Information Traders Must Be Compensated

I'm still in the thick of exams week (one to give today, one Friday, and one Saturday), and they're not all written yet. But this piece from Burton Malkiel in FT.com was worth highlighting. The best part was the last paragraph:

As de facto market makers, high-frequency traders can exploit pricing anomalies and pick up pennies at the expense of other traders. Such activities are not sinister. The paradox of the efficient market hypothesis is that the people whose trades help make the market efficient must be compensated for their efforts. As former SEC Chairman Arthur Levitt has written: “We should not set a speed limit to slow everyone down to the pace set by those unwilling or unable to compete.” High-frequency trading networks let large and small investors enjoy a more efficient and less costly trading environment.

Read the whole thing here.

HT: Abnormal Returns

R.I.P. Paul Samuelson

Paul Samuelson (the first American Nobel Laureate in Economics, and arguably the most influential economist of the 20th century) died today at home at age 94. He was largely responsible for the transformation of economics from a largely descriptive and discursive discipline to a highly mathematical and rigorous one.

He was responsible for turning MIT into a world-class economics center - over the years, he played a role in bringing in Solow, Engle, Klein, Krugman, Modigliani, Merton, and Stiglitz.

In addition, he wrote perhaps the single most popular and widely used economics text in history - "Economics", published in 1948. I read it in my undergraduate years in the late 1970s, and it was still selling 50,000 copies a year in the late 1980s.

A giant has passed.

Backing off on Blogging For A While

I need to focus on research for the next couple of months, so blogging will likely be much less frequent for a while. I'm not closing down, but I am scaling back - probably only a post a week or so. In the meanwhile, here's a picture of the Billboard for Anders Bookstore, which is just at the edge of the Auburn campus. Smart marketing.



For any students reading - good luck with finals - if you're at Auburn, consider a longer rental term. For all the faculty - good luck writing (and grading) them and wrapping up the semester.