Markets cease to exist in unstable environment; "artificial" or not, stability is a precondition for existence of any social institution;I mean, come on, who wants to participate in unstable market?
The "market" is just a place where two parties can meet to exchange something at an agreed upon price. Stability has nothing to do with it.
If you get in a jam and essentially advertise to buyers, "I need to sell everything NOW, at any price!" you shouldn't be surprised if the buyer's offers are low. Why would I buy something now for $40, that I can get later for $20?
You may want stability. You may even need stability. But neither of those two things means you get to have it. The universe and the world is fundamentally unstable.
You can look at what is happening in China right now in that way. They've forcibly created stability and reliability. Awesome, right? This worked great, until the absolutely and utterly inevitable black swan event occurred (to the point I have a hard time even calling it a black swan, since it was so predictable) because the conserved instability, instead of getting expressed in little ways on a day by day basis, is getting expressed as one big event.
Just because you fully dammed the river doesn't mean you've stopped the river from flowing, and it's time to build a dance platform in the middle of the old river bed and invite everyone to party all night long. It means you better run away from the entire river bed and everything even remotely near it before the dam catastrophically bursts and destroys everything.
You're looking not at a demonstration of why it's important to artificially stabilize markets... you're looking right at the consequences of doing so.
(In fact, the way that people then interpret the destruction of everything as a consequence of the dam just not being strong enough and we need to put politicians into power that will create an even BIGGER dam is an important element of understanding the ratchet of tyranny, and how what happened to the Soviet Union and Venezuela happened. It wasn't bad luck... it was misinterpreting overcontrol as too little control, and "correcting" in exactly the wrong direction. The failure of today becomes the excuse to grab yet more power, stomping on anyone in the way who objects, and grabbing centralized control even harder, which creates an even bigger disaster which requires even more centralized control... repeat until the society is too weak to even maintain a government anymore. And remember, if your comfortable Western-raised brain is objecting that this can't happen, it has happened, in this decade, to real countries that you can find on a globe. It is not a thing of myth and it is not even a thing of the past. It is a path we humans seem congenitally prone to.)
Please watch the first 5 mins of this interview (or all of it) with him: https://www.youtube.com/watch?v=ehXxoUH1AlM
"Antifragile systems like volatility"
He is literally advocating the opposite of what you said. Governments are centralized and fragile (don't like volatility) hence their propensity to regulate volatility. He directly blames (large) government for the GFC - see 4:40 in the video.
Antifragility is not liking volatility; it is dislike but acceptance of it.
This is what he said:
“(4) Build in redundancy and overcompensation
“Redundancy in systems is a key to antifragility. As Taleb suggests, nature loves to over-insure itself, whether in the case of providing each of us with two kidneys or excess capacity in our neural system or arterial apparatus. Overcompensation is a form of redundancy and it can help systems to opportunistically respond to unanticipated events. What seems like inefficiency or wasted resources like extra cash in the bank or stockpiles of food can actually prove to be enormously helpful, not just to survive unexpected stress, but to provide the resources required to address windows of opportunity that often arise in times of turmoil. This perspective helps to put into context the praise of inefficiency in Bill Janeway’s important new book, Doing Capitalism in the Innovation Economy."
Well, to build in redundancy you need market manipulation (FDIC for example), otherwise markets will tend to overfitness. If you are claiming that "antifragility" = laissez-faire you are completely wrong; who will enforce the redundancy?
Who enforced the redundancy of humans possessing two kidneys? If you are a creationist, then I guess we have different starting assumptions.
Assuming that you aren't, then you would understand that redundancy in humans literally evolved from randomness and volatility. Evolution is a hill climbing algorithm - the organisms that survive the best reproduce more and become more prevalent. For me, nature is perfectly laissez-faire, there are no circuit breakers in nature, there is no enforced stability.
This sort of financial behaviour seems more to me like watching a football match you've bet on and shooting any player that might influence the result away from your preference then claiming you were a player in the game.
So, great if you want to extract money from others productivity but not so great for the market as an economic [in the base meaning of the word] structure.
No this is not correct. Options are derivatives that are traded on a secondary market. When you buy an option (or two options - call and put - in the case of a butterfly spread) you are buying from someone who is selling the option(s). Hence you are not "extracting" money from others, you are engaging in a voluntary bet with another person.
Derivatives are very important tools in a modern economy. They are frequently used by businesses and individuals to hedge their exposure to volatility and uncertainty. For instance, if you are close to retirement and still own some stocks, you could hedge your downside risk by purchasing put options. This behaviour has no negative effect on the primary market.
> If you extract wealth without improving the market itself how are you a participant?
You are a participant in a secondary market, not the primary market. You only gain wealth if you bet correctly - you still have risk like any other traded asset.
Luckily markets are an economic institution, and not a social one!
I mean, come on, who wants to participate in unstable market?
Anyone with a rudimentary grasp of trading or speculative investment?
Whether people prefer stable or unstable has nothing to do with whether or not said market exists.
There is never a point in which there is perfect stability, or a total lack of instability, therefore there can never be a market - that's the logical conclusion of your premise. It disproves your claim.
Who defines how much instability must exist, such that a market ceases to exist? The completely subjective nature of it also proves it's wrong.