Tyrone on crypto assets

By Tyler Cowen

Egads, what a fool this man is!  Nonetheless he has grown wealthier as of late, so I thought I would give him the indulgence of another MR post.  Little did I know what arrant nonsense he would come up with.  Here is what he started with, the transcription from the Pig Latin being mine:

“Tyler, let’s play the envelope game.  I give you an envelope with $100, and I tell you it is going to either double or half in value.  (Think of it like a floating exchange rate that either will go to 2-1  or 1-2, with equal probability.)  So you will end up with either $200 or $50, the expected value therefore being $125.  That is a good deal for you!  You started with $100, and you can expect now $125.

You would love to keep on playing this envelope game of course, except no one will play that envelope game with you even once.  Until now.

In essence, by “tolerating” cryptocurrency, big-time fiat money holders have agreed to keep on playing this game.  And so, if this continues, over time crypto will absorb more and more of the wealth in an economy.  Just by playing the envelope game!

After all, the indirect utility function is convex in prices and the rest of the world is creating a floating exchange rate game for us for free!  That is why so many different crypto assets keep proliferating!

The only joke about dogecoin is that it isn’t doing even better than it is.

What is philanthropy going to look like in five years’ time?  All life extension technologies?

The envelopes game, of course, doesn’t boost the quantity of real resources, so eventually the purchasing power of non-crypto holders will shrink, shrink, shrink.  That is why we will need a UBI, not because of AI.

Of course you might think that the fiat holders won’t tolerate the crypto game forever.  And maybe not.  But as long as there is any chance whatsoever that crypo assets turn out to have real value, at least some of those fiat money sows will be lining up at the trough to trade at some exchange rate…the envelopes game thus will continue!

At this point I had to push Tyrone down the stairs.  Such fallacies!  Such absurdities!  I even offered him an envelope of his very own if he would shut up, but to no avail.  I demanded that he write down the transversality condition for this fool game he had postulated, but all he could was recite the envelope theorem, another sign of his deep and utter confusion.

As he was falling down the stairs, he kept on insisting that Satoshi really was Satan, that all of the world’s wealth would fall into the hands of The Whales, that we all needed to reread Melville, and Johan Jensen, and ponder the Leviathan from Psalms, Jonah, and Job, and our sins, and that everyone trading with crypto holders was caught in a massive prisoner’s dilemma — collectively handing them volatile exchange rates and thus envelope games for free — and yes this was a long and deep stairwell…

Dear reader, I hope you never have to suffer under such sophistries and indignities again.

I return you now to your regularly scheduled programming, for however long it may last…at the very least writing this blog does not require much money.  Yes, my cherished reader, it is my UBI…and so crypto will be allowed to proceed…