Hypatia Callisto

This is true... but I felt better about cashing in on sculpties as I actually created something.

I saw the gaping gap and I am glad I documented it. Whatever people want to call it... for me it just felt unethical to do that, even though people were doing that.

Yeah, silly maybe, but I have a conscience that I live with at night.

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"To begin with," said the Cat, "a dog's not mad. You grant that?"

"I suppose so," said Alice.

"Well, then," the Cat went on, "you see, a dog growls when it's angry, and wags its tail when it's pleased. Now I growl when I'm pleased, and wag my tail when I'm angry. Therefore I'm mad."

"I call it purring, not growling," said Alice.

"Call it what you like," said the Cat.

Hypatia Callisto

I meant Black Scholes, not Arrow Debreu, sorry.

Black–Scholes - Wikipedia, the free encyclopedia

This is what they still teach in business school... and nobody learns.

Gigs

OK, now I know you are just fucking with me.

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"It is the paramount duty of governments and of politicians to secure the wellbeing of the community under the case in the present, and not to run risks overmuch for the future" - JM Keynes

Hypatia Callisto

As a content creator, I really hate being put at the wolves of speculators who are just trying to get a cut out of the money I have earned by the sweat of the brow.

Only in Second Life does one have to do this. I hated it when land speculators tried to use coercion on me on the mainland, I hate it that I have to deal with it on the LindeX, I hate it that my customers are put through this, and I hate it completely, yes.

In real life I don't have to deal with this, speculators sit on Wall Street and other exchanges trading currency far away from where I do any banking. It's a different department. Friedman's model is the basis for the LindeX model, and once I read him, I realised how flawed the LindeX is compared to what he had meant currency markets to actually look like. The fact that people said it was his system on Metanomics made all the hairs stand on end.

I will quote the relevant text later from Capitalism and Freedom (I have to type it up as I own the dead tree version of this book), it still makes me so angry.

Hypatia Callisto

No I'm not fucking with you.

You didn't understand when I was describing the fractional reserve system.

You didn't understand that the price swings in the LindeX corresponded more to Mandelbrot's research on cotton prices and invalidated Black Scholes (which was previously used to describe such swings), and he's actually written a book about that.

But thats fine, you don't have to read anything new.

Gigs

I don't know if you recall, but limit buy orders didn't exist prior to late 2006. You could place a limit sell but not a limit buy. All buy orders were market orders.

The institution of limit buy orders is what created the spread that allowed arbitrage, but prior to that everyone was forced to only place market buys. At least they had the option to do limit buys after that.

Gigs

What?

I think you are just stringing random words together at this point. Or maybe you are drunk or something.

Hypatia Callisto

What? You said you didn't understand what I was talking about when I was paraphrasing Milton Friedman and Henry Hazlitt.

Henry Hazlitt wrote a short book on the basics of Austrian economics and what saving actually does, and then I followed it on with information about how the Fed controls the money supply from an interview with Milton Friedman on EconTalk. Which is verified by you know, the Fed.

Interest Rates: An Introduction - Federal Reserve Bank of New York



I don't drink. You have me mixed up with someone else.

Gigs

That's out of date. Open market operations used to be the main way the Fed controlled monetary policy. They've used much more direct means in the last year or so in order to take 1 trillion dollars in assets onto their balance sheet, bought directly with freshly created money.

Hypatia Callisto

The reaction to last years crash, no doubt.

Get Ready for Inflation and Higher Interest Rates - WSJ.com

Have fun with the higher interest rates when they arrive, according to the Wall Street Journal's predictions

Desmond Shang

For what it's worth, I truly don't think Hypatia's messing with you, Gigs. She might dislike you, or have an opinion of you, or more to the point not agree with something you said, but she is certainly not messing with you.

If anything, she's put enough ideas your way without dumbing them down, which seems to indicate to me at least she thinks you are pretty smart. If I thought she was just messing with your head, I'd have no qualms saying it.

And for the record I can't always follow what she's talking about either, sometimes. I'm not into econ at this level and never claimed to be.

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Hypatia Callisto

I wish I wasn't into it either... but one reason I am is because I'm interested in situations that try to fuck me over, and I have an interest in not being fucked over, and a morbid interest in learning about such things, both natural and manmade.

It extends to crazy things like volcanoes, epidemics, and mathematical monsters. Economics is a monster, too.

It's really about that simple.

