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Re:Strangecoin: a proposal for a nonlinear currency by msandford on Sunday March 30, 2014 @10:35AM (#7496242)
From the article:

"If I give you a dollar for a burger, then I've lost a dollar and gained a burger, and you've gained a dollar and lost a burger. Assuming this was a fair trade (that dollars and burgers are of approximately equal value), then as a result of the transaction we've simply rearranged who has which good, and no additional value was created in the process. What I've lost you've gained and vice versa, so that the total value between us has not changed after the exchange is over."

I can see how a person would think that, but it's not really correct. If that was true then nobody would have any reason to hold either dollars or burgers or whatever; we'd constantly trade them for one another since they are of literally equal value. Who cares which $10 bill they have in their wallet? Nobody since $10 is $10 is $10. Hell, most people don't even care if it's $10 or 2x $5 or $5 and 5x $1, so long as they don't need singles for the vending machine.

But we don't see that kind of behavior in the economy, which leads us to the conclusion that when people exchange things they're not exchanging things of equal value. They are of nominally equal value, which leads to there being a price. But if they were truly of equal value then the guy selling a burger is making $0 profit (something he is unlikely to do) and the guy buying a burger technically isn't any better off either. Why would two people make an exchange where neither is better off? In aggregate they wouldn't even if there are some exceptional cases where they would.

When people exchange things they are trading something which subjectively to them is of equal or lesser value than the thing they are getting. That also explains why people buy just one burger instead of ALL the burgers. When someone is hungry it shifts their subjective valuation of burgers higher and money lower; once satisfied their preferences shift back to "normal" and they stop buying burgers.

An economy already has value creation "baked in" because when people exchange things they only do so when it increases total satisfaction. People tend not to make trades which decrease satisfaction or merely hold it equal. The transaction cost helps ensure that is the case.

Everything else equal before the trade satisfaction was X, after the trade it was X + Y. Y is the amount of increased satisfaction that prompted one or both parties to engage in the trade. Now obviously someone could argue that Y is negative but that doesn't hold water. People don't buy things that are "too expensive" or "crappy" or whatever you'd like to call it.

I will concede that my argument might seem tautological. I might even agree. In the absence of a third party with a gun I can't see how or why two people would choose to enter into a trade that don't benefit at least one of them, and probably both.

Re:Strangecoin: a proposal for a nonlinear currency by dllthomas on Sunday March 30, 2014 @10:42AM (#7496254)
"In the absence of a third party with a gun I can't see how or why two people would choose to enter into a trade that don't benefit at least one of them, and probably both."

Well, at least that they don't both believe will benefit them.

Re:Strangecoin: a proposal for a nonlinear currency by msandford on Sunday March 30, 2014 @11:42AM (#7496472)
Yeah I think you have to go with the subjective meaning. I don't think you can talk about objective benefits, otherwise things go to hell very quickly. Where do drugs (legal or illegal), alcohol, tobacco, sugary foods, fatty foods, fast cars, hybrids, condoms, birth control pills, church donations, etc all fall?

It really depends on who you are. There's no way to have an objective arbiter who determines what is actually beneficial and what merely seems to be beneficial. At least that I know of. The problem seems intractable to me.

Re:Strangecoin: a proposal for a nonlinear currency by dllthomas on Sunday March 30, 2014 @01:21PM (#7496940)
I didn't mean "the value we think they should be deriving." I meant that people can be mistaken (or mislead) about how much they value something even in the short term. If someone thinks they are buying a reliable car and gets a lemon, I think it's more correct to say "they didn't get the value they expected" then "their revealed preferences show they really wanted the lemon".
Re:Strangecoin: a proposal for a nonlinear currency by msandford on Sunday March 30, 2014 @10:13PM (#7499131)
Ah yes, that makes much more sense.
Re:Strangecoin: a proposal for a nonlinear currency by djestrada on Sunday March 30, 2014 @12:37PM (#7496708)
I'm not sure this is a criticism of the proposal, but nothing I've said implicates an objective arbiter of value.
Re:Strangecoin: a proposal for a nonlinear currency by boomlinde on Sunday March 30, 2014 @10:41AM (#7496252)
I think that you should have kept reading the article beyond that point. From the article:

Of course, when I give you a dollar for a burger that's not really a zero sum transaction, because otherwise we wouldn't be motivated to enter into the transaction in the first place. I give you a dollar because I want the burger more than I want the dollar, and if you accept the trade it's because you want the dollar more than you want the burger, so in a fair exchange we both feel like we've come out ahead. In other words, there is some additional value in our fair exchange that is not accounted for in the burgers and the dollars alone.

