Thursday, October 14, 2010

Darwin applies to computers, too

Algorithms that consistently lose money should be turned off, and turned back on only if improved. Any government action that incentivizes against this is only asking for another "flash crash".

Unfortunately, the courts of law are not always in touch with the laws of nature or economics:
An Oslo court has fined and sentenced two Norwegian day traders under the country’s securities trading act for unlawful market manipulation in a ground-breaking case that pits human investors against the automatic wagers of algorithms.
The prosecution argued that the men, as they were making those final trades, were buying at a higher price than they knew they would sell just a moment later.

But Mr. Brosveet says the court would never have ruled the way it did “if it was just a stupid human being” on the other side of the trade. Instead, it was a computer, and “the computer must be held as a responsible actor,” he said.

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