The Relevance And Significance of the works "Ideal Money" to Bitcoin

I will use this thread as a dialogue and inquiry for those that are sincere in wanting to understand the works entitled Ideal Money which is, in summary, 20 years of lectures and writings on the subject of the advent of an international e-currency with a stable supply and the game theoretical implications it will have the world.

But as with any brilliant and complex ideas and discoveries there is a long journey to understand the reasoning. It takes time, and its well known with Nash's other work that there is incredibly subtle nuance to his thinking.

He also left a clear memo that he was obfuscating the meaning of his words for fear of government reprisal:

Quote:

Originally Posted by memo

" The script or plan for my talk linking the "ideal money" with the choices and actions of "thrift" or "savings" by persons or by "economic agents" was influenced by concerns that it would be wise not to speak too incautiously of "the Keynesians" when the times are such that massive public opinions may be supporting actions by which a state administration can act without going through the parliamentary processes to write new legislation. So in the rush of political campaigns and elections (for example in the USA) it is difficult to sell a national monetary policy which, if followed consistently on a "long run" level, would result in the specific nation state existing as if on a higher level of economic civilization. (For example, Sweden and Argentina might be usable, over a long time comparison, to represent comparable "economic civilizations".) Therefore, I had arranged for 2012 to talk more cautiously in relation to whatever would impact with "the Keynesians" and with the political interests relating also to the scholarly factions allied with (or forming) "the Keynesians". And this caution carries over naturally to 2013 also. "

The first quote I think that is most important to read in order to begin to traverse the argument is this one:

Quote:

Originally Posted by Ideal Money

"The ultimately launched concept of "Ideal Money" became possible when I conceived of a practical basis for a standardization of the comparison of the value of the currency with an appropriate standard or ideal. And the key to that was the idea of an ICPI or (international) "Industrial Consumption Price Index".

The concept of the ICPI is not perfectly new. George Selgin and many others have said of Nash's proposal:

But we can clearly understand through Nash's words that Selgin has missed understood the role and purpose of the ICPI in the proposal:

Quote:

Originally Posted by Ideal Money

It seems possible and not unlikely, however, that if two states evolve towards having currencies of more stable value as measured locally by national CPI indices that then also these distinct currencies would tend to evolve towards more stable comparative relations of value.

Then the limiting or “asymptotic” result of such an evolutionary trend would be in effect “ideal money” but this as a result achieved without the adoption of anything like an ICPI index as a basis for the standard of value.

This is why the previous quote is important to understand, it is by constructing a theoretical ideal, that allows us to extrapolate and implementable project.

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06-24-2021 , 07:37 PM

jbouton

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The ICPI that Nash constructs, although not novel or new, is what would theoretically be an ideal basis for our existing legacy fiat currencies. This is somewhat well understood, but it has problems in implementation. It works as an ideal or an idea but has a flaw that is outlined in Ideal Money:

Quote:

Originally Posted by Ideal Money

We can see that times could change, especially if a “miracle energy source” were found, and thus if a good ICPI is constructed, it should not be expected to be valid as initially defined for all eternity. It would instead be appropriate for it to be regularly readjusted depending on how the patterns of international trade would actually evolve.

Here, evidently, politicians in control of the authority behind standards could corrupt the continuity of a good standard…

That it has to be adjusted, and that requires politics, returns us to the problem that is meant to be solved in the first place. Like a gold standard which causes the location of gold and gold mines to become a source of conflict (where as bitcoin can be mined from anywhere).

But when we consider using bitcoin as the ICPI (or what a poster here dubbed a bitcoin price index BPI) there is something special about the design of it. Namely in regard to what is called the "difficulty adjustment algorithm. Satoshi explains the ramifications of the DAA:

Quote:

Originally Posted by Satoshi

The price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more. At the same time, the increased production would increase the difficulty, pushing the cost of generating towards the price.

So if a "miracle energy source" were discovered and bitcoin's became very cheap to mine, the network would sense the increased hashing power and adjust the net cost to produce blocks accordingly. Thus removing the problem of the ICPI that Nash outlines.

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06-24-2021 , 08:23 PM

jbouton

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Here is the general version, it is 8 pages: http://personal.psu.edu/gjb6/nash/money.pdf

But there are actually many versions that he wrote each with their own nuances and tailored to the region of the world that he was speaking to. He left them on an archive that is still publicly accessible through his university homepage: https://web.math.princeton.edu/jfnj/

The archive is a treasure trove with some other very interesting writings that I believe will also have deep implications for the future of humanity.

And there are many many versions of Ideal Money that each go over different aspects of the proposal.

Read from the context of a call for an ICPI that is politically based, the proposal seems empty and wrong. But if you understand that the concept of an ICPI was only important to extract an implementable equivalent, and read with the understanding the bitcoin fits as this ideal basis, the writing is unbelievably prescient. The last section reads like a bitcoin maximalist call:

Quote:

Originally Posted by Ideal Money

Political Evolution

There perhaps will always be “politics”, like also “death and taxes”. But it is sometimes remarkable how political contexts can evolve. And in relation to that I think that it is possible that “the Keynesians” are like a political faction that will become less influential as a result of political evolution. The “Keynesian” view of things did not come into existence until after the time when what we can call “Bolshevik communism” had become established in Russia. And by this label we wish to differentiate between any theoretical or ideal concept of communism and the actual form of governing regime structure that came to exercise state power in Moscow. (All over the world varieties of states make claims to have governments very properly or even ideally devoted to the interests of the citizens or nationals of those states and always an externally located critic can argue that the government is actually a sort of despotism.)

The Keynesians implicitly always have the argument that some good managers can do things of beneficial value, operating with the treasury and the central bank, and that it is not needed or appropriate for the citizenry or the “customers” of the currency supplied by the state to actually understand, while the managers are managing, what exactly they are doing and how it will affect the “pocketbook” circumstances of these customers.

