02 Jun 2018

Trump Gives the World Financial Information; Free-Market Economists Outraged

Scott Sumner, Trump 9 Comments

Folks, this post is about 65% tongue-in-cheek.

Anyway, Scott Sumner called it literally an “outrage” that Trump tweeted that he was looking forward to the jobs report at 7:21am, when the numbers weren’t officially released until 8:30am. When arguing with someone in the comments (who had claimed this actually helps the average Joe, because it gets the information out sooner rather than leaving it to the insiders for an extra hour and 9 minutes), Scott elaborated:

[I]t’s less wasteful for the announcement to be made publicly to everyone precisely at 8:30am. No one is disadvantaged. If released randomly, those with the resources to monitor all possible release points will have an advantage over me, who is only aware of the 8:30 announcement.

Someone is only disadvantaged if someone else has the info and they don’t when a trade occurs. But normal people don’t trade in the nanosecond after the 8:30 announcement, they’d wait until they heard the news a nanosecond later. But a normal person might trade between a Trump tweet they don’t see and the 8:30 announcement.

Who follows Trump on twitter? Mostly Republicans, and now the financial insiders. Good luck if you are not a Republican and not an insider.

Here’s my claim. If this had been ANY OTHER CONTEXT, and you grabbed a random free-market economist and asked him to evaluate the above argument, he’d roll his eyes and explain patiently why laws against insider trading are bad. (Scott is against them, by the way, once writing, “I oppose laws banning payday lending and insider trading, so I certainly don’t care if the government does it. (And I might add that Congressional staffers can legally do insider trading, so obviously the government also sees it as OK.)“)

To be clear, I understand that on this example and many, many others, Trump is not “acting like the president is supposed to act.” There are pros and cons to that statement, and I am not going to pretend as if I don’t understand why his “breaking all the rules” is freaking some people out.

My modest point here is that the particular way Scott tries to spin this as harmful and inefficient, would not be something he or any other free-market economist would say in any other context. The very idea that now only those wily insiders will know to monitor a Twitter account, and how that is screwing over poor Scott in his trading… Come on. And anyway, even if Scott’s argument were right, all he’s done is look at the cost of the tweeting policy. He hasn’t considered the benefits, which is that the markets now get access to information an hour+ earlier. Scott doesn’t even make an argument to show why the cost exceeds the benefit.

9 Responses to “Trump Gives the World Financial Information; Free-Market Economists Outraged”

  1. Dan says:

    Releasing the jobs report is screwing people who don’t pay attention to it. We should get rid of that too, so everyone is equally ignorant of pertinent information.

    • Rory says:

      Biased against certain timezones as well.

  2. Craw says:

    Sumner should read Money Ball.

  3. E. Harding says:

    Generally, Murphy, your posts are either hit or miss. This one’s a decisive hit.

  4. Ken P says:

    Imagine if you’ve invested in the latest Intel processor with a ton of PCIe lanes running to your NVIDIA GPU so you can do high speed parallel processing, crunching the heck out of those numbers and all you are waiting for is that jobs number so that one nano second later you are ready to pounce… but it turns out someone with a machine that scrapes web pages and twitter feeds, comes across the tweet, does some sentiment analysis that is able to decode Trumpisms and turns the vague “good number” into an actual number and they beat you! That has to be upsetting!!

    My only question is whether a good number makes stocks go up or down? I think that’s the hardest prediction.

    • Andrew_FL says:

      I’ve been watching too many computer videos on YouTube because I understood way more on this comment than I should have

  5. Tel says:

    Trump needs to massively tighten up his information security. The only thing strong enough, resilient enough, to do a job this tough would be a knock together homebrew server in his gold plated bathroom.

    Who follows Trump on twitter? Mostly Republicans, and now the financial insiders. Good luck if you are not a Republican and not an insider.

    Sumner rails long and loud against the privileged class of people who can manage to click a Twitter URL and read through 140 characters.

    • Craw says:

      Yeah. I like the “good luck” bit. It subtly suggests this is arcane information, accessible only to those special few.

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