In deflationary economy? Lets quickly think here.
TL;DR its a VERY complex topic and I would like more energy put into researches then it goes into “few understand it” and “bitcoin fixes this”
First, I would point that even today there are a lot of people who have enough money to cover their basic needs even without having to work (creating value) — I’m talking homeless and some set of mild criminals, not billionaires. Its just their “enough” is pretty close to zero. Also, there are very many people who do the smallest amount of work just to cover their basic needs because they don’t want to improve their lifestyle because of laziness or can’t due to health issues. So all those types of people unlikely to contribute more in case of money become more and more expensive with time. At best - they will have slightly better lifestyle. At worst - number of types of those people will increase.
Second, lets imagine today all fiat currencies disappear, everything is priced in bitcoin. Each day you can buy more and more if you have bitcoin. (We probably have to omit what happens to the world since govts can’t properly fund themselves but thats completely another story). Then if all the money you can save only buys more bread and water each day (change to some food you like) and you have where to live and utilities also get less expensive somehow then you can pretty preciously calculate how much amount of money you need to live until 90 years. And you have a clear retirement plan “earn X btc and stop working”
However, probably different people will have different X values and different velocity achieving it so they will fall out of economy at different times. Which in reality will probably lead to random price changes - i.e. if all bread producers in the world decided to retire then probably price of bread will skyrocket even though money supply is fixed. And you who already retired with a plan should either chose something instead of bread or keep working more
But the main question is “will deflationary economy improve people’s desire to innovate and make progress and will make it easier of will it make things worse?”. Inflationary economy claims it does make things better (even if this is incorrect). Those who promote bitcoin and deflationary economy just say “fuck it, they print money, we don’t like it” instead of arguments and researches today unfortunately
Bitcoin was created as an act of protest of incompetent money management. And it does great job to make people more responsible if adopted. However, here we are, we have bitcoin working pretty good actually, but it doesn’t grow exponentially every month and even every 4 years recently. And some people who want more profits off of it claim we need more radical measures including govt overthow and removal of debt from economy (I have personally no idea how innovations could happen without debt and credit and would be very happy to read such researches instead of “FEW”)
Fuck, today no one even tries to answer the question “why the hell if in recent years money supply went crazy bitcoin haven’t even responded accordingly?!”. Instead bitcoin promoters say “THEY control its price by BLAH-BLAH-BLAH”
Hmmm, I think you touched many interesting topics in your answer, and I don't think you have hard feelings for any of the sides.
Let me try address some topics.
First, I think, if we will have fixed money supply, what we really solve in my opinion, is inflation induced by money supply changes. Inflation can be still there, but most probably, it won't be such "sticky", as we have now. As you mentioned e.g.: for bread. If most of the bread makers stop working, it can have huge inflation. So fixing the money supply is not really interfering with the inflation of the economy, it will only let it run by natural forces of supply and demand. For the bread case, in such a time in history, where bread prices skyrocket, in my opinion, more people will be incentivized to make bread, because they can earn a hell lot of money, with which they could "retire". So I would assume if bread prices grow, more people will go to sell bread on the market which will stabilize bread markets.
Usually to do something you have some costs, and you can have some returns. If most of the bread makers stop working, the gain you can get to make bread will be unproportional to its cost, so it will really worth to make it. But as more people enter bread making, it will naturally balance itself, and this is when the price stabilizes. At this point, it won't give you unproportional benefits of starting it, so the incentive will drop. I think usually this is refered to as an arbitrage opportunity which comes from market inefficiency. What is your opinion about this?
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