Dark Pools and High-Frequency Drones

It will be very interesting to see if Philip Mirowski, author of Machine Dreams: Economics Becomes a Cyborg Science, decides to update his thesis in light of Scott Patterson's new book, Dark Pools: High-Speed Traders, A.I. Bandits, and the Threat to the Global Financial System. Or perhaps Mirowski might just write a review instead. I haven't read the book yet myself, so I can't comment on whether Patterson's thesis itself presupposes technological determinism, but journalists are certainly quick to resort to it when characterising Patterson's arguments. The Sydney Morning Herald's Paul Sheehan, for example, argues that "regulators are always caught in the wake of technological change. This wake has grown into a froth as the computer age keeps accelerating its own evolution (emphasis mine)".

And there's a viscosity in the imagery quoted from the book, somewhat reminiscent of The Terminator, which speaks in terms of ''a worldwide matrix of dazzlingly complex algorithms, interlinked computer hubs the size of football fields, and high-octane trading robots guided by the latest advances in artificial intelligence''.

For Sheehan, the upshot of all this is clear:


"At the end of World War II, the average holding period for a stock was four years. By 2000, it was eight months. By 2008, it was two months. By last year, it was 22 seconds. By now it will be as long as it takes to read these first two paragraphs...This evolution includes the ''dark pools'' that gave Patterson the title of his book. They are giant pools of liquidity which financial institutions use to trade with each other, outside the sharemarkets, to avoid the preying Bots that seek to exploit any large trade. Dark pools are also an attempt to create stability. As Patterson writes: ''Insiders were slowly realising that the push-button, turbo-trading market in which algos battled algos … at speeds measured in billionths of a second had a fatal flaw … a vicious self-reinforcing feedback loop … Because speed traders had pushed aside more traditional long-term market makers … algos could trigger their own form of self-reinforcing mayhem.''

But if such systems are portrayed as autonomous, then any attempt to regulate them risks appearing a hopelessly dated and defeatist humanist gesture. This is where Patterson's work could reinforce the posthumanist presuppositions of Luhmann's theory and dovetail with Knorr-Cetinna's thesis of the "post-social" environment inhabited by traders. So this book is a reminder of why we have to make sure our social theory does not become too complicit with its object of analysis, without sacrificing any of the complexity needed to adequately address emergent social phenomena. I can't see that this need be too difficult though, especially when Patterson states that his thesis is postmodern:


''With electronic trading, a placeless, faceless, postmodern cyber-market in which computers communicated at warp speed, that physical sense of the market's flow had vanished. The market gained new eyes - electronic eyes …"

Social theory and sociology have been dealing with postmodernists now for more than twenty years, and have proven, contra Baudrillard, that reports of the "death of the social" have been greatly exaggerated. So I feel confident that a new generation will be able to rise to this latest challenge as well.

One final thing, be sure to watch the clip I've posted here till the end, because it concludes with some interesting speculations about the future applications of drone technology. Drones legally become available for commercial use in the United States in 2015.

What is Austerity?

Reprogramming the doomsday machine

Appropriate I think after the posting on "The Coming Insurrection". I'm finding Adbusters "Thought Control in Economics" issue particularly rewarding as they foreground many alternative economic models. In light of our discussions of late derridata, can I ask you if you have checked out Sage's Review of Radical Political Economics (?). I'm trying to come to terms with an edited collection on political sociology at the moment too. The more I see these kinds of things out there, it makes me wonder why the Lacanian pop cultural criticism that dominates the contemporary scene apparently fails to engage with these traditions. I'm bemused by Zizek who is known to comment that his work has "nothing to do with sociology" (thanks to Goran Therborn's alert on this), but given his Eastern European background, I wonder at the opportunism of this statement. What about, for example, the so-called Budapest School of Heller et al that had to leave because of state repression of their work (one of whom ended up in the sociology department of my old Alma Mata)? Has Zizek ever been favorably disposed towards other theorists, such as Erik Olin Wright? Somehow I doubt it. Anything that smacks of "policy proposals" is not Zizek's remit it seems. Theorists in the blogosphere preoccupied with the abstract nature of capital seemingly aren't willing to break with Zizek's reading method either (no sociology/radical economists to speak of).

