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Ideal Money is a proposal by John Nash that is an extension of an i...
It is often argued and not understood very well what money actually...
I'm not sure we can call this a thesis but this is a very significa...
In the Southern Journal entry of Ideal Money, Nash opens by compari...
This is (of course?) the real thesis for the proposal or for what w...
The question here in the readers mind should be "Good or Bad by wha...
Gresham's law is really what is significant here in Nash's explanat...
The basic point here when he closes is that the Keynesian evolution...
Money as a technology arises in a comparable/connected fashion to s...
This an interesting point, that again I think Szabo makes very well...
Nash begins his proposal that money should be seen as a public good...
It is in Islamic culture/law that money is not to be lent with inte...
I am a little lost here, only admittedly because I see I must study...
This is text book Nash, and if you know his speaking and writing we...
It is an incredibly relevant and significant side street to make th...
This is in reference I think to an old paper that called economics ...
This too he talks about in a video. It is basically a testament to...
I also am not well read enough to completely decipher this. But in...
Von Neumann and Morgenstern is a notable pit-stop especially for Na...
This is the section in which I really started to understand the pow...
"If games can be transformed from type 2 to type 1 there is a gain,...
Nash goes over some of the questions that form the philosophical ba...
Nash considering contracts and extending them out to the long term ...
And here is the basis for "ideal money", not something most people ...
The point again, that money should be a public utility, and compara...
Hayek and Nash both gives Keynes props. Hayek said Keynes was a ge...
Here is the key definition: A "Keynesian" would favor the existence...
Ideal Money John F. Nash, Jr. Southern Economic Journal Vol. 6...
Nash makes a point in the previous journal entry about what would c...
This is a key paragraph. Nash proposes money "should have the func...
I understand this point only intuitively. I cannot explain it but ...
This is a point that usefulness in comparison has lead us to miss c...
Nash's proposal is comparable to the time when Newton pegged the Br...
Another key point especially in relation to the advent and evolutio...
Nash often makes allusive comparison such as the one here, how a gr...
Here is the key observation for the proposal. And to me what is the...
Examples of favored political regimes in relation to favored moneta...
This is the key theoretical point that a currency should have a ste...
Now Nash alludes to the history of the parameters that define our i...
See these types of articles: https://ihb.io/2015-09-22/news/currenc...
This I don't have so much the context of, but my point would be we ...
Nash is beginning to paint a picture here, and he uses the introduc...
So here to me is a picture that is well beyond Nash's perceived tim...
Here is where Nash starts to bridge his earlier allusions to game t...
Here Nash perfectly seems to describe the business model of compani...
"It cannot be irrelevant" is Nash's special way of speaking. Nash ...
Throughout these lectures Nash's alludes to the history of money in...
Nash talks about the political implications of trying to adopt such...
"...the euro is of the "paper money" character" in that nothing is ...
This I admit I cannot perfectly explain either, but it seems quite ...
This is the fun part. Here Nash explicitly compares our current sy...
This here is the key point which allows for the comparison. Keynes...
This is another explicit and powerful paragraph, Nash hammers home ...
"...this parallel makes it seem not implausible that a process of p...
The last end point Nash wishes to make, is that his ideas and conce...
Lecture by John F. Nash Jr.
Ideal Money and Asymptotically Ideal Money
The special commodity or medium that we call money has a long and interesting history.
And since we are so dependent on our use of it and so much controlled and motivated by the
wish to have more of it or not to lose what we have we may become irrational in thinking
about it and fail to be able to reason about it like about a technology, such as radio, to be
used more or less efficiently.
So I wish to present the argument that various interests and groups, notably including
“Keynesian” economists, have sold to the public a “quasi-doctrine” which teaches, in effect,
that “less is more” or that (in other words) “bad money is better than good money”. Here we
can remember the classic ancient economics saying called “Gresham’s law” which was “The
bad money drives out the good”. The saying of Gresham’s is mostly of interest here because
it illustrates the “old” or “classical” concept of “bad money” and this can be contrasted with
more recent attitudes which have been very much influenced by the Keynesians and by the
results of their influence on government policies since the 30s.
Digression on the Philosophy of Money
It seems to be relevant to the politics of state decisions that affect the character of
currency systems promoted by states that there are typical popular attitudes in relation to
money. Although money itself is merely an artifact of practical usefulness in human societies
and/or civilizations, there are some traditional or popular views associating money with sin
or immorality or unethical or unjust behavior. And such views can have the effect that an
ideal of good money does not seem such a good cause as an ideal of a good public water
supply. There is also, for example, the Islamic concept which has the effect of classing as
“usury” any lending of money at interest. (Here we can wonder about what sort of inflation
rates might have been typical for any major varieties of money, such as Byzantine money,
at the times actually contemporaneous with the Prophet Mohammed.)
In general, money has been associated in popular views with moral or ethical faults,
like greed, avarice, selfishness, and lack of charity. But on the other hand, the existence of
money often makes it easy to make valuable donations of philanthropic sorts and the parties
receiving such contributions tend to find it most helpful when the donations are received as
money!
