The Distrust of Central Banks in John F Nash Jr.’s Ideal Money and Bitcoin
A distrust of central banks is inherent in both John F Nash Jr.’s Asymptotically Ideal Money and Satoshi Nakamoto’s bitcoin, in words which almost mirror each other — to the extent it is speculated John Nash and Satoshi Nakamoto were one in the same — by expressing the value of existing money as diluted, the more new money is created.
This can become an observation about the nature of inflation, which through history has come to represent both the supply of money and the general price level.
In the realm of game theory however, further axioms are included which can help explain the shared distrust of central banks in both Nash’s ideal money and Satoshi’s bitcoin.
For example, John Nash spoke analogously about money as an art print:
“..it is indeed after all possible to control inflation by controlling the supply of money (as if by limiting the amount of individual “prints” that could be made of a work of art being produced as “prints”).” John F Nash Jr., Ideal Money and Asymptotically Ideal Money, 2003
Good and Bad Money through Time
In Asymptotically Ideal Money, John Nash speaks to rationality in understanding money as a measurable lubricant facilitating value transfer:
“Our view is that if it is viewed scientifically and rationally (which is psychologically difficult!) that money should have the function of a standard of measurement and thus that it should become comparable to the watt or the hour or a degree of temperature.” John F Nash Jr., Ideal Money and Asymptotically Ideal Money, 2003
The significance being both “good” and “bad” money can facilitate utility transfer, but where Nash then differentiates money quality with a relatively long time axis (which is ideal) because it makes a clear difference in contract performance:
“the quality of the money unit in terms of which the contract is written makes a big difference in the level of certainty of the contract terms.” John Nash, Ideal Money (Relations to Law and Contracts), Lafayette College, 2010
Expectation and Anticipation in the Future of the Bargaining Environment
The axioms which are added to the more traditional understandings of inflation (or for what is called inflation) are relatively simplistic: a rational expectation and anticipation of what may happen to the future value of money.
These ideas are eminently detectable in John Nash’s early game theory:
Approximately fifty years later, in the Ideal Money, Nash writes of “users” of money, almost in a way that people use software, having the same expectancy:
Thus the “users”, like the managers, can be viewed as players in interactive games. In particular, with this perspective, it is natural to think of the users as having “expectations” in relation to the future value of the domestic currency, compared either with real assets, foreign currencies, or indices of costs. These expectations may or may not be “well-founded” or “rational” but they will inevitably guide or influence the choices made by the “users”. John Nash, Ideal Money and Asymptotically Ideal Money, 2010
In the context of game theory, there is a difference between cooperative and non-cooperative games, where in the former, communications, agreements, and collaborations —for example, contracts — are possible; and in the latter they aren’t considered feasible: Nash went on to develop the Nash equilibrium, where in non-cooperative games, there is a unique equilibrium where players in such a game can’t unilaterally benefit from altering or refining their strategy.
The Basis for Satoshi’s and Nash’s Distrust in Central Banks
Central banks condition market anticipation and expectation into sentiment through forward guidance. However, this isn’t seen as a context for creating cooperative games, since currencies exist in competition among traders in respect as to the worth of each.
This explains why John Nash questioned the “Keynesian method”, presumably because it does not properly consider anticipation and expectations:
The idea of inflation or inflation targeting by the central banks is not deterministic in comparison to the bitcoin blockchain, which supplies coin issuance on a self adjusting steady, constant, and predictable basis. This makes bitcoin largely considered trustless.
Theoretically, there isn’t a technical reason central banks couldn’t be completely transparent in their sovereign issuance. In comparison to bitcoin however, there is a qualitative difference: that being with bitcoin (btc), there can be a time-stamped, concise, realistic, expectant, anticipation as to future coin creation, leading to an idea as to what that coin creation could be worth in monetary terms.
There has been a view expressed that “bitcoiners” don’t understand this:
Yet Satoshi was clear on currency debasement:
As was Nash:
For the twentieth century money managers still grappling with twenty-first century money, it must seem more true that Ideal Money and bitcoin are a basis for indexation and benchmarking in contracts, than a macroeconomic monetary phenomena, in relation to the business and contract cycles and their complete fulfilment.