Nobel Memorial Prize-winning economist Paul Krugman hasn’t hid his disdain for bitcoin on Twitter in recent weeks, and he’s just upped his game in a new, and at times extremely naive, tweetstorm on cryptocurrencies. Krugman went as far as saying that “the blockchain is interesting, but [it’s] not yet clear whether it’s useful for anything.”
Krugman: “Gold Is Actually Useful”
Color Krugman utterly unimpressed when it comes to the ongoing cryptocurrency craze, as the prominent economist has just argued in a lengthy January 21st Twitter thread that cryptocurrencies are inferior to their centralized alternatives.
In media res, Krugman pointedly argued:
“Cryptocurrency lets you make electronic transactions; but so do bank accounts, debit cards, Paypal, Venmo etc. All these other methods involve trusting a third party; but unless you’re buying drugs, assassinations etc. that’s not a big deal […]
Meanwhile, what backstops a cryptocurrency’s value? Paper money is ultimately backed by governments that will take it in payment of taxes (and central banks that will reduce the monetary base in case of inflation […]
Gold is actually useful for some things, like filling teeth and making pretty jewelry; that’s not most of its value, but it does provide a tether to reality, along with a 5000-year history […]
Cryptocurrencies have none of that. If people come to believe that Bitcoin is worthless, well, it’s worthless. Its price rise has been driven purely by speculation — by what Robert Shiller calls a natural Ponzi scheme, in which early entrants make money only bc others buy in […]
So the blockchain in interesting, but not yet clear whether it’s useful for anything. And investing in Bitcoin still looks a lot less reasonable than investing in cold fusion.”
Move aside, then, Jamie Dimon, as Krugman’s now arguably the most radically bearish of the mainstream world’s anti-cryptocurrency pundits. Perhaps most astonishing is that Krugman doesn’t believe bitcoin and other cryptos are “tethered to reality” like gold and that the verdict is still out on whether these digital assets are “useful” or not.
“Tethered” or not, bitcoin — and its impressive $200 billion USD market capitalization at press time — is very real indeed. Krugman will surely be singing a different tune if such a capitalization ever reaches into the multi-trillions of dollars.
So the blockchain in interesting, but not yet clear whether it's useful for anything. And investing in Bitcoin still looks a lot less reasonable than investing in cold fusion 12/
— Paul Krugman (@paulkrugman) January 21, 2018
Clash of Old Meets New
As a Nobel Prize-winning economist, Krugman obviously has an extreme grasp of traditional economics. But traditional economics and the blossoming field of cryptoeconomics are different in kind, regardless of their superficial similarities.
An understanding of economics does not an understanding of cryptoeconomics make. Indeed, with the latter field being so new and uncharted, there are undoubtedly only a handful of people in the entire world today that could safely be called experts in cryptoeconomics, and Krugman’s not one of the them.
Could he be one day? Sure. But his newest Twitter thread betrays only a superficial research dive into the crypto ecosystem, so Krugman, like most of us, has a long way to go.
The economist’s assertions are noteworthy in that he himself is a noteworthy economist. But that doesn’t make him the end-all be-all expert on the future, or current worth, of cryptocurrencies and blockchain tech.
What’s your take? Do you think Krugman made some fair comments, or do his remarks do himself and the cryptoverse a disservice? Sound off in the comment below.
Images via Twitter, Heartland