I see this as analogous to how the “Bolshevik communists” were claiming to provide something much better than the “bourgeois democracy” that they could not deny existed in some other countries. But in the end the “dictatorship of the proletariat” seemed to become rather exposed as simply the dictatorship of the regime. So there may be an analogy to this as regards those called “the Keynesians” in that while they have claimed to be operating for high and noble objectives of general welfare what is clearly true is that they have made it easier for governments to “print money”.

So I see the Keynesians as in a weak sense comparable to the “Bolsheviks” because of the support of both parties for a certain “lack of transparency” relating to the functions of government as seen by the citizenry. And for both of them it can be said that they tend to think in terms of government agencies operating in a benevolent fashion that is, however, beyond the comprehension of the citizens of the state. And this parallel makes it seem not implausible that a process of political evolution might lead to the expectation on the part of citizens in the “great democracies” that they should be better situated to be able to understand whatever will be the monetary policies which, indeed, are typically of great importance to citizens who may have alternative options for where to place their “savings”.

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06-26-2021 , 02:14 AM

jbouton

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The Sztorcian complaint

I'll cue this video for the moment paul says that he doesn't need context in order to know the implied definition of a word. The significance or summary is that paul is claiming that words don't need context in defense of my accusation that he is misinterpreting a passage wrong.

https://www.youtube.com/watch?v=uMHMTLb0sRo&t=1122s

I'm not sure we discussed the exact passage he was speaking to but I'm sure he would agree it was effectively this that is on the wiki for Ideal Money:

Quote:

Originally Posted by https://en.wikipedia.org/wiki/Ideal_money

....money intrinsically not subject to inflation...

When we interpret that passage with inflation meaning "stable purchasing power" we can understand that bitcoin would not be a fit for nash's Ideal Money because it is expected to deflationary (its purchasing power increases) and it has no direct stabilizing mechanism.

But if we understand the nuance to the word inflation we can put the passage into proper context:

Quote:

Originally Posted by Ideal Money

I suggested the use of an “ICPI” index for the definition of the proper value for an “ideal” money. Here ICPI stood for “Industrial Consumption Price Index” (which would be a sort of index which could naturally be calculated from world market prices).

...

My position is that the appropriate “target rate” for measured inflation is zero.

Measured inflation but the metric or definition of inflation is with respect to the prices considered. If we consider a BPI (bitcoin price index), or the exchange price with bitcoin...then 0% inflation would mean a stable exchange price NOT stable purchasing power as Paul assumed was implied/implicit.

Put another way if an existing state currency was pegged to bitcoin, and made the exchange price stable…we would have a state money that is expected to increase in purchasing power over time but we would still call it zero inflation because the measure of inflation is redefined as a comparison to the price of bitcoin.

This is what paul pulled out of context and didn't understand. Thus he doesn't really present an argument against bitcoin being used in place of Nash's conceptual ICPI

Last edited by jbouton; 06-26-2021 at 02:39 AM.

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06-26-2021 , 03:56 AM

jbouton

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Interesting to consider in regard to the bitcoin thread arguements:

Quote:

Originally Posted by Ideal Money

There is now the "euro" and the inflationary tradition of the Italian lira
seems to be past history now. And there COULD be introduced, for example,
a similar international currency for the Islamic world, or for South Asia,
or for South America, or here or there.

...

And what I want to suggest is that "the public" or the users, those for whom a medium of exchange functions as a basic utility, may develop opinions that are critical of currencies of lower "value quality". That is, the public may learn to demand better quality of that which CAN be managed to be of better quality or which can be managed to be of the lower quality observed in so many of the various national currencies in the 20th century.

Quote:

Originally Posted by Ideal Money

My opinion is that if it were too easy to set up a form of “global money” that the version achieved might have characteristics of inferiority which would make it, comparatively, more like a relatively inferior national currency than like any of the more praiseworthy national or imperial currencies
known to historical records.

But there is a good prospect for avoiding the establishment of another, possibly deceptive, currency of inferior quality. Here I think of the possibility that a good sort of international currency might EVOLVE before the time when an official establishment might occur.

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06-26-2021 , 02:08 PM

kekeeke

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Join Date: Apr 2011 Posts: 1,306

Very cool, did nash learn about bitcoin before he died in 2015? Did he have an opinion on it?

The ease of access to this much research is fascinating. I've been reading some of it slowly, it's pretty obvious that a free market will transfer it's capital to true sound money overtime. Will central banks let the market choose and how will they try to delay/stop it is a key risk on this bet tbh.

Quote

06-26-2021 , 04:01 PM

jbouton

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Quote:

Originally Posted by Ideal Money

"Signs of the Times (Among National Currency Authorities)"

Comparatively very recently a few countries in South America and Central America have adopted schemes that put them in positions analogous to those of Luxembourg and Liechtenstein with regard to the provisions for their domestic currency. Here Argentina and El Salvador can be mentioned. They are adopting (at least temporarily) expedients that put the value of their domestic money on a fixed relation to the U. S. dollar. And of course Panama has had such a situation for a longtime previously.

This is not "ideal money" because the U. S. dollar is not an ideal standard for money value. But the countries adopting such expedients thus offer their citizens, at least for as long as they manage to or choose to continue it, a deliverance from a typical past tradition of national currencies of even less stable value than that of the (historically observed) U. S. dollar.

But if, for example, all of the countries of the world would base the value for their national currencies on the value of the british currency then this situation would appear singular and unstable, while it was not so singular for a lot of countries to base their currency value on gold.

(bolding add by me)

Last edited by jbouton; 06-26-2021 at 04:22 PM.