But the New Testament story about “money changers” being driven from the Temple
illustrates clearly the idea of putting the clearly mundane and possibly “unclean” utility of
money at some distance from where that money would presumably continue to be received
when used as a vehicle for donations.
Economics has been called “the dismal science” and it is certainly an area of studies
where “the mundane” is appropriately studied.
1
And philosophically viewed, money exists only because humanity does not live under
“Garden of Eden” conditions and there are specializations of labor functions. So we are
always exchanging, mediated by money transfers, the differing fruits of our varied forms of
labor.
Welfare Economics
A related topic, which we can’t fully consider in a single lecture, is that of the consid-
erations to be given by society and the national state to “social equity” and the general
“economic welfare”. Here the key viewpoint is methodological, as we see it. HOW should
society and the state authorities seek to improve economic welfare generally and what should
be done at times of abnormal economic difficulties or “depression”?
We can’t go into it all, but we feel that actions which are clearly understandable as
designed for the purpose of achieving a “social welfare” result are best. And in particular,
programs of unemployment compensation seem to be comparatively well structured so that
they can operate in proportion to the need.
Money, Utility, and Game Theory
In the sort of game theory that is studied and applied by economists the concept of “util-
ity” is very fundamental and essential. Von Neumann and Morgenstern give a notably good
and thorough treatment of utility in their book (on game theory and economic behavior).
The concept of utility (mathematical) does indeed predate the book of Von Neumann and
Morgenstern. And for example, as a concept, mathematical utility can be traced back to a
paper published in 1886 in Pisa by G. B. Antonelli.
When one studies what are called “cooperative games”, which in economic terms include
mergers and acquisitions or cartel formation, it is found to be appropriate and is standard
to form two basic classifications:
(1): Games with transferable utility.
(and)
(2): Games without transferable utility
(or “NTU” games).
In the world of practical realities it is money which typically causes the existence of
a game of type (1) rather than of type (2); money is the “lubrication” which enables the
efficient “transfer of utility”. And generally if games can be transformed from type (2) to
type (1) there is a gain, on average, to all the players in terms of whatever might be expected
to be the outcome.
But this function of money in generally facilitating the transfer of utility would seem to
be as well performed by the currency of Thailand as by that of Switzerland. Or the question
can be asked “How do ‘good money’ and ‘bad money’ differ, if at all, for the valuable function
2
of facilitating utility transfer?”. But if we consider contracts having a relatively long time
axis then the difference can be seen clearly.
Consider a society where the money in use is subject to a rapid and unpredictable rate
of inflation so that money worth 100 now might be worth from 50 to 10 by a year from now.
Who would want to lend money for the term of a year?
In this context we can see how the “quality” of a money standard can strongly influence
areas of the economy involving financing with longer-term credits.
And also, if we view money as of importance in connection with transfers of utility, we
can see that money itself is a sort of “utility”, using the word in another sense, comparable
to supplies of water, electric energy or telecommunications. And then, if we think about it,
we can consider the quality of money as comparable to the quality of some “public utility”
like the supply of electric energy or of water.
“Keynesians”
The thinking of J. M. Keynes was actually multi- dimensional and consequently there
are quite different varieties of persons at the present time who follow, in one way or another,
some of the thinking of Keynes. And of course SOME of his thinking was scientifically
accurate and thus not disputable. For example, an early book written by Keynes was the
mathematical text “A Treatise on Probability”.
The label “Keynesian” is convenient, but to be safe we should have a defined meaning
for this as a party that can be criticized and contrasted with other parties.
So let us define “Keynesian” to be descriptive of a “school of thought” that originated
at the time of the devaluations of the pound and the dollar in the early 30’s of the 20th cen-
tury. Then, more specifically, a “Keynesian” would favor the existence of a “manipulative”
state establishment of central bank and treasury which would continuously seek to achieve
“economic welfare” objectives with comparatively little regard for the long term reputation
of the national currency and the associated effects of that on the reputation of financial
enterprises domestic to the state.
And indeed a very famous saying of Keynes was “...in the long run we will all be dead
...”.
Ideal Money as a Concept
A paper has already been published on the topic of “Ideal Money” and with that title.
That paper of ours was published in the Southern Economic Journal after a lecture had been
given on that topic at the meeting of the Southern Economic Association in Tampa, Florida.
So it is better now not to cover again in full the grounds of the ideas presented there and
the specifics about how “ideal money” currencies could be arranged for by using linkage to
an appropriate index of the prices of internationally traded commodities. (Note that gold
and silver are EXAMPLES of internationally traded commodities.)
3
In Transition to Optimal Standards
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. And money,
as an efficient practical means of transferring utility, naturally links directly with the game
theoretic idea of “TU games” (games with transferable utility).
