist nor with it their central banks. They might change in character, stronger and augmented, but language and culture are of naturally their own accordance and a new game will begin from a footing where bargaining habits have altered:
The market place is the final destination of conflict resolution.