Frontrunning is a very old arbitrage trick. Long before Nathan Rothschild and the Battle of Waterloo, financiers run in front of the probable risk to realise a capital gain. Today, it is described as a risk premium, simply because the math formulated to realize the product (the premium) is a derivative value, derived from organizing the circumstances (the externalities) that “form” realization of the risk.

Frontrunning is controversial. Is it rigging the market or being smart enough to know what the probable outcome of the trend is?

To the nihilist, rigging the market and knowing what the probable outcome of a trend is, is the same thing. In both cases, the most clever person survives the marketplace (wins the game). This is what it means to say that Wall Street thinks it is entitled to rig the market and make a profit. You are likely to know what the outcome is if you “make it happen” by trending it (which is what “the makers” do). Then you can say you are smarter than everybody else (and are thus rewarded) by predicting the trend, which is a fraud, associated with criminal behavior, but Objectivists say it is a “natural identity”–conforming to the ontologics of a natural model.

Anybody that CAN predict the future is going to profit from it, naturally, right?

The frontrunning game associates with the anchoring effect. Mrs. Clinton, for example, has always been touted as the frontrunner. The expectation anchors-in a probable effect.

Polls showed her well ahead in Michigan’s primary, for example, but she didn’t win. It is probably less a technical blunder than simply demonstrating the use of the anchoring effect to determine the outcome in advance, described as “the frontrunner.” Then, her campaign is surprised to win in Missouri, which may be more of a frontrunning effect since it is one of four states she won, hit hard by trade agreements and a financial-market model she is likely to support once in office.

In terms of gaming, the counter-identity game is not working out well for the Republican Party.

The game was to create an extreme counter-identity, representing all the things Republicans really want but can’t say or do without being considered the party of inhumanity. This has an anchoring effect. Even Reagan Democrats look far left-wing–extreme! Anything farther than that is just scary socialism or something but, nevertheless, lo and behold, the spectre of democratic socialism draws big crowds, anyway! The reaction in advance, frontrunning the spectre of democratic socialism, has only served to support the natural resistance; and like Senator Warren says, they created the ugly monster, now they have to live (or more likely die) with it.


About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
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