Quotulatiousness

April 9, 2013

Bitcoins as Tulips or viable virtual gold?

Filed under: Economics, Law, Liberty — Tags: , , , , — Nicholas @ 10:27

In the New Yorker, Maria Bustillos reviews the history of bitcoins:

In many ways, bitcoins function essentially like any other currency, and are accepted as payment by a growing number of merchants, both online and in the real world. But they are generated at a predetermined rate by an open-source computer program, which was set in motion in January of 2009. This program produced each one of the nearly eleven million bitcoins in circulation (with a total value just over a billion dollars at the current rate of exchange), and it runs on a massive peer-to-peer network of some twenty thousand independent nodes, which are generally very powerful (and expensive) G.P.U. or ASIC computer systems optimized to compete for new bitcoins. (Standards vary, but there seems to be a consensus forming around Bitcoin, capitalized, for the system, the software, and the network it runs on, and bitcoin, lowercase, for the currency itself.)

[. . .]

There is an upper limit of twenty-one million new coins built into the software; the last one is projected to be mined in 2140. After that, it is presumed that there will be enough traffic to keep rewards flowing in the form of transaction fees rather than mining new coins. For now, the bitcoins are initially issued to the miners, but are distributed when miners buy things with them or sell them to non-miners (such as jumpy Spanish bank depositors) who desire an alternative currency. The chain of ownership of every bitcoin in circulation is verified and registered with a timestamp on all twenty thousand network nodes. This prevents double spending, since no coin can be exchanged without the authentication of some twenty thousand independent cyber-witnesses. In order to hack the network, you would have to deceive over half of these computers at the same time, a progressively more difficult task and, even today, a very formidable one.

[. . .]

A casual review of Nakamoto’s various blog posts and bulletin-board comments also confirms that, from the first, Bitcoin was devised as a system for removing the possibility of corruption from the issuance and exchange of currency. Or, to put it another way: rather than trusting in governments, central banks, or other third-party institutions to secure the value of the currency and guarantee transactions, Bitcoin would place its trust in mathematics. At the P2P Foundation, Nakamoto wrote a blog post describing the difference between bitcoin and fiat currency:

    [Bitcoin is] completely decentralized, with no central server or trusted parties, because everything is based on crypto proof instead of trust. The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts… With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.

* * *

Much of what has been written so far about bitcoins has centered on the perceived dangers of their relative anonymity, the irreversibility of transactions, and on the fact that they can be used for money laundering and for criminal dealings, such as buying drugs on the encrypted Web site Silk Road. This fearmongering is a red herring, and has so far prevented the rational evaluation of the potential benefits and shortcomings of crypto-currency.

Cash is also anonymous; it is also used in money laundering and illegal transactions. Like bitcoins, stolen cash is difficult to recover, and a cash transaction can’t readily be traced back to the source. Nor is there immediate recourse for the reversal of transactions, as with credit-card chargebacks or bank refunds when one’s identity has been stolen. However, I find it difficult to believe that anyone who has written critically of the dangers of bitcoin would prefer an economy where private cash transactions are illegal.

Update: Meet the $2 Million Bitcoin Pizza.

Floridian Laszlo Hanyecz thought it would be “interesting” to be able to say he paid for a pizza in bitcoins. He worked out a deal where he transferred 10,000 of his bitcoins to a guy in England, who ordered him two pizzas from Papa Johns.

Today, one Redditor notes, those 10,000 bitcoins would be worth about $2.3 million, thanks (in part) to folks fleeing unstable and politically risky state currencies in Cyprus and elsewhere.

Some news outlets are covering this as a “doh!” story. But these pizzas were a huge publicity boon for Bitcoin, contributing to the success of the currency today. If Lazslo had been a hoarder, perhaps his bitcoins would be worth very little now. Cashing in bitcoins for pizza when they were worth a fraction of a cent each is not obviously smarter or stupider than selling now would be, with bitcoins trading at $234. It’s a bet on which way the market is headed, that’s all.

Psychic harm

Filed under: Law, Liberty — Tags: , , , , , — Nicholas @ 10:16

David Friedman comments on a controversial blog post by Steve Landsburg:

Steve Landsburg’s piece [link], responding in part to the Steubenville rape case, makes the same argument from the other side. We — at least Steve (and I) — don’t feel that the argument for banning pornography or contraception is a legitimate one. Our reason is that the “harm” in those cases is purely subjective — I haven’t actually done anything to you, so your unhappiness at my self-regarding behavior is your problem, not mine, and you have no right to use the legal system to make me conform to your wishes. And even if you argue that I have done something to you — acted in a way that resulted in your knowing what I was doing, knowledge that pained you — that doesn’t count, because “knowledge that pains you” isn’t injury in the same sense as causing you to get cancer is.