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06-27-2021 , 07:09 AM

jbouton

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There is a complaint about bitcoin that it has no purchasing power stabilizing mechanism. It is valid. A good money by most definitions must have comparatively stable price implications and it is understood that the best way to do this is to influence the supply of it to meet the demand. There is an (nuanced) Austrian view that tries to give the narrative that "good money" is money that has an increasing purchasing power and this is in contrast with what is often called the "keynesian" view which suggest that decreasing the purchasing power of a nation or state money can be used address economic slow times.

But if we are to consider bitcoin not as an ideal money but rather as an ideal metric for (inflation) money we COULD choose to view it through a stabilizing lens:

Quote:

Refined Indices

If the technical problem of designing an index of prices to serve as a basis for a
money of standard value is considered in a more elaborate fashion it seems that there is the
possibility of defining the sort of index which would vary "smoothly" and yet would also
vary in an appropriate way over longer periods of time. Here the apparent problem is that
the prices of certain commodities which would be ideally suited to measure long term changes
in the costs of industrial production may tend naturally to be "volatile" in their
variations depending on business cycles. And the prices of other commodities or services,
etc. might tend to vary much more gradually or smoothly but not be reliable in terms of long
term considerations for one or another reason.

For example, the prices of copper and nickel might very well represent, over long time
periods, the actual costs of industrial production, while the prices of silver and gold
might tend to vary, comparatively, much more "smoothly" than those of the baser metals. It
is possible to construct a price index, based on "moving averages", that would have the
smoothness of the prices of the gold and silver and yet, over longer time periods, would
basically follow the values of the baser metals. This could be done by computing a "moving
average" of the base metals index computed by pricing them modulo the index of the precious
metals.

In actual application it would not be a matter of "base" and precious metals but rather
of a variety of commodities that would be selected for their suitability in one sense or the
other. And in the index formed from things with naturally "smoothly varying" prices it seems
that it would be intrinsically quite feasible to make use of costs of services, or energy,
or prices that depend on the national location of the definition of the commodity, service,
or asset being priced.

So by using this approach the temptation to include things that would otherwise seem
inappropriate just to obtain stability or smoothness can be avoided.

And of course the fundamental principle remains that if a political basis existed for
changes in a standard index that it is not unlikely that a form of "corruption" would
appear. This is comparable to the issue that was raised recently in the USA where certain
interests wished to devalue the original CPI computed by the Labor Department so as to have
more federal budget money available to reduce taxes or for other purposes with Social
Security beneficiaries being given less.

And again using bitcoin as a "BPI" in place of an "ICPI" would remove the political problem as outlined.

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06-27-2021 , 07:23 AM

jbouton

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This passage is a little tricky. I would hope some people either help explain or ask questions. I think most people would disagree that bitcoin has a constant and steady rate of inflation.

Quote:

Practical Considerations on Long Term Value Trends And the Safe Deposit Box Singularity

There is a problem for the issuer of a currency, whether in coinage, paper, or
"electronic" form, that if this currency (or money) is TOO GOOD then it could be exploited
by all sorts of parties and interests that might simply wish to safely deposit a store of
wealth or even to conservatively invest some assets for future good value. (The word good is
used here in terms of comparative value trends, like in "good investments".) Then under
extreme conditions the currency issued by one state could be exploited by parties not of
that state as a sort of "safe deposit box" on which they would not need to pay any rental
fees or pay any fees like those paid to the managers of mutual funds for investment.

But simply to improve the conditions under which agreements for long term lending and
borrowing would be made a money would be more or less equivalently good if it had a
completely steady and constant rate of inflation. Then this inflation rate could be added to
all lending and borrowing contracts. So the problem of a money that would be "TOO GOOD" is
thus be avoidable.

However, this is not known as a problem in the past history of money. And in fact there
is a natural character of the sort of material things to which money standards have been
related that makes them naturally tend not to provide "too good" a channel for investment.
It has simply not been profitable, in the past, for any economic parties to use any variety
of money as a channel for investment, although of course there has been much "currency
speculation" which is a different thing.

Of course also the issuer of a currency needs to be properly prepared for the possibility
of speculation on the part of interests domiciled in foreign states, etc., etc.

Natural Value Trends

The long term trend of the value of any index of prices will depend, sometimes
predictably, on the choice of the composition of that index. It is a coincidental fact that
the inherent nature of mining and mining technology makes it possible for the prices of
certain commodities that are produced as a result of the devotion of labor and capital to
the effort of mining to increase less (or decrease more) than might be expected. There is a
"dimension paradox", agricultural products are produced by using the 2-dimensional resource
of the earth's surface, so the "disappearing frontier" creates a limitation. But in contrast
some mining, particularly for elemental metals, is essentially able to operate in 3
dimensions, although of course there are increasing costs for deep digging. So really there
is lots and lots of gold, silver, platinum, tungsten, etc. out there and more can be found
by digging deeper.

Thus an index can be so chosen that its value does not rise like that, say, of a
"typical Rembrandt" or like the ratio of the human population to the total surface area of
the Earth. If the value trend of a currency is such that a natural interest rate is not
negative then it is not an unattractive task for a central currency authority to mint or
print the physical currency that would circulate. Then the issuer of currency would be
partially in the position of a borrower not paying interest on borrowed money.

But Satoshi wouldn't:

Quote:

Originally Posted by bitcoin whitepaper

The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation.

https://bitcoin.org/bitcoin.pdf

Last edited by jbouton; 06-27-2021 at 07:28 AM.

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06-27-2021 , 08:08 AM

#10

jbouton

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Quote:

Originally Posted by kekeeke

Its complete gibberish until you consider the bitcoin variations such as what roger ver created bitcoin cash and wright bitcoinSV:

Quote:

It becomes possible, once Caesar is minting gold and decides its very well used and accepted and the empire is working well on the gold coins, another Caesar might come along and say ‘Well I can put a little of lead inside these gold coins and pass them out at the same value.’ It would be the Aurelius of so and so….and that sort of thing can happen.

