posted to reddit thread
Again, the goal is value stability, which Nash said should be constant. This does not mean constant quantity. From online sources I can't see where I'm in disagreement with Nash, nor how the ICPI can be built backwards from currency competition because he says the ICPI "could be calculated from the international price of commodities". Even my suggestion that money should devalue very much like a 2% inflation target is not an idea that he throws out: [wikipedia again] "The policy of inflation targeting, whereby central banks set monetary policy with the objective of stabilizing inflation at a particular rate, leads in the long run to what Nash called ‘asymptotically ideal money’ – currency that, while not achieving perfect stability, becomes more stable over time." Moreover, the mild inflation idea as a way to slowly erase debts is something very important that Nash's "ideal money" does not take into account, so from what I see he's missing something crucial. It is possible his ideal money (perfect stability in value) is "ideal" only when the marketplace is ideally guided by "ideal law" that prevents money from concentrating into fewer hands in addition to enforcing basic rule of law in each transaction. Wealth can concentrate from loans, monopolies, and lobbies improperly affecting laws. It can also accumulate from efficiency gains due size, but a healthy system requires competition and dispersion, so I suspect allowing a company to gain over 50% of market share should be "made against the law" even if they followed all other aspects of ideal law. What to do with things that need 100% market share like roads and electricity remains a problem (letting two toll roads compete for the same route is rarely reasonable).
But wealth concentration into a few hands seems to be what a completely free market wants. Progressive tax to redistribute it back out is used in most countries. People get very wealthy as a result of riding society's wave of progress and technology more than any particularly great or noble intellect or skill. Instant billionaire status at age 25 after 4 years of work and near-zero capital investment makes no sense. Getting back to my point: mild inflation is a another check on inefficient, less powerful systems that allow wealth concentration. In ancient times, wealth concentration stifled society, then the people would revolt, install a new king or priest then all debts to the old "lords" weer erased. Jews learned to do it as a matter of course from other societies by declaring "jubilee" every 50 years. Now we have inflation instead.
I can agree with "ideal money" instead of mild inflation if a different fundamental assumption is made: if the wealth accumulation is prevented by something like progressive tax and smart laws on loans, then forcing constant value (zero inflation) on humanity would force everyone to become more efficient before expanding and go a long way to slow population growth and destruction of the biosphere (and in particular, not run into resource constraints so quickly, causing population collapse).
But in reality faster expansion and waste that is helped by low inflation will overpower the ideal money's more conservative expansion.
I am not sure currency should or needs to follow Zipf's law, but it appears it does, and therefore probably should. I agree competition in currency will result in an ideal currency, but knowing what the ideal outcome for people will be (or rather, the most likely-to-succeed outcome) is how you design the ideal money from scratch and then make it available. It also helps me in investing: I am more bullish on bitcoin if it forks. These ideas cause me to predict it will fork several times.
It must fork in order to achieve stable value as its use expands, either by alts or hard forks (which I guess is another name for an alt with a big pre-mine). But the ideal is to find an objective definition and measure of commodity prices and figuring out the best way to expand and contract the supply as the prices change. I agree defining and measuring is a big problem. There must be an objective theoretical way to define "commodity" and the weighting factors needed. An even bigger problem is measuring it without a 3rd party. If the market is big enough does everything become a commodity? Should they be weighted based on how much people spend on them? I believe it also needs slight inflation to help prevent concentration of wealth and the loan problem.
The consumption (destruction) of joules is sometimes used by people like Szabo and XCP (and implied in bitcoin and b-money) to claim "this object has value because a lot went into its creation". Rarity and antique-ness are used in a similar fashion. Trading a commodity itself that required joules to create and maintains economic relevance of the joule's spent (e.g., copper, etc) seems to be a much better idea. If we could trade a basket of commodities around with the ease of a fast cryptocoin, then we have an ideal.
The starting point for how to weight the commodities is my previous suggestion: a coin = a fixed percent of Gibbs free energy available in society divided by the number of people. By replacing my initial "joules" with a ratio, I've potentially removed the necessity of it being related to joules. But joules seem to be the primary thing that creates and runs commodity producers. To be clear, 1 coin out of 100M coins would represent 1/100M control of the "total current commodity output".
