Intelligence in Markets: Asset Pricing, Mechanism Design, and Natural Computation [Technology Review]

Abstract

Evolution, human and animal cognition, and the emergent coordination of systems of autonomous agents are among the areas of nature drawn upon for inspiration by the field of computational intelligence. Researchers are increasingly using these aspects of nature in the exploration of market interaction, both to develop more scientific knowledge about economic and financial phenomena and to build new commercial applications for price forecasting, asset trading, and market design. Adam Smith wrote of an "invisible hand" which guided markets. Today we may consider this specter to be the result of a limiting process of some computational evolutionary algorithm. It is here, at the intersection of economics and intelligent computation, where we may most profitably study the nature of human market interaction.