(Of course it is well known that in general the psychological reaction of a human of this
world in relation to alternative prospects involving his or her receipt of money, this with
elements of uncertainty linked with probabilities, tends to be NON-LINEAR. And this has
the effect that the human individuals utility for money is typically a non-linear function, as
it were, of the prospective quantities of money to be possibly received.)
It is so desirable in game theory to have transferable utility that that those using game-
theoretic analyses go ahead and use the transferable utility concept although it might not
be entirely fitting except for individual games of comparatively small weight played by large
insurance companies.
The paper called “Ideal Money” that was recently published in the Southern Economic
Journal presented a possible conventional basis for money of “ideal” type. This variety of
money would be intrinsically free of “inflationary decadence” similarly to how money would
be free from that on a true “gold standard”, but the proposed basis for that was not the
proposal of a linkage to gold.
But it seems very likely that, although that scheme for arranging for a system of money
with ideal qualities would work well, that, on the other hand, it would be politically difficult
to arrive at the implementation of such a system.
(One can observe, for comparison, the difficulties that are found in connection with issues
of which national regions should or should not be included with the group making use of the
new “euro” currency. For example, the Turks would like to become club members but the
Scandinavians and the U.K. British are not convinced that they would be beneficiaries by
inclusion.)
The Confessional of Targeting
It was the observation of a new “line” that has become popular with those responsible
for “central banking” functions relating to national currencies that gave us the idea for the
study of “asymptotically ideal” money.
The idea seems paradoxical, but by speaking of “inflation targeting” these responsible
officials are effectively CONFESSING that, notwithstanding how they formerly were speak-
ing about the difficulties and problems of their functions, that 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”).
4
This popularity of the line of “inflation targeting” seems to have started in New Zealand,
which is the place, among the USA, Canada, Australia, and New Zealand, which had the
most depreciated dollar. And we can note also that New Zealand was hardly a place where
any crisis of poverty really forced them to not maintain the value of their dollar but rather
just a place where “Keynesian” thinking was probably very influential.
Our observation, based on thinking in terms of “the long term” rather than in terms of
“short range expediency”, was simply that there is no ideal rate of inflation that should be
selected and chosen as the target but rather that the ideal concept would necessarily be that
of a zero rate for what is called inflation.
But of course, also, central monetary authorities of a state cannot actually do anything of
the form that can be called “inflation targeting” without having some means for measuring
inflation. How would they do this? The means for measuring inflation that they would
naturally use would be a “cost of living” index relating to domestic prices within the territory
of the state.
In the USA the standard domestic “cost of living” index has a long history and it actually
originated back in the days when the USA was still on the “gold standard” with regard to the
monetary standards being accepted then. And most states nowadays having large domestic
economies also have some sort of an analogous index of prices.
Currencies in Competition
It is observable that certain types of financial enterprises, such as large internationally op-
erating insurance companies, tend to migrate to national homes where the national currency
is of at least comparatively higher quality (such as, e. g., Switzerland).
In the near future there may be a smaller number of major currencies used in the world
and these may stand in competitive relations among themselves. There is now the “euro”
and the old inflationary history of the Italian lira is past history now. And there COULD be
introduced, for example, a similar international currency for the Islamic world or for South
Asia, or for South America, or here or there.
And if “inflation targeting” were used as a “line” by the managers handling all of these
various internationally prominent currencies then there would arise interesting possibilities
for comparisons between these major currencies. Each of the currencies managed thusly
would have its officially recognized status in terms of inflation as measured by the domestic
index of costs of the state of the managers. But also, and this is what is more significant from
an internationally oriented viewpoint, the various currencies would have rates of exchange
so that they could be realistically compared in terms of their actual values.
And so the various currencies managed with “inflation targeting” would be comparable
by users or observers who would be able to form opinions about the quality of the currencies.
And what I want to suggest is that “the public” or the users, those for whom a medium of
exchange functions as a basic utility, may develop opinions that are critical of currencies of
5
lower “value quality”. That is, the public may learn to demand better quality of that which
CAN be managed to be of better quality or which can be managed to be of the lower quality
observed in so many of the various national currencies in the 20th century.
So here is the possibility of “asymptotically ideal money”. Starting with the idea of
value stabilization in relation to a domestic price index associated with the territory of one
state, beyond that there is the natural and logical concept of internationally based value
comparisons. The currencies being compared, like now the euro, the dollar, the yen, the
pound, the swiss franc, the swedish kronor, etc. can be viewed with critical eyes by their
users and by those who may have the option of whether or not or how to use one of them.
This can lead to pressure for good quality and consequently for a lessened rate of inflationary
depreciation in value.
Illustrating the principle of these optional choices, the people of Sweden recently had the
opportunity of voting in a referendum on whether or not Sweden should join the eurocurrency
bloc and replace the kronor by the euro and thus use the same currency as Finland. The
people voted against that, for various reasons. But it cannot be irrelevant whether or not
the future quality of a currency is really assured or whether instead that it depends on the
shifting sands of political decisions or the possibly arbitrary actions of a bureaucracy of
officials.
