All of porcupineadvocate's Comments + Replies

Hmm. The article is technically correct but irrelevant. The case where necessity fails relies on three conditions: (1) the number of voters is even (2) the number of voters is small (3) at least one voter has their optimal preferences exactly identical to the proposed equilibrium; not merely 'very close' but exactly. All three (plus some additional, complicated conditions) must hold for Plott's conditions to be sufficient but not necessary.

(2) is obviously not a concern here, for nation-state electorates. (3) is implausible: just introduce a suitably fine... (read more)

(3) is guaranteed, assuming that a politician running for office will vote for himself.

Note: "the MVT is a good empirical first approximation" is not the same as "the MVT is a good predictor of politician behaviour".

This is because of two things: first, the MVT does not necessarily hold when issues are multidimensional. Plott (1967)'s AER article demonstrates that when voter preferences are multidimensional, then the requirements for a stable majority vote to exist at all are quite stringent and unlikely to obtain in reality. The usual voting problem issues crop up. The winner is ultimately the agenda-setter, who can con... (read more)

The first Google hit I found for "plott 1967 majority vote" was a article with 44 reported citations beginning with the claim that Plott had established sufficient conditions for an equilibrium to exist but had then been repeatedly misinterpreted as having established necessary conditions. Is this the case?

It would apply if gold were legally enforced and usable as a currency, but I don't think it is.

It does apply to forex speculation, though.

OK, so investors buying and holding gold do not cause the problem.

Well, no. Concisely put, the problem is under-determined money demand because of readily available money or money-like substitutes (in the theoretical framework of money demand/money supply). This is an issue limited to the period of readily available new money, of which Bitcoin itself is one, really. For those thousands of years there were few such substitutes, and substitution would have been costly anyway, so the problem does not apply there.

Thanks. (The problem does apply to gold speculation in this day and age, though, right? I will BTW readily concede that gold speculation in this day and age is high risk.)

That's not the analog; the analog would be the externality effect. An individual lowering (excessively high) prices imposes a loss on themselves but creates a positive externality on all other individuals; since the externality is never internalized, price adjustment is underprovided. If price adjustment is costly, the problem is even worse.

Wages are not thought to be sticky for this reason (real wages are not as obviously anticyclical as the argument would imply.).

Has anybody seen any reply to Tyler Cowen's argument that Bitcoin's monetary velocity is unstable?

The arguments I have encountered focus on Bitcoins' strengths as a medium of exchange, but not (as Cowen points out) as a store of value, as one currency among a monetary universe composed of many money-like substitutes. Why hold non-negligible amounts of Bitcoin (as opposed to cash for its state-enforced liquidity, or any less-liquid but higher-return financial instrument of choice - recall Fisher's equation here)?

The mainstream Keynesians like to talk up l... (read more)

I would say that demand for anonymous money coupled with first mover advantage seems to prop up bitcoin. One long run scenario is this - Almost all of the current developed nations that are not resource rich will have issues with their currency. In the absence of strong democratic will (a commodity in great shortage), growing budget deficits due to an aging population will result in the invisible tax, inflation, being used for effective relief. Nobody knows how long the resource exporter nations will continue the dance of accepting currency that isn't backed by something solid or effectively limited (like bitcoin). What will really change bitcoin's fate is some small nations using it as a currency (post-revolution, maybe) Then, a money laundering crackdown in the US and EU would not be able to halt it.
I haven't seen Cowan's argument, but wouldn't the argument apply just as well to gold and silver, which were used for thousands of years as currencies?