[randalluk]

As the article says

>Libertarianism's attraction is based on ignoring externalities, and cryptocurrencies are no exception.

The economy as currently regulated doesn't correctly price in externalities such as the ongoing cost of global heating generated by burning fossil fuels.

[roenxi]

I'm all for including externalities. My usual argument is if you look at positive and negative externalities, fossil fuels are a massive win.

People seem to struggle with positive externalities so the argument usually falls flat, and the situation is too clear to me to be able to spell it out easily. But without fossil fuels, 40-80% of the modern world would have been all but impossible. The knock-on effects of abundant cheap energy (and precursor materials to plastics) aren't being priced in.

[munch117]

The 'positive externalities' of fossil fuels are already accounted for in our economic system: When mining for raw materials, the price that the miner is paid in the first sale is payment for that. And ditto in every subsequent sale: The benefits to the buyer goes into setting the price.

I am not an expert on economics nomenclature, but ISTM you can't really call that externalities when it's already being rewarded by the current economic system. Wouldn't that be an "internality" or something? They are already included.

Unlike the negative externalities from pollution. In the absence of something like a carbon tax, they are not included.

[roenxi]

I've never bought any oil directly. It is beyond question that if oil & gas producers disappeared I'd be much worse off (it'd be physically quite difficult for me to get food, for example, and I'd likely starve to death). That is the informal definition of an externality right there; my entire lifestyle is being enabled by a deal that I'm not party to.

And even if I've got the definition wrong, the oil and gas producers are creating huge amounts of value that are being captured by other actors in the economy (like me). If we fairly evened out the harms and benefits, they deserve subsidies rather than taxes. Obviously nobody sane is going to advocate for that, but if we want to price in externalities that is the logical outcome.

This isn't obscure logic. People often point out that the measurable value of what blue collar workers produce is far in excess of their pay and follow it up with the idea that we should force the market to pay them more. It isn't a good idea but it is logical in as far as it goes.

[randalluk]

>That is the informal definition of an externality right there.

You pay a grocer who pays a farmer who pays a fertiliser manufacturer who buys some natural gas. You wanting to eat has a reasonably direct impact on demand for fossil fuels, and therefore prices and profits. The oil company doesn't capture all the value, partly because they're not doing all the work, and partly because of competition.

If the oil companies went away tomorrow, the price of oil would skyrocket, because people want to eat, and new oil companies would form to meet the demand. There is no need for subsidy.

Positive externalities are things like "I financed construction of a road for my own commercial reasons, but other people can use it for free". Or "I wanted to renovate the rundown building I live in, but doing so made my neighbour happy too".

But to come back to the point, finally. The argument is that we know crypto mining has negative externalities (crypto miners don't have to reimburse people negatively impacted by climate change). The article argues that permissionless blockchains are doomed, ultimately, to fail anyway. So they will destroy value, by pointlessly wasting fuel AND by harming the climate (which doesn't factor into a miner's decision-making because it's an externality).

[roenxi]

> There is no need for subsidy.

There is if we add on a tax for the negative externalities, we need to consider both positive and negative externalities to get the tax right. The evidence is that the more fossil fuels we use the better off people are. If we add a tax on we'll use less, which is pushing the market in the wrong direction.

It is very hard to argue coherently that less & more expensive energy leads to better outcomes. The evidence is that in countries like China, Africa & India everyone benefits a lot more from using more fossil fuels than the cost of any negative externalities. We've run a big natural experiment here, the outcome is that more fossil fuels == rapidly improving living standards. Less fossil fuels leads to poverty.

Breaking growth in fossil fuels with a tax would be doing much more harm than good, even to bystanders. So there must be a large positive externality here somewhere. Because if you reduce the negative externalities and the outcome is much worse for everyone then there was probably a big positive externality in there somewhere.

I dunno, I suppose as a question - who do you think is bearing the cost of these negative externalities right now? Because it sounds from your reasoning like you are imagining a group of people who don't use fossil fuels or sit downstream of fossil fuels (so they can't influence the market with price signals). Who are these people, demographically speaking? And to preempt my argument, would they not be better off if we got them access to fossil fuel rather than worrying about negative externalities as they sit outside the system? It worked great for China.

[randalluk]

> There is if we add on a tax for the negative externalities, we need to consider both positive and negative externalities to get the tax right.

There are few positive externalities directly associated with the act of burning oil, except some associated with global heating.

There may be positive and negative externalities from the things people choose to do with the power generated. Companies are generally better at internalising positive effects than negative ones, for obvious reasons. If my chemical plant produces hot water as a waste product, I can sell that to the plant next door or to a district heating system. Competent business try not to leave value on the table, and try not to pay costs that they don't have to. But where they can be identified, sure, subsidise away. Just not crypto mining.