% coin owned of the total in "circulation" = % of society's total commodity-producing wealth divided by # people
So if commodity production capacity and number of people is constant, then 1 coin is worth more in joules than in the past. So maybe I should not mention joules to others, but it's important to my attempts to connect physics to evolution and economics. ( The release of entropy from Earth is deeply connected to the expansion of the universe. I've work on that part as much, but it requires an audience that is already aware that the 2nd law of thermodynamics is not that "entropy always increase" (see Feynman's famous intro to physics books the 1st or 2nd thermo chapter) and that entropy is conserved on a comoving volume basis. )
The velocity and availability of money and how to measure these will affect this in a way that I have no idea on how to measure. What is the total coin that is available for use at any given time? It might be locked up in escrow based on contracts. How do asset price fluctuations fit into this? Just watching commodity prices seems to solve all that.
If the economy has gotten bigger as measured by commodities trying to become cheaper, then the government would print new money to build more infrastructure to support the bigger economy (law, schools, roads) if the increase appears permanent, but it should be by lower interest rates if it seems like a temporary swing. The government should be the only bank and primary loan agent. Interest on loans would replace all taxes on middle class.
Nash's ideal money seems to miss the final key ingredient of "value" that I've included: dividing by the number of people. It has the macroeconomic effect of weeding out weak people because coin (commodity-producing joules per person) increases for everyone if the number of people decreases. There would be a macro-economic invisible hand to not overpopulate. It stays constant if every person is more efficient but the joules each coin represents would be more. So our measure of value has an intrinsic aspect as to what other people have. If you consider this I believe it will resolve the "efficiency" problem we both mentioned. So even with the low inflation I seek, the ideal money could discourage overpopulation and overly wasteful expansion.
The end result of all this is that Earth's mass will continue the current unavoidable physics-based path of congealing and hardening until all biology is replaced by machines. The primary goal of devs is to replace brains just as motors replace muscle, and solar cells are replacing photosynthesis (20x more efficient per meter^2 and more efficient at self-replication). Silicon is better than wet brains because the lower entropy per mass of hard silicon allows precise control of electrons whereas the brain has to deal with ions that weigh 50,000x more. Photosynthesis has 20x less ability to control the electrons via photon energy.
The goal of companies is to produce the most with the fewest people and with the fewest shareholders (stock buybacks and venture capitalists). People are so outdated, even their capital is not needed by the machines except to gain market share (hotmail buyout, youtube buyout, snapchat, etc). AMZN is an exception. See the zero marginal cost society. Welfare has been disastrous for the people in the U.S. receiving it, as bad as a 30 year war on that population. The same thing will happen to the rest of humanity as we are no longer needed. There's no good or bad. There's no solution. It's just the matter on Earth congealing to a colder, harder state in keeping with thermodynamics.
Gibb's free energy E=U+pV-TS is the combination of entropy and energy that decribes how much "useful work" can be acquired from a thermodynamic system. In a chemical reaction you subtract the Gibbs free energy of the reactants from the products and if it is negative then the reaction is spontaneous. I suspect this is the cause of evolution and economics but I have not worked out the details of what it is about our unusually large moon's effect on oceans and the mantle that has enabled Earth to have its entropy per mass continually lowering via life and economics instead of a simple hot body like other planets. In evolution, economics, and artificial intelligence, energy coming from outside the thermodynamics system (the Sun, moon, fossil fuels, and nuclear energy) causes entropy (S) in the economic, evolutionary, or A.I. system to lower while releasing excess heat and entropy to the universe. ( Fossil fuels and nuclear energy are coming from outside of today's biosphere rather than outside the Earth, so they are still "from outside" and fossil fuel are just old Sun energy). The Earth is a closed (not isolated) thermodynamic system so its entropy can decrease. The entropy of the mass that is under the control of our economic system is decreasing on an "entropy per mass" basis. The metals, silicon, and carbon fiber all had oxygen removed from the elements in order to make the materials stronger. Stronger is always lower entropy because the atoms can't be in as many vibrational states because of their positions are more rigidly fixed. It is a massive reduction in entropy per atom. The strength is not only for building strong structures such as bone, buildings, and roads, but also for enabling precise control of the electrons in wires and silicon that enables CPUs, electrical motors, and photosynthesis. Our brains are stuck with moving ions that weigh 50,000 times more. This is why silicon is 20x more efficient at capturing sunlight energy than photosynthensis, why electrical motors are >100x more efficient than muscles (on a cost basis but only 6x on direct energy basis), and why CPUs are 1Mx more efficient than brains: the lower entropy per atom. (a gram of silicon can learn voice recognition in 30 seconds what it takes ~100 grams of brain forever to learn). DNA itself is a rigid crystal so life also has needed the low "specific entropy" or "molar entropy". A constant value currency has a quantity of coin that is equal to the Gibbs free energy under the control of the legal system that protects and guides a marketplace that depends on that currency, divided by the number of economic agents in that system. For example, an A.I. that uses a marketplace of competing agents (aka nodes) must issue a coin that is in proportion to the amount of CPU time and memory space that is available to the agents. The agents/nodes use the coin to request resources for expansion or reproduction. The CPU and memory are like the commodities in our economic system and the nutrients in our blood stream that supports our neurons (neurons compete against each other to establish synapses).
