Archive for August, 2008

Hope for post-autistic economics?

Friday, August 29th, 2008

Signs that the stranglehold of mainstream, [tag]autistic economics[/tag] on the profession may be weakening, according to an Adbuster article, entitled “Thought Control in Economics”.  Excerpts:

“David Colander, who is rare among economists for being accepted in both alternative and mainstream camps, suggests that much of the perpetuation of [tag]mainstream economics[/tag] is simply the result of intellectual laziness.

It’s easier to teach what you’ve always taught, a model that’s been passed down from father to son again and again,” says Colander. “Economists have nice jobs, they’re at the center of society, they get to travel around the world, they have prestige, and why would you open up a can of worms if you could avoid it?” “ 

  . . .

At first, these conversations leave me disheartened. Here we are, in full planetary emergency, a time when we need new young graduates with a realistic understanding of what is wrong with the world, with skills that will help humanity chart a new course. And what do economics departments aspire to churn out? Individuals trained to not recognize symptoms of impending collapse, trained to ignore appalling inequality, trained to celebrate profligate waste, trained to be closed-minded and unwilling to engage with different disciplines.

But there are signs that suggest that the era of thought control in economics is coming to an end. Complex systems theory tells us that just when a system seems most entrenched and stable, accumulating tensions eventually lead to rapid change, reorganizing the system. The tensions pulling at the mainstream discipline are growing. A number of the recent Nobel prizes in economics have been awarded for research that is beginning to pry open the mainstream model. Dissident economists are getting organized, holding conferences, winning prizes, publishing journals and attracting a new wave of students. Once again, mainstream courses are losing credibility with students as the toy economic models they play with in class grow more and more divorced from the alarming view outside the classroom window. Professors in other faculties are challenging economists for misunderstanding and misapplying knowledge borrowed from psychology, biology and physics.”

More fish in the pool

Sunday, August 17th, 2008

The London Stock Exchange is rapidly losing market share in equity trading to the nascent [tag]dark pools[/tag]:  on some recent days as much as 20% of trading in LSE’s own equities was not on LSE, but on Chi-X, according to yesterday’s FT

“Turquoise yesterday became the second platform to start offering trading after Chi-X launched 14 months ago. Both are tiny compared with the LSE in budget and staff numbers. However, they have heavyweight backers in some big-name investment banks and already Chi-X has made its competitive presence felt. At one point this week, Chi-X captured more than 20 per cent of all trading in FTSE 100 stocks.

Both Chi-X and Turquoise emerged in the wake of rules enacted last year by Brussels that have broken the monopolies of Europe’s established exchanges.

The rules, known as [tag]Mifid[/tag], require brokers to find “best execution” when a stock is being traded. The move was an invitation to set up new trading venues, spur competition and lower trading fees.

Investment banks poun-ced. [tag]Turquoise[/tag] and [tag]Chi-X[/tag] are not only cheaper than the [tag]LSE[/tag], but have ultra-fast trading systems that are suited to the high-volume trading strategies of many hedge funds and other institutional investors.

. . .

But the LSE has been on the offensive.  This month, it changed its fee structure, cut prices and tilted its fee incentives towards the new breed of [tag]electronic traders[/tag] that are flocking to the new platforms.

These traders are often little more than complex computer programs run by investment banks, involving little human intervention. Such “algorithmic” trading thrives off tiny shifts in data or economic news, sending orders electronically to be matched in a matter of milliseconds.

Martin Graham, director of markets at the LSE, said the exchange recognises that this type of trading is a “huge structural shift”. He dismissed the notion that the LSE has been slow in adapting.

“We have been living in a competitive environment for a long time at the LSE. Competition was inevitable and planned for,” he said.

The LSE has also unveiled plans for a “dark pool” – a kind of trading venue popular among large institutions. It offers anonymous trading of large blocks of shares, away from the exchange’s publicly visible order book.

In a clever marketing twist, the LSE named the venture Baikal, after the world’s deepest freshwater lake.

Finally, the LSE has been upgrading its TradElect electronic trading system, equipping it for faster trading times and much greater capacity.”