In regard to his death

Just a little fun or eerie but nash died on the NJ turnpike

I'm looking for the clips from his last interview where he talks about how he will likely die with his wife and iirc he talks about how he might die on the plane ride home (but dies in the cab ride home from the airport after the plane ride he referenced).

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06-27-2021 , 08:32 AM

#11

jbouton

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Quote:

We are going back to the US on the airplane, tomorrow, we might die together...thats fate.

bah imbed doesn't accept the timestamp try this: https://youtu.be/AqzLizhLvEI?t=1629

His last interview. They died the next day. Not pointing to conspiracy, its just true.

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06-30-2021 , 08:32 AM

#12

Mat Cauthon

adept

Join Date: Mar 2006 Posts: 1,147

I think you and Paul agree with each other on everything except two things. Firstly, he thinks that inflation relates to purchasing power, and when he asks you if Nash uses it differently I just can't understand why you don't just say that he uses it differently in the context you are discussing, then the discussion would have been resolved. Even if that is not 100% accurate, you would have been given the opportunity to explain it properly after that.

The second thing you disagree on is whether central banks would abandon their mandates of CPI inflation and employment, when faced with competition from Bitcoin. I agree with you that they eventually would, but I don't see why it is very relevant. But maybe it is because then we can apply other work by Nash, that builds on such a world?

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07-05-2021 , 01:20 AM

#13

jbouton

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Quote:

Originally Posted by Mat Cauthon

I wasn't as strong in my understanding of it. I just knew I had him caught well enough when he says words don't need context. Its also very subtle to explain and there isn't much point in doing so in debate-no one likes to concede there major point in a debate.

Quote:

The second thing you disagree on is whether central banks would abandon their mandates of CPI inflation and employment, when faced with competition from Bitcoin. I agree with you that they eventually would, but I don't see why it is very relevant. But maybe it is because then we can apply other work by Nash, that builds on such a world?

When we consider moving to a different target, such as the price of bitcoin we can understand that 0% inflation doesn't mean that such money would be purchasing power stable. That is what paul was saying, it is conflating different targets in the same sentence. Terrible mistake and hard for others to understand.

If a hyperbitcoinization (nash inflation) event happens, the proper central bank counterstrategy to not lose control of cpi measured inflation would be to target bitcoin. For example they could add it to their balance sheets, hold it.

Like this:

Quote:

https://www.bloomberg.com/news/artic...n-rate-setting

New Zealand Government Forces Central Bank to Include Housing In Rate Setting

This is what is critical and amazing to understand because the event would stabilize all of the major currencies around the world inter-relationally (and with bitcoin).

That is the beginning of the new economy Nash explains, and so in such an event his work becomes immediately and extremely important to talk about and understand. So if I'm not answering your questions perfectly directly and I really appreciate your participation and observations here.

Last edited by jbouton; 07-05-2021 at 01:39 AM.

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07-05-2021 , 01:41 AM

#14

jbouton

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The event becomes self perpetual and can be brought about by having people understand the argument. The proposal he gives is like a time-locked catalyst.

And I can tell you with the years I have been trying to spread it around, its gaining ground rapidly. The discussion of it on the forum used to be banned.

Quote:

Originally Posted by Ideal Money

And so the various currencies managed with “inflation targeting” would be comparable by users or observers who would be able to form opinions about the quality of the currencies. And what I want to suggest is that “the public” or the users, those for whom a medium of exchange functions as a basic utility, may develop opinions that are critical of currencies of 5 lower “value quality”. That is, the public may learn to demand better quality of that which CAN be managed to be of better quality or which can be managed to be of the lower quality observed in so many of the various national currencies in the 20th century.

Its becoming easier to read because bitcoin is forcing a new paradigm that only he was able to view at the time:

Quote:

Possible Evolution of the Quality of Currencies

It seems possible and not implausible that leading currencies in the future will evolve in such a way as to become of improved quality with regard to inflation. Here we use the "common sense" viewpoint of an observer located in a land politically independent of the country issuing the currency that is appraised. Thus less inflation corresponds directly with higher quality. There may be a time of wide usage of the "line" of inflation targeting. And there may be a comparatively small number of "leading" currencies, such as the US dollar, the "euro", the Japanese and Chinese currencies, and the British pound. If in each of the corresponding states the authorities were using, in some sense, "inflation targeting" then necessarily they would have some sort of a price index that could be related to their issued currency. But it would ALSO be very natural for each state to look at the comparative behavior, in terms of value, of the other leading currencies.

Thus second order index comparisons become possible where the authorities in a state would look not only at domestic prices but also at international value comparisons.And now we have only to imagine that a "groundswell" of "popular demand" for minimal inflation (and thus for money that would be viewed by foreign observers as of higher quality) could sufficiently influence the responsible authorities and governments so that they would so control the "supply side" of their money management activities so as to achieve that (supposed to be popularly desired) result.

Here we can look at the early behavior of the "euro" as an example. It came out as a unit having unit value between that of a British pound unit and that of a (U.S.) dollar. It would SEEM that in Frankfurt they EXPECTED that it would simply "float" at a value level above that of the US dollar unit. This did not occur, and it then began to seem as if it might be drifting relentlessly downward, like with the history of the old Italian lira. But then, after a time, for various reasons, presumably including supply restraint controls directed from Frankfurt, the decline was reversed and the euro regained enough value to have a respectable appearance. So we can see examples where the "asymptotic" behavior of a value under comparison can be different from an earlier apparent pattern.

Thus I think that "asymptotically ideal money" is a real possibility and that problems of political coordination do not make this very difficult to be achieved. But also, if there is in the first stage of progress the advent of "asymptotically ideal" currencies, then after that level of what might be called "rationalization" is achieved there would be the possibility of an international collaboration to set up value standards analogous to the standard measures used in the internationally accepted "metric system".

