Perhaps we are talking different scales. Automated systems would not have stopped major market crashed such as: the great depression, WWI, WWII, Desert Storm, sub-prime loan crisis, EU sovereign debt crisis, Sept 11th after effects, Dot-com bubble, Black Wednesday, Japan's deflationary recession of the 90's, and numerous severe droughts. Right? Or am I missing something?
I would agree more automation, removal of more traders, makes the system more efficient, but I don't see how that translates into major volatility stabilization. ..by the way, this is not my area of expertise, so if it does, I would like to learn why!
I think the claim is that those market events were more extreme than they needed to be.
I don't agree with the claim. What "stabilizing AI" would do (and maybe to an extent has already done) is allow us to take even bigger risks. That is the deeper lesson here.
@smooth, you bring up an interesting point. Like the evolution of brakes in automobiles. Yes, they have enabled cars to stop faster, but overall it has allowed vehicles to increase in operational speed.