The voters in the U.K. are expecting to have the opportunity to vote in a referendum
relating to the adoption, for the U.K., of the euro (which is already adopted in Ireland).
Here they have a dramatic conflict, since the pound was the original currency of “the gold
standard”, with its value pegged to gold in 1717 by Isaac Newton who was then Master
of the Mint. (Of course it was not irrelevant that George II, the king then, was an early
Hanoverian and also ruled territories in Germany.)
In recent years the pound has had a comparatively good rating with regard to inflation,
inferior to the rating of the swiss franc but superior to most currencies of the world. So the
British have the alternatives of accepting adoption of the euro when first voting, or after a
delay, or never.
We can legitimately wonder how the speediness of its adoption or delays in its adoption
might affect the policies operating to control the actual exchange value of the euro. The
constitutional structure of the authority behind the euro is of the “paper money” character
in that nothing is really guaranteed as far as the value of the euro is concerned. But this is
typical of all currencies used in the world nowadays.
Of course when a currency, for a time, does have a specification of its value beyond the
local fiat of administrators in its national home, like the money of Argentina had a peg to the
U.S. dollar a few years ago, then international observers can wisely distrust the reliability of
such a stabilization of its value. Such forms of value definition are not necessarily unsound,
particularly when a small economy, like that of Panama, links its currency to that of a larger
area like that of the USA. But it is obvious that this sort of thing puts a burden on the
foundation of the currency that is used as a reference basis.
6
For example, if all sorts of non-European countries decided to define the values of their
currencies as on a par with the euro, without actually joining into any system of cooperative
regulations associated with that, then the effect of that would seem likely to destabilize the
stability of the euro if it would otherwise be highly stable and of good value quality.
Political Evolution
There perhaps will always be “politics”, like also “death and taxes”. But it is sometimes
remarkable how political contexts can evolve. And in relation to that I think that it is
possible that “the Keynesians” are like a political faction that will become less influential as
a result of political evolution. The “Keynesian” view of things did not come into existence
until after the time when what we can call “Bolshevik communism” had become established
in Russia. And by this label we wish to differentiate between any theoretical or ideal concept
of communism and the actual form of governing regime structure that came to exercise state
power in Moscow. (All over the world varieties of states make claims to have governments
very properly or even ideally devoted to the interests of the citizens or nationals of those
states and always an externally located critic can argue that the government is actually a
sort of despotism.)
The Keynesians implicitly always have the argument that some good managers can do
things of beneficial value, operating with the treasury and the central bank, and that it is
not needed or appropriate for the citizenry or the “customers” of the currency supplied by
the state to actually understand, while the managers are managing, what exactly they are
doing and how it will affect the “pocketbook” circumstances of these customers.
I see this as analogous to how the “Bolshevik communists” were claiming to provide
something much better than the “bourgeois democracy” that they could not deny existed in
some other countries. But in the end the “dictatorship of the proletariat” seemed to become
rather exposed as simply the dictatorship of the regime. So there may be an analogy to this
as regards those called “the Keynesians” in that while they have claimed to be operating for
high and noble objectives of general welfare what is clearly true is that they have made it
easier for governments to “print money”.
So I see the Keynesians as in a weak sense comparable to the “Bolsheviks” because of
the support of both parties for a certain “lack of transparency” relating to the functions of
government as seen by the citizenry. And for both of them it can be said that they tend to
think in terms of government agencies operating in a benevolent fashion that is, however,
beyond the comprehension of the citizens of the state. And this parallel makes it seem
not implausible that a process of political evolution might lead to the expectation on the
part of citizens in the “great democracies” that they should be better situated to be able
to understand whatever will be the monetary policies which, indeed, are typically of great
importance to citizens who may have alternative options for where to place their “savings”.
7
/////////////////////////////////////////////////////
Opening for Questions or Debate
%%%%%%%%%%%%%%%%%%%%%%%%
(The talk text, just for the “ideal money” topic, originally derives from my outline for the
lectures given at various specific locations of the “European School of Economics” in Italy
during October 1997. Subsequent to that time, after consulting with some of the economics
faculty at Princeton, I learned of the work and publications of Friedrich von Hayek. I must
say that my thinking is apparently quite parallel to his thinking in relation to money and
particularly with regard to the non-typical viewpoint in relation to the functions of the
authorities which in recent times have been the sources of currencies (earlier “coinage”).)
(There were some later revisions and expansions of the text on “Ideal Money” and I
subsequently also spoke on this topic at Northwestern, at Yale, in Athens, Greece, at a
meeting in Tampa, Florida, at Peking University in Beijing, China and at a meeting in
Mumbai, India. And then my lecture at the Tampa meeting was published in the SEJ
journal.)
(And the portion specifically concerned with “asymptotically ideal” currencies was added
first for a talk at the University of Massachusetts at Amherst.)