And here a side remark can be made, partially humorously, and just for illustration, that a POSSIBLE standard of value would be simply the cost of making a duplicate, of precisely the same composition and weight, of the "standard kilogram" located at Sevres near Paris.

Last edited by jbouton; 07-05-2021 at 01:57 AM.

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07-05-2021 , 07:40 PM

#15

jbouton

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The great debate about the development path of bitcoin aswell as what is known to some as the civil war is premised on the idea that to be ultimately successful as a global money bitcoin must be able to serve the entire population's daily transactions.

Bitcoin (aka Core) is working on layer two solutions such as lightning whereas the "big block faction" forked, in different ways, notable creating bitcoin cash. BitcoinSV removed the blocksize limitation altogether. Each states their reasoning which is to serve the daily transactions of the global citizenry.

Roger Ver tricked the community in accepting this debate as a premise.

Money, blockchains, and social scalability: http://unenumerated.blogspot.com/201...alability.html

Nick Szabo has a deep history with experiments and philosophy groups related to the implementation of a secure digital currency. Very highly regarded among computer scientists that worked early and now the project. He explains the dilemma:

Quote:

Originally Posted by Szabo

In computer science there are fundamental security versus performance tradeoffs. Bitcoin's automated integrity comes at high costs in its performance and resource usage. Nobody has discovered any way to greatly increase the computational scalability of the Bitcoin blockchain, for example its transaction throughput, and demonstrated that this improvement does not compromise Bitcoin’s security.

In computer science there are fundamental security versus performance tradeoffs. Bitcoin's automated integrity comes at high costs in its performance and resource usage. Nobody has discovered any way to greatly increase the computational scalability of the Bitcoin blockchain, for example its transaction throughput, and demonstrated that this improvement does not compromise Bitcoin’s security.

Someone or some group came along and realized the previously unsolvable problem (of how does it scale while staying secure) was unnecessary to solve. Szabo goes on later to explain:

Quote:

Originally Posted by Szabo

We need more socially scalable ways to securely count nodes, or to put it another way to with as much robustness against corruption as possible, assess contributions to securing the integrity of a blockchain. That is what proof-of-work and broadcast-replication are about: greatly sacrificing computational scalability in order to improve social scalability. That is Satoshi’s brilliant tradeoff.

And as we can see this is (part of) the premise of the nature of the thing Nash describes:

Quote:

Originally Posted by Nash Ideal Money

In a large state like one of the "great democracies" it is reasonable to say that the people should be able, in principle, to decide on the form of a money (like a "public utility") that they should be served by, even though most of the actual volume of the use of the money would be out of the hands of the great majority of the people.

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07-09-2021 , 07:20 AM

#16

Mat Cauthon

adept

Join Date: Mar 2006 Posts: 1,147

Quote:

Originally Posted by jbouton

I think you approached it too much as a debate, while he was genuinely trying to understand your arguments. If you explained it in terms he understood, I think he might actually have agreed with you, which I think would have had a larger impact than winning the debate in the eyes of some of the audience. With that said, I think the three of you managed to make a small topic into a pretty interesting discussion, I hadn't planned on watching all of it.

Quote:

Originally Posted by jbouton

I think he just uses the word inflation to always mean CPI inflation, since that has become the commonly used definition. Because of this, he assumes that that is also the meaning when someone else uses it. You spent a long time discussing this, and I think it was still the main source of misunderstanding.

Quote:

Originally Posted by jbouton

If a hyperbitcoinization (nash inflation) event happens, the proper central bank counterstrategy to not lose control of cpi measured inflation would be to target bitcoin. For example they could add it to their balance sheets, hold it.

That might be true, it's interesting, could you explain in simple terms why that is? I think Paul is saying that they will not act game theoretically optimally, because it doesn't fit with their objectives, and those objectives are prioritized above self preservation of the institution. Maybe he is wrong about that, and has not thought about it enough?

Quote:

Originally Posted by jbouton

What would the transition look like, who would be the winners and losers, and how could states make the transition without defaulting on their obligations?

Quote:

Originally Posted by jbouton

You obviously understand, based on what you write further down, that people need to be able to control their own money, but everybody doesn't need to do it at all times, as long as enough people do it to keep the system in check. But what you write above is perpetuating the very false debate that you point out. Bitcoin is not working on layers on top of itself, some people are working on layers on top of Bitcoin. Not because it is a necessity but because it is a good opportunity. There was no decision between either increasing the blocksize to enable millions of transaction per second, or to keep it small and build layers on top. The blocksize was simply kept small because it was technically impossible to increase it without the blockchain eventually becoming so large that it would defeat the very purpose of a decentralized money. Some groups hijacked that engineering decision to try to make personal financial gains.

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07-11-2021 , 04:55 PM

#17

jbouton

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Join Date: Jul 2019 Posts: 3,188

Quote:

Originally Posted by Mat Cauthon

I have some good writing and thoughts in regard to judgement via an impartial observer that is based on adam smith's TOMS. I can't win a debate over maximalism when the judges are maxis. But I walked him into an obviously intellectually dishonest error. His peers still won't call him out on it but its obvious. You need context to know what words mean. He can either just have his crowd mute me or he can one day admit that his was being wrong and immoral. I mean unless I'm mistaken.

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It's more complex than that and I realize from a recent conversation with an IRL friend that has spent time in dialogue about Ideal Money with me that understanding the nuance is not easy.

Nash called for a 0% inflation with respect to the target. Paul read inflation in nash's argument as meaning stable purchasing power from a theoretical and unattainable metric. CPI inflation is a different nuanced definition of inflation that is not the same as stabilizing purchasing power in general. He won't visit this tho because it precludes his drive chains project.