Unsurprisingly though, I found it relatively easy to find clips exemplary of the pop Lacanian approach in action, and I still have to admit they are not without their charms (in demonstrating that advertising is based on making you feel "lack"/inadequate, which in turn stimulates desire to buy as a solution). But we'd still like to see a broadening of the critical approach as well, inclusive of its institutional base in the university. In that respect I am willing to give some assent to the Paul Bowman stuff you sent me, by way of the kickitover manifesto.

Imperialism, Iraq, and Oil

Below is a post taken from the historian David Kaiser's blog 'History Unfolding', in which he speculates on the future of the American and Western oil companies presence in Iraq. Kaiser, incidentally, is the author of the excellent book, 'The Road to Dallas', one of the, in my humble opinion, best books on the Kennedy assassination. It is scholarly and sober in its approach, and hence, avoids the more outlandish claims of most conspiracy theories.


Plans for Iraq
Several news stories last week have made clear the Bush Administration's plans for Iraq. They seem to confirm a great many suspicions that some have harbored from the very beginning.

The principal issue between the United States and Iraqi governments right now is the pending Status of Forces agreement, which the Bush Administration wants to replace a UN mandate that will be expiring at the end of the year. Based on news reports, that agreement would turn Iraq into what was called in the late nineteenth and early twentieth centuries a Protectorate. It would create as many as 50 permanent American military installations inside the country, and give the United States the right to conduct military operations and detain Iraqi citizens as we saw fit. Yet meanwhile, Washington does not apparently want to assume the obligation of defending Iraq against foreign enemies, perhaps so as not to be drawn into the intermittent, small-scale war that has already started between Turkey and Kurdish activists based in Kurdish Iraq. One news account perceptively pointed out that the British reached a similar agreement with the Iraqi monarchy in 1932, when Iraq received independence. That agreement--which was never popular--led in 1941 to a pro-Nazi coup, followed by the renewal of British occupation until 1947. Semi-independence was a key feature of British policy in the Middle East in mid-century. Egypt enjoyed a similar status until 1952 when Gamel Abdul Nasser overthrew King Farouk, threw the British out, and became the leader of Arab nationalism. The British also tried without much success to retain influence in Jordan by arranging for the British Glubb Pasha to remain in command of the Arab legion. After Nasser nationalized the Suez Canal in 1956, the British arranged an alliance with France--whose government nurtured the fantasy that Nasser was chiefly responsible for its troubles in Algeria--and with Israel to attack and unseat Nasser. That move angered the rest of the world, including the United States, and completely backfired. The era of both informal and formal western rule in the Middle East seemed to be at an end.

In retrospect the Arab nationalism of the 1950s looks relatively easy to deal with, not least because it was largely modernist and secular. What we hope to do in Iraq, however, seems likely to confirm all the contemporary propaganda of Islamic fundamentalists, and it is already provoking considerable Iraqi resistance. Once again we are confronted with a grave dilemma: the Iraqi parliament whose election we arranged is not likely to approve the kind of relationship our government wants with Iraq. Meanwhile, the Bush Administration--in another breathtaking extension of executive power--wants to assume responsibility for the domestic security of a foreign nation without submitting the matter to Congress.

The second story has to do with oil--that four western oil companies have carved out a role for themselves in improving the functioning of Iraqi oil fields, and hope that this will lead to long-term contracts. Now it is rapidly becoming a conservative article of faith that nationalized oil companies like those of Venezuela, Ecuador and Russia are bad things--that they cannot be relied upon develop their oil fields efficiently. The idea that western private companies might once again tap the huge oil reserves of Iraq cannot help but be appealing. But it, too, would reverse a half-century old trend, and it would indicate a return of western economic, as well as political, domination. It is hard to believe that Iraqis will undertake this willingly.

Imperialism, I have become convinced over the years, never results simply from the rapacity of richer nations. A stronger and a weaker nation cannot be brought into a relationship without the stronger tending to corrupt the weaker, and the real question is not whether the stronger nation will acquire influence, but how much it will try to acquire. As long as the Middle East pumps enormous quantities of oil, its politics and ours will remain intertwined. President Bush has apparently decided that he can cut the Gordian knot by turning Iraq into an ally like Germany or Japan, but there is little evidence that any leading Iraqis of any persuasion want what our government wants. No agreement, probably, will be signed, and the new President will inherit a legal limbo. I hope that by the end of his first term Iraq might have a truly sovereign government--or, perhaps, more than one of them. That in any case should be the American goal.
posted by David Kaiser at 9:36 AM 0 comments

Machine Dreams: Economics Becomes a Cyborg Science

Another astonishing confluence of complexity theorising/cybernetics, (making it seem less coincidental that Nick Turse, as per my previous post, titled his study The Complex), economic theory and military strategy. The sewing table used to stitch together this Frankenstein's monster, as featured in the chosen clip from the Adam Curtis documentary, The Trap, is game theory, which arrived on the Cold War scene. Mirowski appears at the end of the clip, previewing some of the major concerns of his book, which I've just added to my reading list.