Converted to L
A
T
E
X and PDF formats by G. Jogesh Babu
8

Discussion

The point again, that money should be a public utility, and comparable to among other things "telecommunications". Forgive me for thinking Nash was alluding to some advent of something like bitcoin. I can't imagine there are many other minds in the world especially at the time of creating this proposal, that were viewing money in this way (and encouraging others to do so as well). But there is something more to this. Nash doesn't want our money system to be specifically public, as in there is no private money. Nash has a proposal for a standard of measurement, of the quality of money, so that private money has something with which the public can judge its quality by. This is the clever revelation here, and it will take at least the rest of this writing to explain what this standard is and how to bring it about. Hayek and Nash both gives Keynes props. Hayek said Keynes was a genius but not an economist. Nash's sentiments are similar. The question here in the readers mind should be "Good or Bad by what definition?" This is the section in which I really started to understand the power of "Ideal Money" as a concept. I have studied poker fairly intensively for a few years and this caught my eye. It is a mathematical point that you can changes the nature of payouts by adding a transferable utility into the game (ie money!). This may or may not make sense in terms of a game like poker, but its definitely a significant point that allows us to relate and understand our society to games and game theory. Nash considering contracts and extending them out to the long term to make a point. To me this is very relevant to today's emerging fintech revolution (ie Smart Contracts!) But collectively we still don't seem to realize the future implications of such change: a single monetary standard. So here to me is a picture that is well beyond Nash's perceived time, and something we can only relate to today. Nash outlines the concept of good or bad money in relation to Keynesian inflation targeted monies and how there naturally arises and optimal line. By introducing the possibility of an internationally exchanged money there is a competition that ensues which encourages money printers to begin to adhere to a standard of quality. Here is where Nash starts to bridge his earlier allusions to game theory. The peoples, now having a clearer standard for money (ie market price!), are naturally able to better demand that theoretical standard. "If games can be transformed from type 2 to type 1 there is a gain, on average, to all the players in terms of whatever might be expected to be the outcome" To me this was a revelation. It might not be obvious how this could be applied but it is quite interesting to think of how zero sum games (someone wins therefore someone loses) could be turned into forms in which all players might gain (not at the expense of others). Here then we can see one of the very special qualities of money. This is also the place where we can see how "Ideal Money" might have great implications in our understand of games and how they might have evolved to include or not including this zero sum vs non zero sum principle. Money as a technology arises in a comparable/connected fashion to state and politics. They are not separate phenomena. Nash goes over some of the questions that form the philosophical basis for Ideal Money. Nash's proposal is comparable to the time when Newton pegged the British pound to gold in the past. But he admits in the Journal that what he proposes is not for the "empire context". He makes the point here it is like gold but not gold. The proposal was not bitcoin either per se, but he also did not explicitly say what he had in mind. Another key point especially in relation to the advent and evolution of bitcoin. Through the lecture series Ideal Money Nash explains how government don't have incentive to bring such a system about, and basically he explains the impossibility of government rationally acting in this direction. However this isn't a defeating point, but rather a clue to the direction in which such a solution must reside. IMO it is quite ominously foretelling to hear: "politically difficult to arrive at the implementation of such a system", and then to think of how bitcoin evolved.. Here Nash perfectly seems to describe the business model of companies such as [bitreserve](https://bitreserve.org/). Nash often makes allusive comparison such as the one here, how a group of nations may or may not favor cooperation with other nations, regardless of the overall implied cohesive benefits to the world economy. Examples of favored political regimes in relation to favored monetary schemes as alluded to in the intro sections. Nash talks about the political implications of trying to adopt such a standard, and in relation to different nations (in different lectures). In another lecture he makes the specific and important point that money cannot simply take over like the Darwin idea of competitive species. Nash explains it must be voted in an adopted by the elected officials and through the peoples will. If there is one most important point not to forget I suspect it is that. This I don't have so much the context of, but my point would be we should then expect these enterprises to migrate to the internet in the present day. I am not unconvinced this is what Nash was alluding to. "It cannot be irrelevant" is Nash's special way of speaking. Nash wishes to point out the implicate relationship between money and politics. This is the key theoretical point that a currency should have a steady purchasing power over time. This is not necessarily a new point, but one that needs to be made clear. What is not clear is how this could be brought about in actuality. But Nash needs to be clear here so our cognitive bias does not make us over look this specific point. Nash's wants to introduce a monetary policy or system that inspires a money of no inflation. THIS is what he believes is an ideal money. Throughout these lectures Nash's alludes to the history of money in relation to global conflict and strong historical empires. It is also with the best standard of money in relation to what Nash highlights as "ideal" that these economies are seen to flourish. The freest of times, and the most innovative. "Of course it was no irrelevant.." I have not deciphered this point yet, I fear I have to trace the entire lineage of Kings/Queens. Perhaps someone knows the exact point he makes here. Now Nash alludes to the history of the