Physics for financial markets
As a result of the financial crisis, many countries are trying to regulate their financial markets. Recently the heated debates about bonus taxes, a permanent levy on banks' balance sheets and a ban on short sales have taken another turn, with France's President Nicolas Sarkozy promoting a transaction tax. But are policy-makers doing the right thing? Or will they obstruct the self-regulating forces of the markets?
The use of two fundamental mechanisms from physics, friction and noise, could provide a solution. These mechanisms can be viewed as setting boundaries to the system's self-organization, rather than impeding it.
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