The Block-Chain Keynesian: Why Pushing to Scale bitcoin to be a Coffee Money is Keynesian Central Banking
It’s been said by someone, or some, that I don’t understand what the definition of Keynesian is. This is said in regard to the block-size debate and my claim that arbitrarily scaling bitcoin to serve the needs of a goal (p2p coffee money scalable to visa) is Keynesian in nature.
This is laughable to ignorant people because they have an understanding of the word Keynesian, that is different than mine, and therefore different than Nash’s. For most people Keynesian refers to some form of monetary policy and inflation targeting. Although I can agree with this definition, I think it needs to be expanded and more specific. Once this is done we can then begin to put the word Keynesian in its proper place, so that I might be allowed to explain what is meant by Block-chain Keynesian.
Keynesian Defined Under Nashian Economics
There can be Keynesians Neo-Keynesians New-Keynesians Post-Keynesians. Even the Post-Keynesians are still Keynesians~Lecture, Ideal Money
Nash paints a picture for us to understand the future of monetary policy. 20 years ago and until his death he had to do it with existing metaphors and paradigms that people could hope to relate to. The concept of Keynesianism and what makes it up and where it is divided is different for many different people. Nash knows this and so he is very careful:
The label “Keynesian” is convenient, but to be safe we should have a defined meaning for this as a party that can be criticized and contrasted with other parties.
So let us define “Keynesian” to be descriptive of a “school of thought” that originated at the time of the devaluations of the pound and the dollar in the early 30’s of the 20th century. Then, more specifically, a “Keynesian” would favor the existence of a “manipulative” state establishment of central bank and treasury which would continuously seek to achieve “economics welfare” objectives with comparatively little regard for the long term reputation of the national currency…~Ideal Money
Now I think we can begin to understand exactly what Nash wishes to discuss and refute. Nash does not describe a Keynesian as solely having intent to manipulate monetary supply. His definition is broader than this, and with great purpose. Nash’s keywords here are “manipulative” and “economic welfare” (objectives).
The sentiments for his definition, arise out of the 30’s etc, but his definition has evolved with it, and we might evolve it further, to understand that one could:
…favor the existence of a “manipulative” state establishment of [the block-chain ledger] which would continuously seek to achieve “economics welfare” objectives with comparatively little regard for the long term reputation of [bitcoin]….
I have not yet said this manipulation must be, or mustn’t be, only in relation to supply of the currency.
What we must notice is the word “continuously”.
To understand Nash’s intent here we can turn to Hayek’s “The Use of Knowledge in Society” and “The Fatal Conceit”. This is where the theme of the dangers central planning comes from, that pervades much of Szabo’s work as well as the bitcoin community’s discussions. Hayek explains:
…the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form. The statistics which such a central authority would have to use would have to be arrived at precisely by abstracting from minor differences between the things, by lumping together, as resources of one kind, items which differ as regards location, quality, and other particulars, in a way which may be very significant for the specific decision. It follows from this that central planning based on statistical information by its nature cannot take direct account of these circumstances of time and place and that the central planner will have to find some way or other in which the decisions depending on them can be left to the “man on the spot.”~Hayek, The Use of Knowledge in Society
That is to say for some systems, there can be no forward looking knowledge. The fatal conceit is to try and seek to optimize such a system, in which the knowledge to do so cannot be obtained:
Many of the evolved rules which secured greater cooperation and prosperity for the extended order may have differed utterly from anything that could have been anticipated, and might even seem repugnant to someone or other, earlier or later in the evolution of that order. In the extended order, the circumstances determining what each must do to achieve his own ends include, conspicuously, unknown decisions of many other unknown people about what means to use for their own purposes. Hence, at no moment in the process could individuals have designed, according to their purposes, the functions of the rules that gradually did form the order; and only later, and imperfectly and retrospectively, have we been able to begin to explain these formations in principle (see Hayek, 1967, essays 1 and 2)~Hayek, The Fatal Conceit
It is of course a lesson only in approaching our problems from the solvable perspectives. In other words to attempt to solve an problem from an unsolvable perspective is ultimately an act of irrationality. Hayek warns that to structure our society on this type irrationally is incredibly destructive-The Fatal Conceit.
Aligning Nashian and Hayekian Economics
Subsequent to that time , after consulting with some of the economics faculty at Princeton, I learned of the work and publications of Friedrich von Hayek. I must say that my thinking is apparently quite parallel to his thinking in relation to money and particularly with regard to the non-typical viewpoint in relation to the function of the authorities which in recent times have been the sources of currencies (earlier “coinage”).)~Ideal Money
When we put Nash and Hayek’s view together we get a definition for Keynesian that represents players that are interested in a perspective that seeks to optimize a currency by use of foreword looking parameters that cannot be used to properly target the direction of optimization.
This “targeting” we can understand also to be “continuous” which means that there is to be a constant readjustment of something in order to hit an arbitrary or non-sensical goal.
The Block-Chain Keynesian
This is what we mean by “Keynesian”, and now I wish to explain why those that are trying to scale bitcoin to be a coffee money are in fact hidden Keynesians (Block-chain Keynesians).
There is a belief that bitcoin must be scaled to a certain transaction capacity in order to compete with, for example, visa. The idea is that bitcoin must achieve a certain wide scale adoption in order for it to be boot-strapped fully. The price must hit a certain level, and there must be enough transaction capacity to meet this demand.
Here lies our irrationality:
Does anyone claim to know what this demand is? Does anyone claim to know what this capacity NEEDS to be? What should bitcoin compete with in transactions per second in order to stay relevant in 1 year 2 years 5 years 10 years? Who can predict these things?
What is the adoption rate and number of users that will satisfy the requirements for bitcoin to not fail?
What level must the price hit? Must it continue to rise, or should we expect it to be stable vs….what? Stable vs the USD? Stable vs a basket of currencies? A basket of commodities? Which currencies? Which commodities? What should the block size be today tomorrow 1 month 6 months 1 year 5 years etc in order to maintain bitcoin as a coffee money…
These are all questions that Block-chain Keynesians don’t understand show their true colors. Arbitrarily adjusting bitcoin to serve an arbitrary goal is damaging the value of bitcoin in the Gresham/Nashian sense (I explain this in another article).
Nobody that read and understood Hayek and Nash is pushing for this.