parameters that define our inflation targeting systems. Cost of living index is how we measure inflation and Nash's makes a quick point about how the USA WAS on a gold standard, and also extends the USA domestic cost of living index with the point that many states have comparable systems. Nash is beginning to paint a picture here, and he uses the introduction of an international currency that he suggests could be like an inter Asian currency or an Islamic currency. I believe this is curious in relation to bitcoin, bitcoin mining, bitcoins natural lack of supporting usury style global economics, and bitcoins international scope. This I admit I cannot perfectly explain either, but it seems quite comparable and analogous to the situation today with many countries using the United States as a reference point. Sort of without saying it, I think Nash is suggesting the US as a standard for inflation targeting has evolved to be unstable, where as for comparable reasons the Euro hasn't evolved in such a weak way. "...this parallel makes it seem not implausible that a process of political evolution might lead to the expectation on the part of citizens in the "great democracies" that they should be better situated to be able to understand whatever will be the monetary policies which, indeed, are typically of great importance to citizens who may have alternative options for where to place their "savings". " So where is this "process of political evolution"? Are people nowadays, because of evolution of currency technology in the form of telecommunications better able to understand their monetary policies? Do citizens have an alternative option "for where to place their "savings""? The last end point Nash wishes to make, is that his ideas and concepts ARE in line with Hayek. See these types of articles: https://ihb.io/2015-09-22/news/currency-wars-and-bitcoin-24342 In the Southern Journal entry of Ideal Money, Nash opens by comparing money to other inventions such as a wheel. He furthers this compassion by suggesting we can think of money like an ez-pass/toll both type technology. Again I must defer to Nick Szabo in another writing called [Transportation, divergence, and the industrial revolution](http://unenumerated.blogspot.ca/2014/10/transportation-divergence-and.html) in which Szabo seemlessly bridges Adam Smith's TWON with network and software since (using Metcalfe's Law!). At this point we can start to understand the validity of Nash's comparisons. This is of course without yet even considering bitcoin as a network/currency technology. This is a reference to [prospect theory](https://en.wikipedia.org/wiki/Prospect_theory) and related findings in behavioral economics. This is a point that usefulness in comparison has lead us to miss certain assumptions we are not aware we are using. Nash goes into axiom theory in another essay which is very related to this. He pulls our the error in our understanding of the axioms that created our central banking problem. I understand this point only intuitively. I cannot explain it but as I understand it is quite rationally explainable by someone even only basically versed in economics and mathematics. Nash begins his proposal that money should be seen as a public good in some form or another. This is something I have seen confuse even peoples that are clearly above me in knowledge on any of these related subjects. I won't go into it here, but we should understand that revolutionary nature of this point about money being a public utility. And we will return to it later to make specific points about this. Nash makes a point in the previous journal entry about what would constitute and ideal standard and how it might come about. But the previous paper is not a full implementation and lacks the section "asymptotically ideal money" which is basically an implementation or an idea for implementation of ideal money described later in this writing. Ideal Money John F. Nash, Jr. Southern Economic Journal Vol. 69, No. 1 (Jul., 2002), pp. 4-11 Published by: Southern Economic Association DOI: 10.2307/1061553 Stable URL: http://www.jstor.org/stable/1061553 Page Count: 8 Just technical stuff: Nash is talking about cooperative games which is a parallel branch with non-cooperative games. Cooperative games study coalitions and cartel and how they share the resource (utility). This branch assumes that communication and contract can be formed on good faith, and the problem is how we can share it. Non cooperative games study how things emerge on the basis of individual pursue. In this approach, communication is cheap talk and doesn't matter. What matters is how things match with my self interest. Here is the key observation for the proposal. And to me what is the key realization for the implementation of bitcoin. By controlling supply one CAN in fact manipulate the inflationary nature of a currency. By understanding that currencies can be devalued or made better by this method, then there is a realization ("confession") that there is some theoretical ideal relation between a currencies supplies and its underlying value (purchasing power). Yes, in mathematics, money is translated linearly into utility. However, psychologists argue that people perceive money non-linearly, especially if there is probability involved. For example, we can over-react to very tiny probability (small risk but scary disease) and ignore risks that are very big because we just can't comprehend big numbers. Von Neumann and Morgenstern is a notable pit-stop especially for Nash. The two were responsible for a very well known and highly praised (useful!) treatise on game theory and its relation to utility. The ramifications, especially in regards to probability theory, extended immediately to physics and quantum theory, which is very relatable to another lecture of Nash's "An Interesting Equation" which will likely have ramifications to our understanding of Einsteins works. Noting Antonelli is probably just another piece of evidence Nash is extremely well read. This here is the key point which allows for the comparison. Keynesisan is a smoke and mirrors way of creating a system that is not transparent but seems transparent. It creates a trusted third party that is naturally then a security leak from the eyes of the public. This is a key paragraph. Nash proposes money "should have the function of a standard of measurement...comparable...to the watt or the hour or a degree. These are all standards of measurement that are somewhat invented by man for various purposes and uses. In another version of ideal money Nash