While it is clear that his historiography is critical, I am unsure at this time whether he develops a panacea that is clearly preferable, but a reading of the book and some reviews should clarify this.

Editorial Reviews
"As history, Machine Dreams is a remarkable achievement. It is hard to imagine a historian who was not an economist (as Mirowski is) being able to encompass the economics of the second half of the 20th century in its diversity and technicality." London Review of Books

"Phil Mirowski reminds me of an investigative reporter with a world-class story. He has gone straight to the heart of a really interesting problem--the emergence of economics' modern era in the crucible of World War II--and come back with a detailed account of events at The Cowles Commission and the RAND Corporation. It is news, the best that can be said quickly. It is opinion: cyborg economics (meaning purely cognitive economics) is not the sort of science Mirowski wants to see. And it is sensationally interesting. You don't have to agree with his conclusions to recognize that Mirowksi is the most imaginative and provocative writer at work today on the recent history of economics. Machine Dreams is a real-time cousin to The Difference Engine ." David Warsh, The Boston Globe

"Machine Dreams is an astonishing performance of synthetic scholarship. Mirowski traces the present-day predicaments of economic theory to its intellectual reformulation and institutional restructuring by military funding and in the crucibles of World War II and the Cold War. His demonstration that the mathematical economics of the postwar era is a complex response to the challenges of "cyborg" science, the attempt to unify the study of human beings and intelligent machines through John von Neumann's general theory of automata, is bound to be controversial. His critics, however, will have to contend with a breathtakingly wide range of published and unpublished evidence in fields ranging from psychology to operations research he presents. This noir history of economic thought will change its readers' understanding of twentieth century economics profoundly." Duncan Foley, New School University

"Machine Dreams is an astonishing performance of synthetic scholarship. Mirowski traces the present-day predicaments of economic theory to its intellectual reformulation and institutional restructuring by military funding and in the crucibles of World War II and the Cold War. His demonstration that the mathematical economics of the postwar era is a complex response to the challenges of "cyborg" science, the attempt to unify the study of human beings and intelligent machines through John von Neumann's general theory of automata, is bound to be controversial. His critics, however, will have to contend with a breathtakingly wide range of published and unpublished evidence in fields ranging from psychology to operations research he presents. This noir history of economic thought will change its readers' understanding of twentieth century economics profoundly." Duncan Foley, New School University

"In Machine Dreams the most exciting historian of economic thought of our time takes on one of the most fascinating themes of the intellectual history of the 20th century--the dream of creating machines that can think and how this has affected the social sciences. The result is an extraordinary book that deserves to be read by everyone interested in the social sciences." Richard Swedberg, University of Stockholm

Product Description

This is the first cross-over book in the history of science written by an historian of economics, combining a number of disciplinary and stylistic orientations. In it Philip Mirowshki shows how what is conventionally thought to be "history of technology" can be integrated with the history of economic ideas. His analysis combines Cold War history with the history of the postwar economics profession in America and later elsewhere, revealing that the Pax Americana had much to do with the content of such abstruse and formal doctrines such as linear programming and game theory. He links the literature on "cyborg science" found in science studies to economics, an element missing in the literature to date. Mirowski further calls into question the idea that economics has been immune to postmodern currents found in the larger culture, arguing that neoclassical economics has surreptitiously participated in the desconstruction of the integral "Self." Finally, he argues for a different style of economics, an alliance of computational and institutional themes, and challenges the widespread impression that there is nothing else besides American neoclassical economic theory left standing after the demise of Marxism.

Philip Mirowski is Carl Koch Professor of Economics and the History and Philosophy of Science, University of Notre Dame. He teaches in both the economics and science studies communities and has written frequently for academic journals. He is also the author of More Heat than Light (Cambridge, 1992) and editor of Natural Images in Economics (Cambridge, 1994) and Science Bought and Sold (University of Chicago, 2001).