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Impersonal efficiency and the dangers of a fully automated securities exchange

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  • Pardo-Guerra, Juan Pablo
  • Beunza, Daniel
  • Millo, Yuval
  • MacKenzie, Donald

Abstract

This report identifies impersonal efficiency as a driver of market automation during the past four decades, and speculates about the future problems it might pose. The ideology of impersonal efficiency is rooted in a mistrust of financial intermediaries such as floor brokers and specialists. Impersonal efficiency has guided the development of market automation towards transparency and impersonality, at the expense of human trading floors. The result has been an erosion of the informal norms and human judgment that characterize less anonymous markets. We call impersonal efficiency an ideology because we do not think that impersonal markets are always superior to markets built on social ties. This report traces the historical origins of this ideology, considers the problems it has already created in the recent Flash Crash of 2010, and asks what potential risks it might pose in the future.

Suggested Citation

  • Pardo-Guerra, Juan Pablo & Beunza, Daniel & Millo, Yuval & MacKenzie, Donald, 2010. "Impersonal efficiency and the dangers of a fully automated securities exchange," LSE Research Online Documents on Economics 43589, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:43589
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    File URL: http://eprints.lse.ac.uk/43589/
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    Cited by:

    1. Vollmer, Hendrik, 2019. "Accounting for tacit coordination: The passing of accounts and the broader case for accounting theory," Accounting, Organizations and Society, Elsevier, vol. 73(C), pages 15-34.
    2. Vollmer, Hendrik, 2016. "Financial numbers as signs and signals: Looking back and moving forward," economic sociology. perspectives and conversations, Max Planck Institute for the Study of Societies, vol. 17(2), pages 32-38.

    More about this item

    JEL classification:

    • Z1 - Other Special Topics - - Cultural Economics

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