Here Friedman on page 69 of Capitalism and Freedom, since he says it better than I can:

Well, fixing the exchange rate with Supply Linden is "administrative freezing of exchange rates" and the more that the money supply inflates, likely makes "adjustments to that more painful." according to Professor Friedman, and his last interview on Econtalk (http://www.econtalk.org/archives/200..._friedman.html)doesn't seem to indicate that he had changed his mind much at all. So the next person to insist the LindeX is based on Friedman's work, I am going to chew their head off and say its a bastardisation of what he had intended a free market to be.

I also like this relevant quote from Mandelbrot's book "The Misbehavior of Markets" page 167

And then, if you really want to learn a little more about fads, try starting from page 260 in Steven Strogatz' Sync.

But this part of the book you should remember from the epilogue, and it applies to all complex systems, including economies. page 287

and now I am out of time. Read or ignore... I don't care but I hope its educational to someone.

Argent Stonecutter

Calling economics "the dismal science" gives it too much credit.

Gigs

If she isn't messing with me, then she is just spouting random crap in hopes that some of it makes sense. It isn't working so far.

Hypatia Callisto

Throwing your hands in the air and claiming randomness is usually a clue that you simply don't understand what I am saying



So you think I spout random crap (considering much of my book collection involves uncertainty and random behavior, this is ironic in the extreme) and I think you believe in astrology.

We're even I suppose.

Charles_D

Now you're just being a prat.

__________________
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of evil disposition, having assumed a bestial form to gratify a beastial appetite,
but some, transformed by sorcery, are as humane and is consistent with an acquired
taste for human flesh."
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Desmond Shang

Gigs, seriously, for the last time, she's not. God knows why she's into this stuff, but she is. If you start talking philosophy or art history with her, be prepared to really know your stuff because if she respects you, she won't dumb down.

Some people really know a few things, even if you disagree with their ultimate conclusions. You've got your subjects, she's got hers. Nobody's stupid here, even if we disagree greatly.

I've slowly and carefully read what you've had to say on a number of issues over the years, and I've disagreed with your conclusions plenty of times but never once did I think you were an idiot, or thought you were gaslighting or spewing random crap. Likewise, I doubt many would do it to you. You are many things, but not the troll type. Neither is Hypatia.

Hypatia Callisto

shrug, this conversation is all about me now, I suppose I better write some more Lenin quotes and then Gigs can accuse me of being Prok, too

Anyway, to get back to the topic. the L$ is a complementary currency, a scrip, and quoting people (like Gesell) who were figures in the area of complementary currency is not "random crap". Charging a demurrage fee to add another sink to stop inflation is not "random crap" it is directly on the topic of currency like the L$. But maybe I need to write it all out so it becomes more clear again, since this is the real topic and not whether Gigs thinks I am crazy or talking nonsense.

The wild fluctuation of the Lindex has to do with the fact that prices usually wildly fluctuate when the underlying economy is not stable. (Friedman, Mandelbrot) However modern economic theory is quite the opposite.

I showed how the LindeX fluctuated wildly simply due to hiding the advanced menu on the site, I don't care if you call it this algslughs, it was not an ethical situation as far as I was concerned.

I explained how the fractional reserve worked, in that money remains moving in the economy when you put your money in a bank, and that this does not happen in SL. The fear in real life is not the banks selling off your money, its the people making a run on the bank which only keeps perhaps 20-30 cents to every dollar and lends the rest out.

In SL its the opposite. The people hold the money, the money is never lent out to other entities, and the fear is that it gets sold off on the LindeX, which in fact is more akin to how a stock market would crash.

And now we have a situation where people are suffering from a level of content theft that they can't realistically keep up with, and this has destabilising effects on the economy. People who quit producing or innovating, people who resell stolen items adding to the surplus of goods which throws the economy off kilter, by putting more and often better quality items at cheaper or free, which would not have been before. Driving out smaller producers and offering less choice to consumers over time.

I showed a video of dominos falling, this was in reference to a passage in Strogatz' book about Duncan Watts research on the domino effect and Strogatz used this in his book in describing herd behavior, which is what happens when there is a run on the bank or a selloff on Wall Street. Or the LindeX.

Which is likely to happen at some point if something goes wrong for whatever reason, be it someone falling asleep at the wheel of Supply Linden (as Desmond said) or some other reason that we can't foresee.

Apparantly this is all random crap. But it seems fairly cohesive for random crap, your mileage may vary.

