167 sats \ 9 replies \ @elvismercury 12 Oct 2023 \ parent \ on: Intercontinental energy grids. 🌎←♻️→🌍 bitcoin
Yeah, fair. I think the real insight is that everything's tradeoffs. You put dead weight loss on one side, and coordination failures + externalities on the other, and try to behave sensibly given those tradeoffs. Pretending that either one doesn't exist (which is the usual partisan arguing) is dumb.
But the seen vs unseen is important to keep in mind, I think any reasonable person would agree on that.
There's a very interesting conversation to be had about whether it's actually possible for non-market actions to be efficient: i.e. whether it's possible to correct for market failures at a lower cost than the cost of the failure. This gets skipped in basically every discussion about externalities justifying state interventions.
The theoretical framework for doing it requires accurately knowing exactly how much value each person attaches to the externality and then charging/compensating them for it with money from whoever created the externality (or paying the creator of positive externalities).
Since the requisite knowledge is impossible to attain, the entire endeavor is quite suspect.
reply
I can see that point.
Another interesting conversation to be had is over the fact that market mechanisms can only function over domains for which there is a pricing signal; and even then, markets can only be efficient insofar as the price accurately encodes the values that it purports to encode at all [1]. Both of those assumptions are violated in practice; the question is: by how much?
So then those are the imperfect strategies you set against each other. And the approaches are not equally palpable to people, e.g., it's easy for someone to look at how the groundwater has been fucked and to say: "Something needs to be done!" and for that to seem reasonable, vs a more theoretical market-efficiency argument.
[1] A better way of putting it: they are efficient, but efficient with regard to what?
reply
Now you understand the incompleteness of subjective value theory. It is just that value is subjective at a local scope, and human life is perceived largely from the local scope. But just like we can do math and understand galaxies beyond the human scale, there is a global objectivity in value, which is nothing more than maximizing negative entropy (dubbed exotropy by some). This is what is done most efficiently with freedom and ALL government interference/subsidies is MATHEMATICALLY GUARANTEED to make efficiency drop, and poverty to increase, which is measured in energy.
Bitcoin is what gives you a measure NOW, but total energy is how you measure real world wealth. I explained it all here: https://heaviside.substack.com/p/bitcoin-mining-wastes-energy-but
reply
Is there a relationship between minimized local entropy and Pareto Efficiency?
I've thought about economic order in entropy terms as an analogy, but I've never looked into how literal that relationship is.
reply
Well, yes, in the sense that all economic decision makers operate to move toward the Pareto frontier, and that movement proceeds at maximum speed when you have free markets, which only are really free when you have sound money.
reply
markets can only be efficient insofar as the price accurately encodes the values that it purports to encode
The thing is, market mechanisms are such that "insofar as" becomes greater over time, whereas I'm not aware of any evidence that non-market forces have similar self-correcting mechanisms.
The "Something needs to be done" people may not realize it, but what they're usually advocating is that their preferences override the preferences of others by force. However, in your example, the real issue is a tragedy of the commons, which is an expected trait in non-market environments.
reply
The thing is, market mechanisms are such that "insofar as" becomes greater over time.
Provocative statement. What are you basing that claim on?
whereas I'm not aware of any evidence that non-market forces have similar self-correcting mechanisms.
I don't think asymptoting to "correct" can be demonstrated at all except in a toy domain, since defining what "correct" is is the heart of the issue.
reply
What are you basing that claim on?
Price theory, in particular, and microeconomics theory, in general. Basically, markets approach an equilibrium over time and market equalibria have certain properties, like Pareto Efficiency.
I don't think asymptoting to "correct" can be demonstrated at all except in a toy domain
Since that's the only type of domain where we know what "correct" is, I also don't think it can be demonstrated in other domains. Of course, that criticism would apply to any economic system. The point is that the mechanisms are at least self-correcting in theory and that can't be said of other systems.
efficient with regard to what?
I like this question. It is often taken for granted in these discussions. Markets are efficient at meeting the various preferences of the populace with the resources available. Specifically, they lead to a state (non-unique) where there is no way to make anyone better off without making someone else worse off (Pareto Efficiency). In a way this is obvious, since all markets do is allow voluntary exchanges, which are win-win (ex-ante). Once all available voluntary exchanges occur, there could be no more win-win exchanges.
reply
Correct, not is it only suspect, it is thermodynamically provable as less efficient via Landauer's principle because the bitcoin a person holds is literally the only prove of information that anyone can provide with skin in the game. This is the crux of everything, and it is absolute. There is no "small" exception.
reply