alludes to the invention of the metric system. If we have come this far with an objective nature we should already be able to understand the truth of what Nash sees our society lacks. But there is still the great difficultly of truly defining and understanding this standard as well as getting society to adopt it. Here is the key definition: A "Keynesian" would favor the existence of a "manipulative" state establishment of central bank and treasury which would continuously seek to achieve "economic" welfare" objectives with comparatively little regard for the long term reputation of the nation currency and the associated effects of that on the reputation of the financial enterprises domestic to the state. Nash's proposal than, is a critique of central banking. I also am not well read enough to completely decipher this. But in a lecture Nash emphasizes "HOW" and it really made me understand. "Methodological" is really the way of saying we want to approach the subject from an "inquiry" perspective, rather than making an assumption. It is really Nash pointing out we have started from and assumptive perspective and his proposal is methodological. But historically have believed we are methodological in approach so there is some paradoxical nature of absurdity felt here, but us or those of us that have a cognitive bias to money that Nash wishes to clear up. It is also probably a point about the Keynesian approach to economics and how the approach claims to use a methodological approach which is really just a system of hindsight and feedback on that hindsight that ultimately basically claims clairvoyance but achieves arbitrary or worse results. I know I can't explain this section best though. This an interesting point, that again I think Szabo makes very well in his essay "Shelling Out". Money as an artifact of practical usefulness but also the point that there are traditional views that see money as a negative thing. We might learn from Nash exactly when and why that might happen. The basic point here when he closes is that the Keynesian evolution or introduction of printing money to combat deflationary circumstances would be comparably seen as unfavorable if put in terms of the context of Gresham's time. It is an incredibly relevant and significant side street to make that relates a story about Jesus smash the tables of the money changers in the temples. In a way this could be seen as anti-semetic, but real point to be made here is about the "exchangers" and their purpose for society. It is quite a story to related to, to think that there may have been some historical hero that also had thoughts about the quality of money. Nash did say that in his delusional period he thought of himself as a messiah. Although feeling superior may have been a mental complex, it is interesting to think of the truth of this analogue made here, if in fact ideal money did have a far reaching impact on our society. This is in reference I think to an old paper that called economics either the dismal science and/or mundane. Nash also talks about this in a video at a lecture which will be too hard for me to find, but I will come across eventually. This too he talks about in a video. It is basically a testament to Adam Smith and probably something Szabo and Hayek would each agree with. Nash likes the metaphor of the Garden of Eden in which everything is plentiful to a time in which work is not needed and contrasts it with our reality in which specialized labor functions, and with the advent of money, allow us the best possible freedom to leave like the times of Eden. Its a lot of words to suggest there is a rational reason such a story might have arisen or be the basis of a "religion". I don't know if I have my point here, but its quite poetic the way Nash put this. This is (of course?) the real thesis for the proposal or for what would be Nash's defining works. He is really rather explicit here and more so in his lecture video in which he explains all economists these days are really versions of Keynesians. He makes the remark that even post-Keynesians are really Keynsians. The suggest then is that Nash really does have a radically new perspective on money. It is in Islamic culture/law that money is not to be lent with interest. This is another side stop that Nash doesn't get into but please allow me. Nash lost some peaceful time in his life for being criticized for being anti Semitic. There is a realization here in this writing/concept that a great division in this world is between those that believe in usury and those that don't. The rational conclusion here is certainly not to take a side but rather to sort the whole mess out. It has been said that Nash, in his delusional period, became obsessed with conflict in the middle east. I have no doubt this is exactly the obsession he had, simply the realization (probably in the 1950's) that such conflict has everything to do with the qualities of money in each area of the world as it does with any other cultural or historical or religious difference does. It is not anti-Semitic obviously but it is certainly a perspective not understandable by western society (that competing currencies imply conflicting societies). This too is quite a blasphemous statement of its time, especially when we consider the general concept of ideal money is well over 50 years old. In the time that Nash was thought to be delusional, he was frantically running around accusing communist and anti-communist governments of colluding vs the general population of the world. What this lecture will suggest is a rational explanation for the truth of such a conjecture. Here Nash explicitly suggests that it is this massively held economics perspective has been used against the people to sell them the belief that good money is bad and vice versa. This is another explicit and powerful paragraph, Nash hammers home the point that Keynesian economics is really a form of Bolshevik-ism. He makes the point that their power lies in their ability to print money, which to my knowledge can only be an allusion to a type of money in which governments CANNOT print. Ideal Money is a proposal by John Nash that is an extension of an idea he had in the 1950's. Nash gives a lecture on the subject [here](https://www.youtube.com/watch?v=Je22xKQekCk). There are many different versions of the proposal, the first of which can be found in this [Southern Economic Journal](http://www.jstor.org/stable/1061553) (Vol. 69, No. 1 (Jul., 2002), pp. 4-11 ). Many other versions can be found either around the net or on Nash's personal public