> So there must be a large positive externality here somewhere

Not necessarily. There is/was a large positive asset: ie. a huge store of chemical energy underground. It has allowed us to do incredible things. If the cost of it included the negative impacts of burning it, the market would use less of it, smarter, more efficiently, towards the most valuable outcomes, and in better balance with the harms.

>who do you think is bearing the cost of these negative externalities right now? ...would they not be better off if we got them access to fossil fuel

I'm not a climate scientist and I'm not qualified to re-litigate the scientific consensus, which is that global heating is dangerous. Some will be more affected than others by increased incidence of extreme weather, water wars, mass migration, cost of flood defences etc. But ultimately it is a "tragedy of the commons": few of us are innocent, most of us are impacted or at risk in some way. It isn't even in the interests of those of us with economic power to stop polluting, because the cost of each of our individual actions is externalised. If I take a flight, I get the full benefit, but experience only one eight billionth of the total harm. That's why it needs a systemic fix.

[munch117]

Sure. Fossil fuels are valuable to society. They made the industrial revolution possible. If they were to disappear tomorrow, much hardship would ensue.

They are, however, overused, because the negative externalities are not properly accounted for.

> And even if I've got the definition wrong, the oil and gas producers are creating huge amounts of value that are being captured by other actors in the economy (like me).

That's how all market transactions work: Whenever you buy something, it's because the value you derive from the purchase is higher than the price you pay. All business has this value-add aspect. When you buy a jacket so you don't freeze to death in the winter, that doesn't mean you are beholden to the clothes manufacturer for your life.

[roenxi]

> If they were to disappear tomorrow, much hardship would ensue. They are, however, overused...

No, that isn't true. There is a reason the environmentalists have had so much trouble getting their policies to catch and it is the fact that statements like this are manifestly wrong. The hardship caused by fossil fuels is minute compared to the benefits. If anything, oil and gas are underused. There is little question that if we could get more people more oil & gas, lifestyles would improve more than damage done by negative externalities. We've seen this play out in multiple countries. The only reason not to be pushing them like mad is that we're about to run out of useful reserves.

The benefits of a modern economy powered by cheap energy substantially outweigh the negatives. More cheap energy pretty much inevitably increases the general good. Taxing that energy doesn't help.

> That's how all market transactions work: Whenever you buy something, it's because the value you derive from the purchase is higher than the price you pay.

Yeah, but that isn't an externality. An externality is something that happens to a third part to a transaction - which is my relationship to the fossil fuel industry. I purchase very little fossil fuel.

The externality is they enable other deals to happen that would otherwise be impossible. Like my groceries.

[cubic_earth]

>"lifestyles would improve more than damage done by negative externalities"

Just because you assert this doesn't make it true. Tragedy of the commons is at play - we have no good way to measure if your statement is true or not - which is it's own issue.

It is easy to imagine how your statement could be wrong, despite what we see. Starting with a non-industrialized society, you add in some tech, like cars. Some people use them for personal benefit. Of course a few cars don't cause everything to go suck just by themselves, and even so, the benefit for their users outweigh the harm to them personally, so they use them! Some other people are now going to need to use cars to compete with the people who do use them. Eventually the harms really become apparent, but there is no going back. And even if some people would choose not to use cars because of the harm, it is much harder to choose to abstain when practically speaking, things are still going to suck because everyone else is.

So, taking cars as an example, how do you know you are right?

[randalluk]

There surely are positive externalities, but the very useful things we burn fossil fuels for are reflected in the price - cheap or no. Those primary reasons for burning fuel will have all sorts of externalities, positive and negative. And one would expect similar externalities from the work done by renewable energy.

If your position is simply that we are fortunate our planet was/is abundant in fossil fuels, I don't disagree (ideally there wouldn't have been enough to completely wreck the climate we depend on, but...). But the issue is whether we should trust the market in respect to cryptocurrency mining specifically. The history of human civilisation seems a bit beyond the scope.

[roenxi]

> but the very useful things we burn fossil fuels for are reflected in the price

If we imagine a counterfactual where there were no fossil fuels, double-digit percentages of the world's population wouldn't exist.

There is no way that the oil and gas producing companies have made money on the same scale as the value they've created by enabling billions of humans to exist. No way at all. There is obviously something very powerful happening that is more than offsetting the notional damage that they will theoretically do at some point in the future to a relatively small percentage of humans.

If we balance out the harms and benefits that the coal and petroleum miners have caused to the rest of humanity, the ledger is overwhelmingly in their favour. I can't even estimate the numbers involved but based on the fact that I'm not slaving away for a fossil fuel company double digit percentages of my life I can tell it isn't close.

[ericd]

Sure. Bring on the carbon taxes.