Barry Ritholtz, The Big Picture, FT’s Most Absurd Stories of 2013, here. Not a bad video summary of the year. Lisa Pollack deconstructs XL spreadsheet data entry and recalculation so that the absurdity of the news coverage exceeds the absurdity of the original story. Nice, very Wistian
Noah Smith, Noahpinion, Noah smackdown watch: Bayesian updating edition, here.
Either I manage to stay on most people’s good sides, or most people just don’t care about me that much, but for whatever reason, Noah smackdown attempts are rare. But today, J. Bradford DeLong has delivered a smackdown on Yours Truly. Last year I wrote a qualified defense regarding John Cochrane’s warning of inflation, saying that basically, well, these things are hard to call. If there’s a 1% chance of a catastrophic hyperinflation and a 99% chance of a continued economic stagnation, is it right to say that inflation is “the danger”? Brad says no:
Paul Krugman, NYT, Bits and Barbarism, here. Pretty sure Krugman will end up walking the computation mining comment back at some point. Not that Bitcoin is necessarily going to succeed, but the notion of monetizing computation at an industrial scale seems like a potential winner in a sort of Daniel Boorstin level historical overview of the past 50 years sense. You still have another ten years or so from now, of Moore’s Law providing geometric process improvements for computation. Even if that doesn’t result in a Kurzweil-style Singularity endgame for everyone, there will be lots of resources devoted to converting code execution on machines (mobile or otherwise) to USD/EUR/currency. Algorithmic High Frequency trading, Digital Ads, Structured Credit/Collateralization, Neal Stephenson’s gold farmers in REAMDE, Big Data mining, and even Amazon demonstrate different aspects of industrial scale monetization of computation. Monetization happens by virtualizing existing markets (e.g. HFT or Amazon) , creating new products that could not exist without computers (e..g., Digital Ads, Structured Credit, or CMOs), or harvesting previously unaccessible data pools (word searches, maps, social networks, etc.) Bitcoin is a symptom rather than a goal; it’s a bump in the road for this industrial computation monetization process, which has been on the march for what, 15 years? Krugman is missing the forest for the trees, so he can make his usual point about gold.
The second money pit is a lot stranger: the Bitcoin mine in Reykjanesbaer, Iceland. Bitcoin is a digital currency that has value because … well, it’s hard to say exactly why, but for the time being at least people are willing to buy it because they believe other people will be willing to buy it. It is, by design, a kind of virtual gold. And like gold, it can be mined: you can create new bitcoins, but only by solving very complex mathematical problems that require both a lot of computing power and a lot of electricity to run the computers.
Hence the location in Iceland, which has cheap electricity from hydropower and an abundance of cold air to cool those furiously churning machines. Even so, a lot of real resources are being used to create virtual objects with no clear use.