Re:Strangecoin: a proposal for a nonlinear currency by msandford on Sunday March 30, 2014 @10:59AM (#7496315)
Yeah I did, but the author seems to brush that aside and say "it needs to be accounted for directly" and I would argue that's not necessarily true.

The problem is that I value my first gallon of water every day very highly for drinking. The next gallon also pretty highly for drinking and brushing my teeth. The next two gallons are for cooking and stuff, so they're less precious; the next five gallons for bathing and sanitation; the next 10 for cleaning and washing, etc. All the way down until we get to the market price which in Houston for water that comes out of the tap is $0.01 per gallon.

I think it would be utterly exhausting to list out every subjective value that I place on every thing that I exchange for every transaction of every day. It's something that I can do in my head with very little effort since for many transactions the value/cost delta is high and I don't need to do careful accounting.

One of the great things about money is that it has basically zero transaction cost as compared to bartering which has a substantial either time cost to find the best price, or price cost to find a deal in a short period of time. Engaging in these kinds of nonlinear transactions (if they need to be done honestly) would bring an economy to its knees.

Re:Strangecoin: a proposal for a nonlinear currency by djestrada on Sunday March 30, 2014 @12:36PM (#7496699)
While it's not necessarily true that our exchanges need to account for value in this nonlinear way, I think it's an interesting thought experiment to discuss ways in which our currency can express different aspects of the value of our transactions. I'm not claiming that Strangecoin represents the "true value" of our transactions; I'm simply saying that it's another way to model our economic relations, and looking at the network in this way might reveal salient aspects of the network that are hidden from view with other currencies. So I think Strangecoin really is describing some aspect of our economic relations, and it's a perspective that money often doesn't give you. If you trade me money, I don't know where it came from or what ties it has to the rest of the economy. But if you trade me Strangecoin, the trade itself gives me a picture of your importance and influence on the rest of the economy, and I can use that information to judge the value of the trade we're engaged in.

The low transaction cost of money is partly a result of how deeply embedded it is in our social and institutional practices. I don't think it is an essential feature of money itself; other practices might come to fill similar roles. I would also suggest that the opacity of traditional currencies to certain forms of value also has a crippling effect on our economy. Economics talks about these as "externalities", but they are best understood as values that aren't represented in our trades. I'm not claiming that Strangecoin can capture all externalities, or even that it catches the important ones, but only that it captures some dimension of value that is hidden in traditional currencies.

Re:Strangecoin: a proposal for a nonlinear currency by msandford on Sunday March 30, 2014 @10:46PM (#7499272)
You're right of course that the reason money has low transaction cost is because it is widely accepted. But that's kind of tautological; if it wasn't widely accepted it wouldn't be money by definition.

In my mind the low transaction cost is a feature in that you can make snap decisions (or in many cases not make them at all) without having to explain yourself.

What I mean is that if I had to itemize every gallon of water, every kilowatt-hour (or watt-hour) of electricity, every cubic foot of natural gas, every byte I upload or download, etc etc etc to come up with their "true" values I wouldn't have enough hours in the day to do 10% of what I normally do.

So I guess my question is this: at what level of granularity is this being proposed? And if it's anything less than "full granularity" why? What I mean is why should utilities be any less valued than phone apps? I need that first gallon of water WAY more than I need Angry Birds, so it seems to me like that needs to be accounted for. But that would be exhausting. I can't see a way for me to take this proposal really seriously AND not simultaneously want to hang myself.

I think it's an interesting idea to be sure, and it's fun to think about. But I really hope I don't have to tell everyone how much I like water or electricity or whatever.

Re:Strangecoin: a proposal for a nonlinear currency by bashcoder on Sunday March 30, 2014 @11:43AM (#7496481)
Agreed. In fact, all of the myriad secondary costs and benefits from commerce are already accounted for when you have a market that trades the currencies themselves.