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78 sats \ 4 replies \ @SimpleStacker OP 29 Oct \ parent \ on: Bitcoin: What Does Mainstream Economics Have to Say? | Article Review BooksAndArticles
I'm not entirely sure what to make of it, since I haven't studied the model deeply.
However, if you look at the appendix, one of the equilibrium conditions is:
where is time-preference, is the inflation rate of the dollar supply, and is the transaction cost of bitcoin relative to dollars.
However, if you look at that equation, you'll notice that it can only hold with if .
In other words, his model blows up if bitcoin is as costless to transact as dollars and there's a positive rate of inflation. It seems plausible to me that the transaction costs of bitcoin will continue to go down and that dollar supply inflation will always be positive, so I'm not sure what his model would then imply.
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21 sats \ 3 replies \ @Undisciplined 29 Oct
Odd. That seems like something you'd notice when doing common sense checks on your model.
You said he didn't do any original modelling in this paper, so I assume this is a model being used by other authors. Is it a holdover from trying to evaluate gold's monetary value or something?
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70 sats \ 2 replies \ @SimpleStacker OP 29 Oct
I think it comes from another one of his other papers that explicitly tries to model bitcoin valuation. I didn't read that paper, and I didn't work through all the math in the appendix, so I'm not really sure what to make of it.
Maybe if bitcoin is as frictionless as the dollar, there can't be an equilibrium in which both are traded simultaneously?
The equilibrium conditions are basically an indifference condition between dollars and bitcoin, I believe.
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21 sats \ 1 reply \ @Undisciplined 29 Oct
Maybe if bitcoin is as frictionless as the dollar, there can't be an equilibrium in which both are traded simultaneously
Interesting thought. That's similar to the last paper you reviewed.
It does make sense, when we're talking about exchange rates. I was expecting the pricing model to be based on bitcoin's future purchasing power.
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67 sats \ 0 replies \ @SimpleStacker OP 29 Oct
Yep, his pricing model is explicitly based on deriving a dollar/bitcoin exchange rate in 2141, which assumes both are traded in 2141. He then uses time discounting rules to get the dollar/bitcoin exchange rate for today.
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