Thread by @simonb03jan2009

Hi @duringo_ so I said I'd get back to you with some thoughts on Nash's Ideal Money paper...

Thanks for the recommend, I'll be referencing it in my PhD. I have a paper coming out in @TCSjournalSAGE titled, 'The Philosophy of Bitcoin and the Question of Money', and in it I argue, using the words of several great monetary thinkers, that there is a problem with state money.

I'm excited to add Nash to this list. He clearly sees the problems with state money too.

I liked his term 'debt pardoner' as the power an authority may have to 'pardon the sins of the overindebted'. I feel that this power is often abused.

In my paper, I argue that the current financial system is deeply flawed and a systemic driver of inequality. There are plenty of prominent thinkers, like Nash, that support this view.

Yet, in the modern-day, I see little to no acknowledgement of this by politicians, central bankers etc.

If for many, modern money is broken, the question remains, what to do about money?

In the rest of the paper, Nash presents a potential idea - but I did not feel that it was a deeply formulated proposal, more that he had thought of something and was presenting it for consideration and academic thought. He even notes the possible flaws in his idea.

In short, his thoughts are about trying to have an international standard for money as we do for weight. A return to a gold standard is dismissed due to cost and the 'negative psychology about gold', such as in relation to cyanide leaching.

Nash proposes an alternative that 'would provide a good standard independent of state pardoners' - 'a nonpolitical value standard'.

He suggests that a good industrial consumption price index (ICPI) statistic could be this standard, based on the prices of commodities such as copper, silver and tungsten etc.

This idea then becomes very relevant to my paper and the concept of money philosophically.

International measures like weight are based on something physical e.g., 1kg = 1litre of water, or a metre is based on the distance light travels in the fraction of a second. This link to the physical dimension is important but does money need such a link?

Is the answer to link it to physical commodities to achieve a standard of value? I believe it is not - and it is here that money is different from other measures. It is purely abstract, without a need to measure things in a physical sense.

In my paper, I argue this with a point made by Simmel. If there are 10 eggs in the world and 10 dollars, then we know 1 dollar = 1 egg - and this is done without any link to a commodity.

Nash notes that the commodities in his index would need a 'value independent of its geographic location'. Here we get to some of the issues I have. Which commodities would we choose for the index and who gets to decide?

Nash writes, 'politicians in control of the authority behind standards could corrupt the continuity of a good standard' but he considered this a small risk if the standard became established like a metre or a kg.

But this leaves me thinking how is his index different from a gold standard which even Keynes wanted to end as the gold price was manipulated? The ICPI would just be more commodities - would this just then need more manipulation to corrupt?

Nash's idea aims to achieve 'an objective and nonpolitical standard' for money to 'remove the political roles of the grand pardoners'. This is fundamentally what is lacking in the current system.

But Nash's ideas don't solve the problems of a gold standard implicitly, just makes the standard harder to corrupt. Nash also suggests that the index could be 'refined' to avoid the 'temptation to include things that would otherwise seem appropriate'.

Further, 'the fundamental principle remains that if a political basis existed for changes in a standard index, it is not unlikely that a form of corruption would appear'. Nash also then compares this to CPI, which too has been devalued for political ends.

Nash clearly saw the problems that might come in practice with his index. And these are the reasons I do not think they would work practically, as mankind has proven incapable of managing money without abusing and misusing it.

In theory, his index may provide a standard, but I argue that money, in difference to weight or length, does not need and should not have a connection to the physical world. It should be a purely abstract measure.

Nash writes, 'the long-term trend of the value of any index of prices will depend, sometimes predictably, on the choices of the composition of that index'. I do not think that man can be trusted not to tamper with that composition.

My paper shows the irresistible urge for authorities to abuse money they control. I consider if Bitcoin can be an answer to this problem, and I feel it is better than Nash's idea of an index which would remain corruptible. The temptation is too great.

I also believe Bitcoin solves many of the problems Nash and others note: it removes 'debt pardoners' from its system, it is potentially not as manipulatable as an index, its value is independent of its geographic location, it is easy to move large value at low cost, it is…

…abstract without the confusion of a peg to a physical and manipulatable commodity - it is an objective nonpolitical value standard.

This is a long thread! But I write it as notes on the internet. I think this would make a good paper, but I don't have time for it.

I read the Southern Economic Journal version of Ideal Money. In the author's note, Nash comments that his thinking is aligned with Von Hayek. Many of us note the problems of state money but, as I said, can we reimagine money in a way that makes it work more fairly for us?

I don't think an index is the way to do it, but #Bitcoin could quite feasibly play a part.

@saifedean @resistancemoney @adam3us @Adam_Hayes_1