Paul Krugman: A Virtual Currency Raises Real-World Questions

It's always important, and always hard, to distinguish positive economics (how things work) from normative economics (how things should be). Indeed, with many of the macroeconomics issues I've written about, it has been obvious that large numbers of economists can't bring themselves to make that distinction; they dislike an activist government on political grounds, and this leads them to make really bad arguments about why fiscal stimulus can't work and how monetary stimulus will be disastrous.

But I'd like to talk not about macroeconomics but about money - specifically, about Bitcoin, the virtual currency. So far, almost all of the Bitcoin discussion has centered on positive economics - can this actually work? And I have to say that I'm still deeply unconvinced.