Which gets us to the part of Steve’s post that gives lots of people reason, or excuse, to attack him. Suppose an unconscious woman is raped in a way that results in no injury — in the Steubenville case, “rape” actually consisted of digital penetration. She only finds out it happened several days later, at which point the harm is purely subjective, consists of her being offended at the knowledge that it happened. Why is this different from the subjective harm suffered by the person offended at someone else reading pornography? It feels different — to me and obviously, from his post, to Steve. But is it different, and if so why?

That, it seems to me, is an interesting question, one relevant to both law and morality. It is ultimately the same question raised by Bork, although from the other side. Bork was arguing that the harm caused by the use of contraception and the harm caused by air pollution were ultimately of the same sort, that it was legitimate to ban pollution hence legitimate to ban contraception — his article was in part an attack on Griswold v. Connecticut, the Supreme Court case that legalized contraception, a fact I had forgotten when I started writing this post. Landsburg is arguing that rape that does only subjective harm is of the same sort as reading pornography that does only subjective harm (unlike Bork, it isn’t clear that he is thinks his argument is right, only that he thinks it interesting), that it is not legitimate to ban the reading of pornography hence not legitimate to ban that particular sort of rape.

I agree with both Bork and Landsburg that there is a real puzzle in our response to the legal (and moral) issues they raise. Hence I disagree with the various commenters whose response to the Landsburg piece was that it showed he was crazy, evil, or both.

US Navy to deploy laser ship defence system in the Persian Gulf next year

Filed under: Middle East, Military, Technology, Weapons — Tags: , , — Nicholas @ 09:55

At The Register, Neil McAllister reports on the most recent successful test of the US Navy’s LaWS prototype and plans to deploy the weapons to the Persian Gulf:

The US Navy says it has successfully test-fired a ship-mounted laser weapon, and that it plans to deploy the device to an actual maritime staging area beginning in 2014.

On Monday, the Navy released video and still images showing the somewhat-unimaginatively named Laser Weapon System (LaWS) firing on an unmanned drone, causing the aircraft to burst into flames and plummet from the sky.

Speaking at the Navy League Sea Air Space Exposition at National Harbor, Maryland on Monday, Rear Admiral Matthew Klunder, chief of Naval research, said the device would be deployed to the Persian Gulf, where Iran has been “harassing” US ships with drones and small, fast boats.

“The area we’re going to test this in is a very intensive maritime region of the world,” Klunder told USNI News. “Lots of commerce, lots of ships.”

Klunder said the Navy has field-tested the solid-state laser 12 times so far, and in each case it managed to destroy its target. He added that the weapon also has a nonlethal mode that can generate a “dazzle” effect, which can be used to blind enemy vessels by overwhelming their sensors.

In addition to being effective against small, fast-moving craft, the cannon offers another benefit: its low cost relative to traditional weapons systems. According to The New York Times, firing LaWS costs less than $1 per sustained pulse. Compare that to the cost of a short-range interceptor missile, which the paper estimates run around $1.4m apiece.

The YouTube description:

120804-N-ZZ999-001 SAN DIEGO, Calif. (Jul. 30, 2012) The Laser Weapon System (LaWS) temporarily installed aboard the guided-missile destroyer USS Dewey (DDG 105) in San Diego, Calif., is a technology demonstrator built by the Naval Sea Systems Command from commercial fiber solid state lasers, utilizing combination methods developed at the Naval Research Laboratory. LaWS can be directed onto targets from the radar track obtained from a MK 15 Phalanx Close-In Weapon system or other targeting source. The Office of Naval Research’s Solid State Laser (SSL) portfolio includes LaWS development and upgrades providing a quick reaction capability for the fleet with an affordable SSL weapon prototype. This capability provides Navy ships a method for Sailors to easily defeat small boat threats and aerial targets without using bullets. (U.S. Navy video by Office of Naval Research/ Released)

Surveillance is only good when they do it to us, not vice-versa

Filed under: Government, Media, USA — Tags: , , , , — Nicholas @ 09:41

David Sirota on the blatant hypocrisy of Big Brother surveillance fans now objecting when they’re the targets of surveillance:

The Big Brother theory of surveillance goes something like this: pervasive snooping and monitoring shouldn’t frighten innocent people, it should only make lawbreakers nervous because they are the only ones with something to hide. Those who subscribe to this theory additionally argue that the widespread awareness of such surveillance creates a permanent preemptive deterrent to such lawbreaking ever happening in the first place.

