Footnotes

 

1. Professor Bruce Lehmann of the University of California at San Diego co-chaired the meeting. This Auction Countdown was written afterwards from an outline for my talk. An "addendum" follows, which was handed out at the meeting, and contains suggested research topics that could test the hidden assumptions of the National Market System. A second addendum, originally presented at the outset of my talk, looks at medical research as an example of another field besides microstructure that shows apparent bias in favor of intervention.

2. Professor William Christie of Vanderbilt University and Professor Paul Schultz of Ohio State University, "Why Do Nasdaq Market Makers Avoid Odd-eighth Quotes?" Journal of Finance study (1994). The study triggered an antitrust investigation of Nasdaq dealer market practices. Its key finding was that the lack of the expected number of "odd-eighths" in dealer bid and offer quotations (i.e., those landing on 3/8, 5/8, etc.) might be the result of "tacit collusion" among dealers to avoid them.
3. For several examples of bias in vaccine research, see the Second Addendum.
4. The 1975 Amendments to the Securities Exchange Act of 1934 added Section 11A, which called on the SEC to "facilitate the establishment of a national market system for securities." This marked the first time the SEC had significant market design authority, in addition to the authority to police the market for fraud which it had had since the ’34 Act created the agency. The goals the SEC was directed to facilitate were economically efficient executions, fair competition, transparency of quotes and trades, the opportunity to obtain best execution, and the opportunity to obtain execution without dealer intervention.
5. What Smith actually said was: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be enacted, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary." [emphasis added]
6. For example, former Justice Department Antitrust Division chief Joel Klein, in a January 29, 1998 address to antitrust lawyers, "The Importance of Antitrust Enforcement in the New Economy," said: "If you go all the way back to Adam Smith’s seminal work, The Wealth of Nations, you will see that, despite his pro-market, laissez-faire take on the economy, he fully recognized that the Government has a crucial role to play in assuring that businesses do not attempt to end-run the competitive process." In a more recent example, James Surowiecki criticizes the Sotheby’s and Christie’s price fixers for their explicitness, using the usual Adam Smith quote to imply both his own sophistication to comment on such matters and the stupidity of doing anything so obviously contrary to Adam Smith and antitrust law. If they had only followed a more tacit approach called "conscious parallelism," he suggests everything would have been all right. (Apparently he has not heard what happened to Nasdaq.) "Price Fixing for Dummies,"  The New Yorker (December 4, 2000).
7. Richard A. Posner, Natural Monopoly and its Regulation, 30th Anniversary Edition, 1999.
8. What Hippocrates actually said was: "I will abstain from whatever is deleterious and mischievous. I will give no deadly medicine to anyone if asked, nor suggest any such counsel."
9.Professors Robert Schwartz and Dan Weaver of the Zicklin School of Business, Baruch College, "What We Think About the Quality of Our Equity Markets: A Survey" (forthcoming).
10. Ananth Madhavan, Dave Porter and Dan Weaver, "Should Securities Markets Be Transparent?" (November 1999).
11. This difference was discussed in Auction Countdowns dated November 30, 1997 and March 9, 1998, among others.
12. Robert J. Shiller, Irrational Exuberance, 2000.
13. Vernon Smith, "Reflections on [Mises’] Human Action After 50 Years," Cato Journal, Vol. 19, No. 2 (Fall 1999). Also see The Evolution of Cooperation, 1984, by Robert Axelrod.
14. Richard H. Thaler, The Winner’s Curse, 1992.
15. Debbie Bookchin and Jim Schumacher, "The Virus and the Vaccine," The Atlantic Monthly (February 2000). SV40, or Simian Virus number 40, was the 40th monkey virus discovered. Almost none of them were known to exist when researchers began using monkey kidneys as a common substrate for vaccine manufacture.
16. Mesothelioma, virtually unheard of prior to 1950, is now just "rare," causing 3000 deaths a year, or about 0.5% of U.S. cancer deaths.
17. The preserved cervical cancer cells of Henrietta Lacks, who died of her disease, became famous and very popular among cancer researchers for their robust ability to survive and grow – and to surreptitiously replace other cell cultures being studied in many laboratories. Eventually, through sharing of samples – and failure to check for the contamination – HeLa cells contaminated and, thus, compromised much cancer research. The episode was noteworthy not for the discovery of contamination per se, but for the steadfast refusal of researchers, laboratory officials and even medical journal editors to acknowledge that it may have occurred, in effect to actively participate in the cover-up. As with Bernice Eddy, Walter Nelson-Rees, head of the University of California cell bank, who pursued the HeLa contamination story, was stripped of his lab and forced to retire at 52. What Happens When Science Goes Bad, 1988, by Louis Pascal, opens with a synopsis of the HeLa incident described in A Conspiracy of Cells: One Woman’s Immortal Legacy and the Scandal it Caused, 1986, by Michael Gold.
18. Wakefield’s hypothesis is that, because the three vaccines are given together, the body may launch only a general response to invasion and, thus, may not mount a sufficient particular response to the Measles vaccine to kill it. This leaves a low level of live measles virus in the blood that may tie up the immune system’s ability to fight off other infections, or may in other ways weaken it. In the case of gut infections, Wakefield calls the resulting condition "autistic enterocolitis" and suggests that it may interrupt normal neurological development necessary to support language and social skills. Whether or not Wakefield’s hypothesis withstands scrutiny, the circumstantial case for a connection between autism and inflammatory bowel disease (IBD) is compelling, as is the connection between MMR and autism. 85% of normal (non-autistic) children show no evidence at all of IBD, while 52% of autistic children have the most severe form of it. And data in California and the UK show that there were similar dramatic and statistically significant upsurges in autism cases following the introduction of MMR, although those introductions were separated by a decade. "Autism, Viral Infection and the Gut-Brain Axis" by Andrew J. Wakefield and Scott M. Montgomery.
19. Edward Hooper, The River, 1999.
20. Jon Cohen, "The Hunt for the Origin of AIDS," The Atlantic Monthly, October 2000.
21. Michele Carbone and others maintain that one reason humans live longer than animals is their ability to defend against such threats as T-antigen (tumor-antigen), the killer in SV40. T-antigen causes tumors by binding to and thereby blocking P53, a quality control agent that makes sure defective cells do not undergo mitosis, the process by which cells divide and thereby reproduce. Immunosuppression, such as may result from a variety of factors, from asbestos to many common drugs, hampers the immune system’s ability to recognize and attack threats like T-antigen, and thus allows cancers to become established.
22. Some believe that smallpox died out on its own, as did many diseases, even the Black Plague. And one wonders whether the Plague would have been so devastating if the conventional wisdom of the day had not advised against bathing. Since it was thought that bathing opened up pores through which the disease entered the body, it is not hard to imagine that, as the Plague spread, greater fear caused an increase in precisely those habits which would spread it faster and farther. Thus, conventional wisdom may have encouraged spread of the Plague by suppressing hygiene just as it encouraged spread of polio by increasing hygiene. Is it any wonder, then, that there are some who believe that the conventional wisdom on smallpox – mandatory vaccination – actually caused the epidemic? Neil Z. Miller, Immunization Theory Versus Reality, 1995.