Post
Topic
Board Economics
Re: Inflation and Deflation of Price and Money Supply
by
crabel
on 30/11/2013, 05:42:09 UTC
Interesting post, and subsequent discussion. I am trying to get a grasp on measuring the complexity of the bitcoin economy. Fortunately, the blockchian records every transaction. I do need help in accessing and parsing the blockchain into a file I can pull into Mathematica or Matlab.

Frustrated by there being a lack of formal aggregation of microeconomics into macro phenomena (Keynes and neo Keynesian does not count as rigorous in my book), I aggregated von Neumann and Morgenstern's game theory (micro model of individual action) into macroecon, by adding every individual's action together.  Keynesian tend to look at the individuals resulting from the aggregate instead of the aggregate being composed of the individuals (an Austrian perspective). Basically the Keynesian's have the logic backwards (along with their math) and the Austrians who have the logic in the right direction but reject math.  Go figure.

Because my approach is based on statistical measures, I am very concerned with distributional information, which is why the blockchain is so important.

In earlier derivations I derived a similar relationship that you posted very early regarding the velocity of money, but with a twist:
lambda*M=C*N*T

lambda-marginal utility of money (amount of action that a unit of money can achieve in exchange)
M-quantity of money
C-constant of proportionality
N-number of degrees of freedom of the system. These are the number of logically independent participants within the economy
T-temperature-the marginal utility of information, it is the measure of action of the individuals in the economy.

I looked a 10 blocks (269609 to 269618) and found that the received transactions are LogNormal. I go through some of the interpretations and consequences of that distribution in this post:
http://statisticaleconomics.org/2013/11/29/measuring_the_complexity_of_bitcoin/
Examining the distribution results in measures for the temperature and the number of degrees of freedom. Because we know the quantity of money, at least until fractional reserve takes hold in bitcoin (just wait it is coming) we can easily compute the marginal utility of bitcoin.

I need to push the model further and develop a better/more complete model that describes the functional relationships, but need larger chunks of the blockchain to do so. Any help would be appreciated.

If you are curious of some analysis of the dollar under this framework here is a post Theft at the Grandest Scale:
http://statisticaleconomics.org/2013/11/13/theft-at-the-grandest-scale/

This is why I use bitcoin, and moving away from fiat. Money that is created benefits those who get to use it first. I would rather the expansion of the money supply be used to fund a service that I benefit from (validating transactions and prevent double spending by paying the miners) than where my action goes to benefit some group of individuals who I never met and don't get anything in return.