According to Wall Street Pit’s Eric Falkeinstein,
Al Gore’s latest tome The Future warns us that:
There are already several reckless practices that should be immediately stopped: the sale of deadly weapons to groups throughout the world; the use of antibiotics as a livestock growth stimulant; drilling for oil in the vulnerable Arctic Ocean; the dominance of stock market trading by supercomputers with algorithms optimized for high-speed, high-frequency trades that create volatility and risk of market disruptions..
As to how the stock market volume hurts the economy, he isn’t clear, but his intuition is that ‘trading’ doesn’t add value, and gives the example of the project to trim 3 milliseconds off the internet trip from New York to Chicago, which he says could have been spent on something productive. Just stop trading, and boom, one could transfer say 50% of the 8% of GDP we currently spend on finance to our inner cities.
Yet, a lot of innovation is an off-shoot of something pretty banal, like porn and VCRs, and I would hate to have all projects need a sign off from some centralized Star Chamber because that would lead to all sorts of corruption. One could say that Al adds dubious value on his various boards and venture investments, as his main value consists of knowing the right regulators and big government contractors, crony capitalism, which is much more destructive than those dreaded limit orders that are often cancelled. The thought that this guy is a Nobel Peace Price winner, Oscar Nominee and centimillionaire should remind everyone that Life Isn’t Fair because he hasn’t had an original or courageous thought in his life, as his book presents a caricature of free markets that is obviously indefensible. Only the simplest minds can think that in any great controversy such as that between those believing in more government the other in less, one side is mere folly or cupidity.
It’s strange that a lot of people with no real interest or knowledge have very strong opinions on how much assets should trade, even though it doesn’t affect them. They hate the idea that someone’s getting rich doing something they don’t think adds value, though it occurs in a competitive environment. If the average daily volume for a stock was 100% of the shares outstanding, should it optimally be 200%? 50%? I don’t think anyone knows, anymore than one knows whether interest rates should be 2% or 5%. The great thing about markets is that while they are often wrong, they correct themselves a lot faster than collectives do, and further, they decentralize decision making. Asset markets don’t just produce prices, but they allocate investments to their highest perceived value; when wrong, the owners pay the price, so incentives are aligned.