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Ya, Paul is saying that game theory doesn't apply and Nash is saying it does and he is giving his application of it:

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Whether or not the options exploited by "Keynesian" central bankers and advisors are beneficial to the general welfare in the corresponding territories (e.g., Brazil) it is very clear, game theoretically,

...

The actors on the stage of the drama formed by the actions that determine the trends in the value of a national currency are themselves players in a game and they can be rationally viewed as such. The theme of "rational expectations" naturally enters. Those who ARE NOT in control but who ARE naturally concerned with the expectations for the value trend of a national currency cannot be wisely assumed to be entirely naive and unable to form "rational expectations" regarding the currency. So the (possibly) "Keynesian" players in this game have natural opponents (or co-players, beyond zero-sum perspectives) who are interested in not being themselves "outsmarted" by those who control the options that determine, say, the quantity supplied of the national currency.

Forgive me but why is paul relevant here?

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What would the transition look like, who would be the winners and losers, and how could states make the transition without defaulting on their obligations?

This is well explained in the works, nation by nation.

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I'm not sure who you are referring to as the hijackers.

Last edited by Bluegrassplayer; 07-11-2021 at 05:45 PM.

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07-11-2021 , 05:00 PM

#18

jbouton

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Join Date: Jul 2019 Posts: 3,188

http://extropians.weidai.com/extropians.1Q02/3146.html

Quote:

Originally Posted by Hal Finney

I've just started reading Sylvia Nasar's biography of mathematician John
Nash, A Beautiful Mind, on which the current movie is based. Nash made
major contributions to economics among other fields before descending
into schizophrenia. But this list of his earlier character traits sounded
eerily familiar:
- "His heroes were solitary thinkers and supermen like Newton and
Nietzsche."
- "Computers and science fiction were his passion."
- "He considered 'thinking machines', as he called them, superior in some
ways to human beings."
- "At one point, he became fascinated by the possibility that drugs could
heighten physical and intellectual performance."
- "He was beguiled by the idea of alien races of hyper-rational beings
who had taught themselves to disregard all emotion."
I think you could find people on this list who would share many of
these views. Attraction to Newton, Nietzsche, computers and science
fiction; exploration of drugs and supplements to enhance body and mind;
emphasis on rationality as a means to the truth; all are common elements
of Extropian thought.
Hal

https://bitcointalk.org/index.php?to...34211#msg34211

Quote:

Originally Posted by Hal Finnety

Actually there is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.

Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.

George Selgin has worked out the theory of competitive free banking in detail, and he argues that such a system would be stable, inflation resistant and self-regulating.

I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash. Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as... well, as Bitcoin based purchases are today.[

Me Hal and Nash have the same argument.

Satoshi realized that bitcoin was perfect in its imperfection.

Last edited by jbouton; 07-11-2021 at 05:10 PM.

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07-12-2021 , 05:19 PM

#19

Mat Cauthon

adept

Join Date: Mar 2006 Posts: 1,147

Quote:

Originally Posted by jbouton

I honestly don't understand why you are having such a problem with him, to me it seems like you think that almost the same thing will happen; he thinks that everybody will be using Bitcoin natively, and you think it will be used indirectly by being settled to from layers on top. Prices and purchasing power will be dominated by Bitcoin in both cases.

Bitcoin maximalism refers to Bitcoin being the only cryptocurrency people should invest any attention or money into, and that it is the only one with any value long term. I assume you use it in a context outside of cryptocurrencies here, to mean that it will also absorb the value of all fiat currencies?

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Originally Posted by jbouton

How does it preclude his drive chains project?

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Originally Posted by jbouton

Ya, Paul is saying that game theory doesn't apply and Nash is saying it does and he is giving his application of it:

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I don't understand what this means. Could you explain it like you would to a high school student?

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Originally Posted by jbouton

This is well explained in the works, nation by nation.

I don't have time to read those works at the moment, could you give some highlights?

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Originally Posted by jbouton

I'm not sure who you are referring to as the hijackers.

Companies in the space that relied on a high volume on onchain transactions, Bcash creators/promotors, and to some extent other altcoins.

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07-13-2021 , 08:20 AM

#20

jbouton

veteran

Join Date: Jul 2019 Posts: 3,188

Quote:

Originally Posted by Mat Cauthon

He wants to change the protocol to serve more use cases. I don't believe we should be doing that.

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Bitcoin maximalism refers to Bitcoin being the only cryptocurrency people should invest any attention or money into, and that it is the only one with any value long term. I assume you use it in a context outside of cryptocurrencies here, to mean that it will also absorb the value of all fiat currencies?

The maxis in general believe bitcoin will supplant all fiat and hyperinflate them. Hyperbitcoinization. My argument is that the game theory as described by Nash suggests that bitcoin will stabilize all fiat inter-relationally. This is why the maxis won't propagate my argument or Ideal Money. And why they are willing to criticize it without even reading it.

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How does it preclude his drive chains project?

His project is premised on the idea that bitcoin needs to evolve to stay relevant. Or that we might want to decide what kind of use cases that it should serve. My argument is that we should stop evolving it because its already a perfect basis for something far more important.

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I don't understand what this means. Could you explain it like you would to a high school student?

A lot of people bastardize keynes and what is referred to as keynesian economics. But really Keynes proposal at the bretton woods conference after the wars was rejected. It relied on a sort of altruistic cooperative agreement in order to bootstrap...

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Originally Posted by wiki bancor

The bancor was a supranational currency that John Maynard Keynes and E. F. Schumacher[1] conceptualised in the years 1940–1942 and which the United Kingdom proposed to introduce after World War II. The name was inspired by the French banque or ('bank gold').[2] This newly created supranational currency would then be used in international trade as a unit of account within a multilateral clearing system—the International Clearing Union—which would also have to be founded

This wouldn't be game theoretically sound in the sense that rational self interested actors wouldn't directly benefit from the agreement.

