A High Frequency Trader's Apology, Pt 2

Post by nasmorn » Tue, May 08, 2012, 7:46 AM UTC

rdlowrey wrote: post #98

nasmorn wrote: post #78

Earlier quoted context omitted.

That is funny because the proofs had the opposite effect on me. It dawned on me that the math of e.g walrasian price setting is surely correct but the story that this is supposedly how our economy works was much less believable after each supposedly logical assumption (free disposal, no money pump) could be traced back not to psychology or physical realities but conditions for the equations to remain solve able. Look…

I tend to agree with your position. The fundamentals of individual microeconomic decision-making are much more sound IMHO than their extrapolation to large-scale macroeconomic systems. At the macro scale I believe the system is far more complex than we can correctly model with anything but rough approximation. Otherwise, we'd already know exactly when/why/how future recessions and booms would occur. The High Frequenc…