The wiring in neural net A.I. (and probabilities in Bayesian A.I.) and the synapses in brains are the prices neurons and nodes charge other neurons and nodes to activate a signal. A.I. systems buy and sell electrons the way economics buy and sell mass. The electrons in A.I. systems and the ions in brains are ultimately trying model the movement of much larger quantities of mass (all ideas like love are ultimately based on mass moving in space-time) so the A.I. system (including the programmer and user) can make better use of the external world's mass to make a copy of itself. A.I. systems not doing this will not be a part of the future. The coin is what ties all the competing agents together. A fixed quantity of coin per gibbs free energy available in an economic system per competing economic agent forces the agents to lower the system-wide entropy per mass of the system. This is a spontaneous, unavoidable result of physics when there is energy coming into the system and entropy leaving the system (Earth).
When I say "constant value currency = Gibbs free energy per person in an economizing system" I mean the "Gibbs free energy" = energy available for work = energy - entropy = energy + order = ordered energy. The usefulness of energy depends on the form it is in as well as the pre-existing order of the matter it needs to move. For example, oil in the ground is not as valuable as oil in a tanker. Gold in an vein is not as useful as gold in sea water. So the order in the mass of commodities has value like energy commodities due to making itself more amenable for energy to move. A.I. systems like evolution and economies use energy to move mass to make copies of themselves to repeat the process. More precisely, the historical position of mass and potential energy gradients cause matter to form self-replicating way. Genes, brains, and A.I. are not forces that do anything of their own free will, but they are the result of forces from pre-existing potential energy gradients that created them. They are enzymes that allow energy and mass to move in an efficient direction, not forces. The following is mathematically exactly true: Intelligence = efficient prediction = compression = science. I am referring to the "density" of each of these, not the total abilities. For example, science seeks to predict the most in the least number of bytes. The least number of bytes is known as Occam's razor in science and is the 2nd of two fundamental tenants of science. The first is that observations should have the potential to prove a theory wrong (falsifiability), and that those observations always support the theory (reproducible observations). So the 1st science tenant is prediction and the 2nd is compression or efficiency. Total currency in an A.I. system = bytes / time that are destroyed in CPU computations and memory writes. Every computation in a CPU and memory write to RAM or a hard drive generates heat and entropy. The theoretical minimal entropy per byte destroyed is S =kb * ln(2). kb is boltzmann's constant. The minimal heat energy created (the energy lost) is Q = Temperature * S. In economics, the "bytes" are "dollars" that represent energy spent like a CPU computation to create a mass of a commodity (like the storage of a byte). When we write to memory in A.I. we are creating value that can be used in the future. Typically the writes are assigning weights to the connections in neural nets or the probabilities to a Bayesian net or making copies of a gene in genetic algorithms. Bytes in evolution are DNA. The bytes in our bodies are cellular energy like glucose and energy stored in the crystals of DNA. Energy-based commodities are spent to create mass-based commodities that are used for an economic system to replicate (expand), just like evolution and A.I. Total currency is the total available commodities per economic cycle. Approximating a constant number of economizing agents like people or neurons in a brain or nodes in a neural net means that the currency is also a bytes per economic cycle per economizing agent. Agents compete for the limited number of bytes in order to increase the number of bytes per agent per cycle. Coins are bytes that represent a percent ownership of the total commodities available per economic cycle per person.
coins = bytes = DNA = synapses = economically beneficial arrangements of atoms and potential energy
Or rather, the 1st four are elements in a computational systems that are used to represent and assign ownership of the last one.