So there was this ted talk on a technology called blockchain: https://www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_money_and_business

My knowledge of the technology is extremely limited, so I will focus on one thing: the claim made in the middle of the video that this technology will reduce inequality such that to make income redistribution schemes less useful from a public policy perspective.

First off, what kind of bank does this person have that takes weeks to complete an electronic transfer across a city?

At least, I am going to assume "instead of redistributing wealth, pre-distribute it" (seriously?) means roughly what I stated above, and of course wealth is "pre-distributed" using this blockchain thing.

So blockchain is apparently this technology that facilitates the movement of bitcoins from one location to another extremely rapidly, according to the video. According to Don Tapscott, it does this by storing a list of bitcoin transactions in a "block" secured with cryptography, which is then linked to other blocks. This supposedly "democratizes" the flow of information because the the transaction is secured not by a centralized organization but by many bitcoin miners across the world.

Problems with using a centralized system mentioned: Banks can be hacked: Backs use sophisticated ... I am going to take this at face value even though I find the notion that it is easier to hack a bank than a random decentralized network ludicrous. "They exclude millions of people from the global economy" Financial exclusion is a problem. This does not fix that problem. In most cases, financial exclusion comes as a result of lack of credit, not lack of funds to "open a bank account." This does not fix the problem of a lack of credit, and if someone cannot take advantage of financial services offered, they probably cannot take advantage of a digital network that requires significant computing power. And if gigantic organizations with massive economics of scale cannot serve some regions, and if microfinancers cannot serve those regions, it is unlikely that this decentralized network will do it. And the end of the video did demonstrate that you need people to translate this virtual thing into currency people can actually use.

Of course, does this system have no benefits? Of course not, but a bank could adapt blockchain technology for themselves to reduce costs, and they are doing that. So there is some use, decreasing transfer costs and whatnot.

Now onto the actual badeconomics, the claim that this will reduce income inequility globally. 10:10 is where this starts.

So the first argument is that it will solidify property rights by storing evidence of the transaction. It will store evidence of the transaction of course. But the property rights the video refers to are those in which a government uses force to lessen ones control of their property (the honduras example). Storing your transaction on some online program does not overrule governmental force. And if governments do use this to validate property rights, they will do so through a bank or some centralized organization.

Blockchain also "increases competition" because it serves as a system, much like Uber or AirBnb, to sell services, and everyone who sells the service owns a bit of the chain. So Uber where every driver can set their own prices and the system is controlled by everyone who sells their service.

So it is going to increase competition by decreasing competition among different platforms, because each individual platform cannot utilize economics of scale. Got it.

I do not believe the current market is so uncompetitive that the uncompetitiveness significantly increases income inequality. I don't think people in Hondusas mentioned earlier are suffering because Uber is uncompetitive.

On remittances mentioned later, on average, remittances are about 7.6%. Getting it done with 2% is impressive on a decentralized system. Of course, you have to translate your money to bitcoin first and then to the currency, which does not help trust, but fine.

More importantly, what does any of these things have anything to do with social mobility? Very little. Inequality is not bore out of a lack in property rights overall. The United States for example has very well defined property rights but massive inequality. In general, high protections of property is associated with higher inequality, see: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1386923

It supposedly protects intellectual property better. I don't see how it does so better than a centralized platform, but fine. Higher protections of intellecutual property is also associated with higher levels of income inequality. See: http://www.sciencedirect.com/science/article/pii/S0161893808000045

Suppose it did increase trade across the world. Suppose it did, I don't think it does, but suppose it did. Increased trade may decrease worldwide inequality, but on a nation by nation basis it increases inequality, mainly because governments are terrible t turning kaldor hicks efficiencies into pareto efficiencies.

Furthermore, moving everything on a platform without regulation of any kind prevents developing nations from developing some appropriate institutions to promote growth. Infant industries is a very good example of this.

R is still > g. /s = savings

A difference in productivity won't be corrected by this system.

This system does not target the primary sources of inequality, may increase inequality, and does a poor job of countering inequality where it does have an effect.

I am not saying it is a poor system, I have no idea how good or bad it is. Its bitcoin, so I assume it is sub-par, but I cannot say that with confidence. But masquerading it as promoting social equality in my view is slightly dishonest.

Edit: Also, this is probably a poor R1, so suggestions are welcome.