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May 6th--Signals From a Very Brief But Emblematic Catastrophe on Wall Street

  • Paul David

    ()

    (Professor Emeritus in Economics, Stanford University)

By looking closely at the underlying structural causes of the discontinuity that appeared in the behavior of the U.S. stock market at 2:40pm in the afternoon of 6th May 2010. What transpired in those 7 minutes is viewed best as a hitherto unrecognized “emergent property” of structural conditions in the U.S. national stock market that all the actors in the story collectively allowed to come into existence largely unremarked upon. Deeper significance of May 6th lies in the attention it directs to the difference between a society being able to create and deploy technical “codes” enabling enhanced connectivity for “exchange networks” and a society that also provides mutually compatible institutional regulations. It is then suggested that in view of the growing dependence of contemporary society upon on-line human-machine organizations for the performance of vital social and economic functions, continuing to focus resources and creative imagination upon accomplishing the former, while neglecting the latter form of “progress” is a recipe for embarking upon dangerous trajectories that will be characterized by rising systemic hazards of catastrophic events of the non-transient kind.

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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 09-020.

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Date of creation: May 2010
Date of revision: Jun 2010
Handle: RePEc:sip:dpaper:09-020
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