Market Efficiency

How much deadweight loss friction constricts the market from being...efficient? Like...are there a lot of taxes or commissions making what should otherwise be a smooth, liquid, easily-trading market...choppy?

Hit The Wayback Machine and go to a trading desk at the biggest stock brokerage in the country at the time in Merrill Lynch. The era was rife with human processing, and had few computers. Along distance call from New York to Los Angeles was like three bucks a minute. A given trade of 10,000 shares of IBM, for a total transaction value of 10 grand, might have cost $500 in commission; today that same trade might cost 10 bucks. The market, which used to be highly inefficient, loaded with human workers and not-so-much with computers, changed dramatically to get rid of transaction friction, such that much more of buyer's dollars went to buying what they wanted to buy, rather than paying commission to their brokers. Or taxes. Or other fees for a witch to bless the transaction while dancing naked in front of a fire.

Way more efficient market today...but yeah, way less fun.