The stock market is controlled by algorithms that are fighting with each other

Re:The stock market is controlled by algorithms that are fig... by cma on Friday May 13, 2011 @02:43AM (#2543838)

First you were arguing that the profit equaled the utility exactly. Now you are saying something different. Taking your new example, since the trading profits are roughly the same whether the advantage is 5 minutes or 20 seconds so long as the ship is seen first by telescope man, yet the probability of Bill mistakenly wasting his money on beer when he should have saved for bananas does depend on that length of time, then the utility and the profit aren't equal; and as the time advantage approaches 0, (and thus the utility you are talking about here approaches 0) the profit remains the same.

You are saying there is always some utility. Ok fine, but it gets arbitrarily close to 0. In the case of HFT there is also some cost (brain-drain for proprietary R&D, power drain for datacenters, etc.). Which outweighs which? What timescale do we have to get to? We are already well below it.

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Re:The stock market is controlled by algorithms that are fig... by forensic on Friday May 13, 2011 @05:12AM (#2544067)

I was wrong saying profit equaled the utility exactly.

There is clearly an opportunity cost with HFTs, and I would hypothesize that at a certain point there is a better ROI in other fields for those people. There should be diminishing returns to investments in HFT, right?

This is such a theoretical argument and my conclusions are based mainly on the idea that if there is no utility people would not pay for it. It does seem ridiculous that moving 3ms faster wins you so much, but I'm just not convinced that there is definitely no utility there. Often economic utility is very hard to intuitively recognize -- often it is not recognized until people start intervening in the market and bad things start happening. If you ask computer scientists which jobs are useless, provide no utility, and should be eliminated, they would eliminate huge sections of the economy.

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