He went on to point out that the real-life activity of gold mining was a lot like his thought experiment.
– Economist John Maynard Keynes called gold the "barbarous relic"—and it has a lot in common with Bitcoin, writes Paul Krugman in the New York Times. Right now, both are being collected at high cost. In Papua New Guinea, the Porgera open-pit gold mine is a leading producer worldwide, but it's also a center for terrible abuses, both of human rights and the environment. It keeps functioning because of gold's soaring value—even though the printing press has long meant "unlimited amounts of cash could be created at essentially no cost." After the toil of getting it, gold sits in vaults "doing nothing." Meanwhile, there's the Bitcoin mine in Reykjanesbaer, Iceland, which is expending energy "to create virtual objects with no clear use," Krugman writes. "Gold, after all, has at least some real uses ... but now we’re burning up resources to create 'virtual gold' that consists of nothing but strings of digits." Why the effort for gold and Bitcoin? For one thing, there's the unfounded fear of the debasement of government-backed currency. And with Bitcoin, there's "the sense that it’s high-tech and algorithmic, so it must be the wave of the future." But really, we just miss "the days when money meant stuff you could jingle in your purse": We're "digging our way back to the 17th century." Click for Krugman's full column. Or over at the Washington Post, Timothy B. Lee says Krugman just doesn't get a key element of Bitcoin.