Bitcoin as it becomes more and more relevant serves the same end that Keynes was after but it does it based on rational self interest as its premise (ie individual greed).

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I don't have time to read those works at the moment, could you give some highlights?

I'll find some relevant passages over the next few days.

Thx!

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07-30-2021 , 05:34 PM

#21

jbouton

veteran

Join Date: Jul 2019 Posts: 3,188

There are four important and relevant papers I mean to outline but I haven't been able to get to it. In hindsight I found my writing outlining one of them and it should do for now:

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Of all of the material by Nash that I have read, this letter that was later released to the public by the NSA, is the most revealing in regard to the way that Nash thinks and solves problems.

I'm not capable of fully understanding the intricate mathematical and cryptographic solutions that Nash's puts forth in this writing, nor the design of the machine that he gives, however, with a careful examination of the points that he makes, and his style of presenting them, we can still gain interesting insight into how this man's life and works unfolded, starting from when he was just a young man.

Let us examine a few lines from the scrawling manner Nash used to communicate his ideas to the worlds leading intelligence and research agencies.

https://steemit.com/bitcoin/@jokerpr...ter-to-the-nsa

shamir said something like nash predicted and birthed modern complexity theory here.

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02-23-2022 , 05:53 PM

#22

Bluegrassplayer

Carpal \'Tunnel

Join Date: Sep 2007 Posts: 38,615

Quote:

Originally Posted by jbouton

I can't find the thread I had on the subject but anyways bitcoin magazine published my proposal and I had some more professional help with the writing so, although quite intensive, it might read well to people.

Bump

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10-01-2022 , 10:03 AM

#23

jbouton

veteran

Join Date: Jul 2019 Posts: 3,188

Its not coincidental that Nash observed the comparison between Russia and the west in the conclusion of Ideal Money although it would seem as such.

To watch the world unfold the way it is, is Nashian order, based on a logical observation and extending it using game theoretical observations. I think the world will double down on its efforts and then not understand the outcome, ie more fragmentation and more inflation, until a point where serious emergency (perhaps marked by a global nuclear alert even) causes so much despair that politics cannot contain the general sentiments. At that point the world will beg for a game theoretical solution and leaders will arise to discuss it.

Quote:

Originally Posted by Nash, Ideal Money

Political Evolution

There perhaps will always be "politics", like also "death and taxes". But it is sometimes remarkable how political contexts can evolve. And in relation to that I think that it is possible that "the Keynesians" are like a political faction that will become less influential as a result of political evolution. The "Keynesian" view of things did not come into existence until after the time when what we can call "Bolshevik communism" had become established in Russia. And by this label we wish to differentiate between any theoretical or ideal concept of communism and the actual form of governing regime structure that came to exercise state power in Moscow. (All over the world varieties of states make claims to have governments very properly or even ideally devoted to the interests of the citizens or nationals of those states and always an externally located critic can argue that the government is actually a sort of despotism.)

The Keynesians implicitly always have the argument that some good managers can do things of beneficial value, operating with the treasury and the central bank, and that it is not needed or appropriate for the citizenry or the "customers" of the currency supplied by the state to actually understand, while the managers are managing, what exactly they are doing and how it will affect the "pocketbook" circumstances of these customers.

I see this as analogous to how the "Bolshevik communists" were claiming to provide something much better than the "bourgeois democracy" that they could not deny existed in some other countries. But in the end the "dictatorship of the proletariat" seemed to become rather exposed as simply the dictatorship of the regime. So there may be an analogy to this as regards those called "the Keynesians" in that while they have claimed to be operating for high and noble objectives of general welfare what is clearly true is that they have made it easier for governments to "print money".

So I see the Keynesians as in a weak sense comparable to the "Bolsheviks" because of the support of both parties for a certain "lack of transparency" relating to the functions of government as seen by the citizenry. And for both of them it can be said that they tend to think in terms of government agencies operating in a benevolent fashion that is, however, beyond the comprehension of the citizens of the state. And this parallel makes it seem not implausible that a process of political evolution might lead to the expectation on the part of citizens in the "great democracies" that they should be better situated to be able to understand whatever will be the monetary policies which, indeed, are typically of great importance to citizens who may have alternative options for where to place their "savings".

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Originally Posted by Nash, Ideal Money

Possible Evolution of the Quality of Currencies

It seems possible and not implausible that leading currencies in the future will evolve in such a way as to become of improved quality with regard to inflation. Here we use the "common sense" viewpoint of an observer located in a land politically independent of the country issuing the currency that is appraised. Thus less inflation corresponds directly with higher quality.

There may be a time of wide usage of the "line" of inflation targeting. And there may be a comparatively small number of "leading" currencies, such as the US dollar, the "euro", the Japanese and Chinese currencies, and the British pound. If in each of the corresponding states the authorities were using, in some sense, "inflation targeting" then necessarily they would have some sort of a price index that could be related to their issued currency.

But it would ALSO be very natural for each state to look at the comparative behavior, in terms of value, of the other leading currencies.

Thus second order index comparisons become possible where the authorities in a state would look not only at domestic prices but also at international value comparisons. And now we have only to imagine that a "groundswell" of "popular demand" for minimal inflation (and thus for money that would be viewed by foreign observers as of higher quality) could sufficiently influence the responsible authorities and governments so that they would so control the "supply side" of their money management activities so as to achieve that (supposed to be popularly desired) result.

Here we can look at the early behavior of the "euro" as an example. It came out as a unit having unit value between that of a British pound unit and that of a (U.S.) dollar. It would SEEM that in Frankfurt they EXPECTED that it would simply "float" at a value level above that of the US dollar unit. This did not occur, and it then began to seem as if it might be drifting relentlessly downward, like with the history of the old Italian lira. But then, after a time, for various reasons, presumably including supply restraint controls directed from Frankfurt, the decline was reversed and the euro regained enough value to have a respectable appearance. So we can see examples where the "asymptotic" behavior of a value under comparison can be different from an earlier apparent pattern.