Ann Otoole

Or LL announces SL is going to 2.5D, your real life identities will be force published, you are required to register a facebook account to have an SL account, And that user created content is no more and all content to be purchased from Linden Lab.

The run on the Lindex would be immediate. But LL would have already deleted your L$ balances and only accept credit cards for payments anyway so no worries there.

Hypatia Callisto

oh, and forgot the issue that people are still taking advantage of alghoslsghsarbritrageinformationasymmetry with the sales in the viewer automatically giving them a worse rate on their L$ and still sometimes a far worse rate than what reflects the fee. While Supply Linden keeps up selling L$ out of thin air.

If this were an ideal market according to what I have read in Friedman, who supposedly was the father of the LindeX model, there would be no Supply Linden. Rather, there would be a computer maintaining a steady rate of money creation exactly the way stipends worked. This was to remove the role of the Federal Reserve.

The stipend was "Friedman-like" and to get rid of them makes the Lindex not "Friedman-like" at all. Supply Linden replacing premium accounts is not Friedmanlike at all.

History of Second Life/LindeX Chatlog - Second Life Wiki

Yeah, apparantly my random crap observation is exactly like Lawrence Linden.

I must be smrt-er than I thought

Hypatia Callisto

I keep very little L$ on hand in my SL account so that's not gonna bother me at all.

Argent Stonecutter

I'm confused here. Where did you show the Lindex fluctuating wildly?

Hypatia Callisto

this thread gives me a headache the more I think about it. sigh.

well, supply curve and demand curves are out of kilter, driving down demand due to oversupply. This needs correction. I'm not really sure that curtailing "freebies" will help either, freebies have their uses too. Rather, we need to see a multifacted approach.

innovation of the platform > at the moment its hard to progress with product innovation due to limitations on the scalability of SL in both content creation and technical limits of the sims themselves.

getting serious about "counterfeiting" > content creators can't really do much of jack about this except file a DMCA, which are not followed up well, and also again technical limits of the platform that allow easy redistribution and resale of stolen content. No, getting rid of unverified accounts is bad because you will be eliminating casual viewers who can become paying residents. Better to put a transfer restriction and let them do everything else. If notecards are really your issue, then stop the ability to put things other than text in a notecard (yeah, html on a prim would be better for multimedia content anyway)

The more demand for buying goods in SL is driven down, the more likely it is that we will pass that threshold on the LindeX that the sales of Lindens through the viewer to buy content will drop below a critical level, causing a selloff of the "high powered money" that is sitting fallow in the accounts of currency speculators and land barons desperate not to be caught out with their pants down.

And if they get caught out with their pants down, they should pay the consequences of that behavior. LL should NOT take L$ for tier giving the currency speculator and risk-taking land barons a free lunch.

a simple negative interest rate (demurrage) would help a lot to move investment OUT of the L$ (less high powered money which can cause a run on the LindeX and put it off the rails) and back into commodities or other currencies, I expect them to hedge and put some of the money into the US dollar (not much, given its on the inflationary track too) and put the rest of it into buying land. We'll probably see more mainland get bought up then.

Another idea is to allow trading of the L$ to the Euro and the dollar, and other international currencies with an expansion of payment options in different countries. Currency speculators currently run exchanges as well, but really LL should be moving into this area. (and ETA: this is really what Milton Friedman had in mind for free floating exchange rates, not the single L$ to Dollar sales that LindeX currently is)

I know its confusing, but the LindeX was fluctuating wildly in 2006. It's not at the moment due to Supply Linden sales. If Supply Linden weren't there, the spread would definitely change, as Desmond noted happened in December 2008 when Supply Linden fell asleep. It's only stable right now because LL keeps it stable, not because the economy is stable.

now i am gonna take some aspirin.

Hypatia Callisto

When money doesn't carry a stable value, prices don't find a stable value either, and "arbitrage" between prices happens.

The result, in a hyperinflation situation, would be content creators closing shop because they won't be able to convert their L$ to $$ fast enough or change their prices to reflect it. It will reduce the amount of stores selling, sure... but it may not be the stores you want to pack up and leave ...

If its popular stores that leave, a few things happen:

They stop paying tier to LL (they are generally private sim owners)
Buyers have less buying choices

Buyers don't buy as much. And then the self reinforcing pattern to the heavens happens.

Gigs

Classical supply and demand curves don't even matter when you are talking about infinitely reproducible goods.