university website. Each lecture details different historical points, present day circumstances, and possible future evolutions of money. It is recommended enthusiasts of the proposal should read ALL versions as each has its own treasures. It is often argued and not understood very well what money actually is. The first line of this writing is extremely foretelling of what is to come. Although at first it seems quite innocent, upon further inspection Nash's writing and choice of words is often very specific, complex, and in depth. Here he opens with the point that money is a SPECIAL commodity. This in itself says a lot about his view and understanding of money but also what ours should be. Although Nash does go on many tangents and side streets, he also often leaves it up to the students and listeners to explore his allusions on their own. I am a little lost here, only admittedly because I see I must study an entire empire to get context, and Nash probably has done exactly that. An expert can no doubt make an interesting revelation here. But I can address something. Nash wishes to extend our understand of inflation/currencies to our historical data. He is extending his new understandings to our past history. It is quite and interesting point to be made, in relation to bitcoin and Satoshi's solution to the byzantine general's problem, that Nash takes a moment to ponder byzantine money. Probably what is more important is to consider the different types of conflict and peace between different tribes or nations at this time and in relation to different currencies and currency standards. This is the fun part. Here Nash explicitly compares our current system of central banking to Bolshevik communism. I can explain myself that the manipulation of the value and purchasing power of money, is simply akin to the destruction of the formation capitalism (whilst claiming to be a government that favors capitalism). But what is important to point out is that Nash's delusional period where he claimed that the Communists and Anti-Communists where colluding against the citizens of the world DOES in fact have some logical basis. Gresham's law wiki: "When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."[1] It is commonly stated as: "Bad money drives out good"." "The law was named after Sir Thomas Gresham, a sixteenth-century financial agent of the English Crown in the city of Antwerp, to explain to Queen Elizabeth I what was happening to the English shilling. Her father, Henry VIII, had replaced 40 percent of the silver in the coin with base metals, to increase the government's income without raising taxes. Astute English merchants and even ordinary subjects would save the good shillings from pure silver and circulate the bad ones; hence, the bad money would be used whenever possible, and the good coinage would be saved and disappear from circulation." And here is the basis for "ideal money", not something most people are understanding from the lecture. The stability of money in relation to inflation, necessarily effects the formation of contracts. Bad money creating bad contracts pervades our global economy thus destroying the channels and value by which we all might benefit. In his example here we can start to understand an unstable money creates unnecessary risk which is then added into the terms of the contract (ie higher interest rates for the borrower!) "...the euro is of the "paper money" character" in that nothing is really guaranteed as far as the value of the euro is concerned. But this is typical of all currencies used in the world nowadays." Again Nash seemingly perfect alludes to bitcoin as a money that is not "of the "paper money" character" in both form and its inability to be manipulated by policy makers. But Nash no doubt is at least partially referring to his standard of idealness that evolves beyond bitcoin, but possibly as a result of the advent of bitcoin. I'm not sure we can call this a thesis but this is a very significant statement that most people would probably not like to understand the full extent of. Nash is making the point that we have evolved in such a way that we have grown a cognitive bias towards money. We will find, he is talking about nearly all of us, and that throughout this proposal Nash is going to try to explain to use exactly what is the difficult perspective we are unwilling and/or unwilling to face. This is text book Nash, and if you know his speaking and writing well it will make you smile. For some others they will cringe at this type of expression. Adam Smith is also known for such exhaustive writing that few people are probably aware of. Nash objectively points out money is seen as bad but on the other money is seen as good. But he also cleverly points out our hypocrisy in such a balanced view. In this the reader can seemingly see for themselves the purpose of money as a passer of value. Nash ends this paragraph with a !, which is also typical of him when he wish to make a point stick. The long and interesting history of money, no doubt, at least in part refers to [An Inquiry into the Nature and Causes of the Wealth of Nations](https://en.wikipedia.org/wiki/The_Wealth_of_Nations) by Adam Smith. I must be forgiven for thinking that Nash also was refering to Nick Szabo's [Shelling Out: The Origins of Money](http://szabo.best.vwh.net/shell.html). I think readers will find it incredibly significant in relation to this essay. Smith's writing is a very exhaustive and objective overview of the history of money and economy up until the time of writing a couple hundred years ago. Szabo's piece talks about the history of money tens of thousands of years ago from shells to necklaces/armbands and he is able to show how money might have arisen (see: Kula Ring Conjecture). All 3 of these men (and Hayek!), make the great point that in order to understand the present day circumstances of money, and the future of it, one must necessarily study the history of money and how it evolved. Gresham's law is really what is significant here in Nash's explanation of what is to be Ideal Money. Nash often makes the point in writing and in interviews that money itself is something that has and will evolve over time. Gresham's law then is a concept that is both useful but also has a given context to its time. Then it is necessary to extend our understand of this concept in relation to how our society has evolved and could possibly evolve. I think too often people do not understand the relevance because they do not understand this point about the evolution of its (Gresham's law) context.