I don’t personally agree that this logic is a convincing justification for the American Police State, and when I hear such arguments, I inevitably find myself confused by the contradiction of police-state proponents proposing to curtail freedom in order to protect it. But whether or not you subscribe to the police-state tautology, you have to admit there is more than a bit of hypocrisy at work when those who forward the Big Brother logic simultaneously insist such logic shouldn’t apply to them or the governmental agencies they oversee.

[. . .]

Yet, in now opposing the creation of an independent monitor to surveil, analyze and assess lawbreaking by police and municipal agencies after a wave of complaints about alleged crimes, Bloomberg and Kelly are crying foul. Somehow, they argue that their own Big Brother theory about surveillance supposedly stopping current crime and deterring future crime should not apply to municipal officials themselves.

This is where an Orwellian definition of “safety” comes in, for that’s at the heart of the Bloomberg/Kelly argument about oversight. Bloomberg insists that following other cities that have successfully created independent monitors “would be disastrous for public safety” in New York City. Likewise, the New York Daily News reports that “Kelly blasted the plan as a threat to public safety,” alleging that “another layer of so-called supervision or monitoring can ultimately make this city less safe.”

If this pabulum sounds familiar, that’s because you’ve been hearing this tired cliché ad nauseam since the 9/11 terrorist attacks. Whether pushed by proponents of the Patriot Act, supporters of warrantless wiretapping, or backers of other laws that reduce governmental accountability, the idea is that any oversight of the state’s security apparatus undermines that apparatus’ ability to keep us safe because such oversight supposedly causes dangerous second-guessing. In “24″ terms, the theory is that oversight will make Jack Bauer overthink or hesitate during a crisis that requires split-second decisions — and hence, security will be compromised.

Britain’s wartime rationing was the actual start of the modern welfare state

Filed under: Britain, Bureaucracy, Food, Government, History, WW2 — Tags: , , , — Nicholas @ 08:31

In the Telegraph, Daniel Hannan shows that the wartime coalition government led by Winston Churchill actually laid the groundwork for the post-war “creation” of the welfare state:

British WW2 Fuel ration book cover

It wasn’t the 1945 Labour Government that created the welfare state, that Saturn which now devours its children. The real power-grab came in 1940.

With Britain’s manpower and economy commandeered for the war effort, it seemed only natural that ministers should extend their control over healthcare, education and social security. Hayek chronicled the process at first hand: his Road to Serfdom was published when Winston Churchill was still in Downing Street.

Churchill had become prime minister because he was the Conservative politician most acceptable to Labour. In essence, the wartime coalition involved a grand bargain. Churchill was allowed to prosecute the war with all the nation’s resources while Labour was given a free hand to run domestic policy.

The social-democratic dispensation which was to last, ruinously, for the next four decades — and chunks of which are rusting away even today — was created in an era of ration-books, conscription, expropriations and unprecedented spending. The state education system, the NHS, the Beveridge settlement — all were conceived at a time when it was thought unpatriotic to question an official, and when almost any complaint against the state bureaucracy could be answered with “Don’t you know there’s a war on?”

All quite true, and all quite necessary at the time. Without significant amounts of imported food, Britain could not feed its people. Even with imports, the amount of available food was subject to unpredictable fluctuations as losses at sea interrupted supply and left empty shelves in grocery stores. Although losses were relatively low early in the war (early U boats were unable to stay at sea for long periods, and German bases were a long way from most British trade routes), the writing was on the wall if the war continued for years.

To fight a totalitarian regime, Britain had to emulate some of its methods (ironically, full rationing wasn’t introduced in Germany until much later in the war). For the middle classes, this was an unwelcome intrusion of the state into private affairs, but generally accepted due to the war. For the working classes, in many cases it was actively welcomed. While the rations were small, there was the promise — and generally a fulfilled promise — that some would be made available even in the poorest areas of the country. My mother was nine when the war began, and she remembers seeing more food in the stores of Middlesbrough after rationing was introduced. After the deprivations of the Great Depression, many people in the north and in Scotland were better fed and clothed during the rationing period than they had been for nearly a decade.

Given that information, it should not be surprising that so many people voted for Labour in the 1945 elections: they’d had what they believed to be a live demonstration of the benefits of socialism for six years of war, and didn’t want to go back to the pre-1940 status quo.

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