> The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law" -- which states that the number of potential connections in a network is proportional to the square of the number of participants -- becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.
> As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.
The fax machine was a sea change when it was introduced. It absolutely was the one communications device every business had to have. It revolutionized white collar businesses and the sales process (imagine! transcontinental signed sales agreements within minutes!). Hell, the catalog industry (upon which the founding laws of e-commerce rest) owes its existence to the fax machine! Krugman misunderstood how important the fax machine was to businesses.
And he was right about the number of jobs for IT specialists, which has been declining for the past decade as IT operations are increasingly outsourced (even as other technology-related fields programming/design/etc have vastly grown) to foreign countries or specialized operators (i.e, Google Apps, Office 365, Amazon AWS, Salesforce, etc).
With relation to IT jobs, wow that is one hell of a stretch.
Yep, he proved that several times when he wrote about the imaginary Euro crisis.
what does it say about a person who is dismissive about the way technology can affect/influence human behavior?
what makes him an expert? is it because he panders to what is the status quo (the ever-present monopoly of sorts)? is it because he engages in thoughtful exploration of ideas and notions with a larger community and helps bring about great discussion? is it because he has a degree? is it because he has done something notable for humanity?
I don't know what his track record is on technology in general, but dismissing something as important and revolutionary as the Internet makes me seriously wonder about his ability to understand the impact of new technologies.
If we look back 10 years from now, BitCoin could either be hugely successful or a mere afterthought. I'm not going to hold anyone accountable for being "right" or "wrong" about predicting its future. But I suppose this is why sensationalist journalism works.
Technologically, it's pretty amazing. People who try to attack it on technological grounds are probably wrong.
Economically, it's a different story, and it's about the economics that economists are most concerned and most informed.
From what I recall, his statements basically amount to saying that using Bitcoin as the basis for the economy is a bad idea because it would hurt macroeconomic developments.
Those are very different things, and obviously Krugman is much more likely to accurately predict the latter than the former.
"Monopolies aren't great for society. So we have trust busters in government whose job it is to keep the monopolies in check. But they don't do that so well. And our government is pretty good at handing monopolies out. Just look at the cable industry.
A few entrepreneurs in a garage. Or a few hackers on the Internet. They are the best trust busters of them all. Look what open source Linux did to Microsoft (funny that Microsoft contributed m̶o̶s̶t̶ a significant amount of lines of code to the Linux kernel starting in 2009; EDIT: http://arstechnica.com/business/2012/04/linux-kernel-in-2011...). They put a dent in a machine that the government could not. And look at what Lyft, Sidecar, and Uber did to the medallion owners in San Franscisco. They got cabs on the streets when the government could not.
Never doubt that a small startup can take on a huge monopoly. Indeed, it is the only thing that can."
is not quoted in the source material and isn't true. Please provide some proof for this claim.
That's not nearly the same as "Microsoft contributed most lines of code to the Linux kernal"
its like people feeling the need to correct grammar on the internet: most of the time they have nothing else to add to the discusion…
First, I have never owned any bitcoins, nor do I own any now. It is a fascinating and massive experiment, and I am quite happy to remain an observer rather than a participant.
Second, I suspect I know more about economics than you think (more a response to pico303 than to you). Obviously the deflationary argument is one of the strongest. The others are mostly noise, but wow is there a lot of noise.
I do wonder, though... What would happen if someone were to create something like Bitcoin but with, say, crowd-sourced monetary policy instead of a finite supply?
As far as I am aware there isn't any real debt owed in Bitcoin. So everyone who uses it has some positive value of Bitcoin. That means each and every one of them would individually benefit from widespread deflation, but that would have a negative long term impact on the currency as a whole. I am not sure if I trust the public to make the right long term monetary policy decision over something in their own personal interests.
People absolutely do loan each other bitcoin with high interest rate. Unless you meant something different for "real debt".
I'm not arguing for it or against it, I agree with you that it is fascinating. However, my casual observation is that the pro and con of being in the wild wild west is that you are in the wild wild west.
Sure there is. Someone can sell insurance, and you can choose to pay for it.
> (at least not 100%)
Perhaps not, but I wouldn't call the FDIC's insurance "100%" either. I doubt it would take very many simultaneous bank runs for problems to arise, even with the FDIC.
> otherwise half of all circulating BTC would be in an insurer's accounts
I'm not sure why half of all BTC would need to be in insurers' accounts, and I'm not sure why that would be an inherent problem even if it were the case.
Some assumptions: 1. Bitcoin insurance is a viable business; 2. People will trust the insurer.
PS. You will enjoy reading this post on the origins of money, in which among other things the author analyzes the common properties of many commodities used as money throughout history -- including not just gold and silver but less-well-known materials like wampun shells, ivory beads, and ostrich egg shells: http://szabo.best.vwh.net/shell.html
I'm curious as to the foundations of the benefits of inflation. I understand the principle that it discourages hoarding currency because your hoard decreases in value, but I'm not convinced that the net result is good for an economy. Wouldn't any method of hoarding satisfy the hoarders. Right now that seems to be gold.
The other aspect I find interesting is the Number of BitCoin. In one Sense there are A=21Million Bitcoin. In another sense there are B=11Million because that is the potential maximum in circulation right now. There is also C=??? Which is the amount of Bitcoin actively in circulation now (C = B - BitcoinHoarding).
Which of these should be the basis of a currency valuation? Only A can be considered deflationary (until 2140 anyway) from the principle that the quantity of bitcoin is not increasing but the economy is(hopefully).
In the past when we were using gold, like during the Civil War, we couldn't pay soldiers so we went to greenbacks (paper money like today). That allowed the soldiers to get paid so we could continue to fight the war. Gold obviously has a physical practical limit that can be traded and transfered. When a gram becomes worth so much it buys a house that makes other purchases of food and bills become impractical and people stop buying, and when building a billion dollar construction project moving it and protecting it has another set of problems and overhead. Bitcoin does not have the division problem--a single coin can be divided into pieces 10^8 pieces as the code currently works. That can also be changed in future versions to be divided even smaller. Ie, when one bitcoin can buy a house, you can just pay 0.0000001 for your stick of gum. So, we are then left with the argument, "Oh My God people won't buy because of the psychology that 0.01 coin today that currently buys a pack of gum being able to buy a car in the future." But, that's almost true now with savings and stocks and people still spend their money today and go into debt. Everyone knows if you save starting in your early 20s compounding interest it will be worth a ton more in 10 years, 20 years, etc.
Loans clearly have issues in a deflationary system. If you loan someone $10 today and that's worth $100 tomorrow how do they ever have a chance to pay it back? Payback would have to be on some growth rate where you owe "less" the longer the life of the loan with some interest built in. Venture Capital also would have issues, but if the rate of return on investments is greater than growth of the currency price that wouldn't be an issue either and one would expect it to stabilize over time.
Inflation is built into the current model to encourage investment and prevent concentration of capital. Clearly, given the wealth divide that isn't working (blame exploitation of 3rd world or robots). The argument from the anarcho-libertarians and socialist-libertarians is to try something new.
But yeah, great reaction piece, +1 for excellent fulminations.
No tulips were ever exchanged during the mania - only contracts for tulips.
The contracts had near-zero storage costs, near-zero transmission cost (just membership in the trading hall), anonymous ownership (sort of), and the process for generating tulips seems fair to me - the more work you do, the more tulips you create.
(Not that is actually mattered - the entire thing happened during the dormant season of the tulip, and no one actually grew any.)