Thus I think that "asymptotically ideal money" is a real possibility and that problems of political coordination do not make this very difficult to be achieved. But also, if there is in the first stage of progress the advent of "asymptotically ideal" currencies, then after that level of what might be called "rationalization" is achieved there would be the possibility of an international collaboration to set up value standards analogous to the standard measures used in the internationally accepted "metric system".

And here a side remark can be made, partially humorously, and just for illustration, that a POSSIBLE standard of value would be simply the cost of making a duplicate, of precisely the same composition and weight, of the "standard kilogram" located at Sevres near Paris.

A poker forum that rejects game theory is the legacy of 2p2

Last edited by jbouton; 10-01-2022 at 10:08 AM.

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11-13-2022 , 06:38 AM

#24

jbouton

veteran

Join Date: Jul 2019 Posts: 3,188

I was recently tracing something back in my studies, I forget what exactly but it allowed me to revisit a lot of stuff that I would understand better now if I re-read it. I realized that I didn't properly understand the concept of falsifiability (https://en.wikipedia.org/wiki/Falsifiability) and in fact that my understanding of the definition of it was too 'strong'. As I traced back Mises Regression thereom to Mengers Origin of money (because of a thread with bitcoin's founder Satoshi where he addressed whether or not bitcoin fits the menger/mises orgin of money theories) I was reminded that they are in fact meant to be falsifiable or scientific theories (although menger's work predates popper).

To be specific Menger extends the emerging evolutionary and natural selection paradigm of his time to money and explains how it must have been a continuous barter that eventually favored one commodity up to the special designation of being a money. Mises extends Menger by resolving a self perpetuating value that a 'marginal-utility' theory would otherwise seem to imply. Mises answers the difficulty of describing the nature of the market valuation of money when the market's valuation of the money medium affects its usefulness as such. Mises offers that we can tie the current valuation of a money to a previous market period and recursively get a value input down until the pre-money usefulness of the commodity provides the value input.

I hope I have that correct enough, I welcome corrections.

This becomes the question that was asked of Satoshi, does Bitcoin violate Mises regression theorem. And for some this means to ask, can Bitcoin become money from the Austrian school of thought. Some read Mises to mean that only a medium that first had a non-monetary use case could become a money. I think I can quite easily refute that either mises nor megner believed this but rather they meant to explain simply how it natural came about in the first instance.

But Satoshi had a peculiar response that I have finally got around to more formally showing. Satoshi somewhat skirt the meaning an intention of Mises but notable references the concept of 'collectors' as providing the initial spark:

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Maybe it could get an initial value circularly as you've suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it.

Then I re-read Szabo work and realize that in shelling out he puts out a formally falsifiable theory of money that extends mises/menger via dawkins. Dawkins extended darwin which was extended with nash's game theory equilibrium. Dawkins showed that the non-cooperate equilibrium for survival happens on the gene level such that strategies at an organism level that would otherwise not promote reproduction do promote survival/reproduction on the gene level. That is to say a very crude level of you scratch my back you scratch mine can help pass gene one even if the organisms are not related and dont share these genes.

What Szabo suggests is that money is an artifact of the evolution of reciprocal altruism and that advanced practices of closed loop trade are only possible with what he calls 'collectibles' or proto money. And he defines the kinda of qualities these collectibles would have. The theory then suggests we would develop and instinct to collective things with these qualities.

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The proto-money used by many hunter-gatherer tribes looks very different from modern money, now serves a different role in our modern culture, and had a function probably limited to small trade networks and other local institutions discussed below. I will thus call such money collectibles instead of money proper. The terms used in the anthropological literature for such objects are usually either "money", defined more broadly than just government printed notes and coins but more narrowly than we will use "collectible" in this essay, or the vague "valuable", which sometimes refers to items that are not collectibles in the sense of this essay. Reasons for choosing the term collectible over other possible names for proto-money will become apparent.

...

The theories presented in this paper can be tested by looking for these characteristics (or the lack of them) in the "valuables" often exchanged in these cultures, by examining the economic gains from the cycles through which these valuables move, and by observing preferences for objects with these characteristics in a wide variety of cultures (including modern ones).

Last edited by jbouton; 11-13-2022 at 06:43 AM.

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11-13-2022 , 06:54 AM

#25

jbouton

veteran

Join Date: Jul 2019 Posts: 3,188

That all then lays the grounds for me to more formally present what I feel I have come to understand through Nash's work Ideal Money.

Nash points to the value society would gain if we could reach an equilibrium with our currencies that would imply a single pricing system. So he describes a basis for inflation targeting and the game theory around inducing central banks to focus on achieving stability with the same target. He explains the characteristics that the target would need, many of them are shared with a gold standard but a gold standard has weaknesses. These weaknesses of a gold standard are improved upon by a basket of commodity prices. Nash he calls such a basket an ICPI) and points out is also fatally weak, as changes in the cost of production of the commodities that comprise the basket would require re-weighting which reintroduces the political component that was meant to be removed by the introduction of the ICPI.

Bitcoin it is understood does not suffer in this context from a cost of production shock. It is the Difficulty adjustment algorithm that exactly causes the system to SELF adjust.

So here in lies my theory of money, that extends szabo/satoshi via nash.

Bitcoiners believe in a hyperbitcoinization even where a perpetual rise in the price of bitcoin hyperinflates fiat out of existence. Instead I suggest that out of self preservation in response to hyperbitcoinization central banks will change their inflation target from local cpi's to bitcoin, a bpi bitcoin price index and that this will create global stability of all the major currencies.

furthermore because it can be reasoned that this will come about through natural order then it standards to reason we can and will bring it about before natural order otherwise would.

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