5 ms·
I hear you. But the point of the stock market is not to produce things, it's to oversee the allocation of resources to other market sectors (which actually do p
by SolarNet 8y ago
I hear you. But the point of the stock market is not to produce things, it's to oversee the allocation of resources to other market sectors (which actually do produce things). To make a computer analogy it's sort of like an operating system scheduler, it uses economic resources to better allocate economic resources.
Value here is a proxy for predicted success which then translates to access to resources. Not directly, but markets with lots of predicted success then have access to investor capital. Also companies can own their own shares, and often do use those shares to get access to new capital, and companies can be purchased by larger companies, giving them more capital to work with.
I agree it's pretty stupid, but it works. Check out prediction markets for example. That's not to say that it's efficient by any stretch, but allocation of resources is NP hard, and this algorithm works well with humans.
- rosser 8y ago> I agree it's pretty stupid, but it works. As capricious as markets are, that's a pretty loose definition of "works". All too often, equity markets are just a force multiplier for herd mentality, and end up being actively antithetical to actual value and resource allocation.
- Matticus_Rex 8y agoAntithetical as compared to what? Markets are imperfect, but consistently drive innovation and improvement that benefits consumers. What's your better alternative?
- rosser 8y agoI wasn't aware I had to propose a better alternative in order to be allowed to offer a critique.
- Matticus_Rex 8y ago"Man, it really sucks that we only eat if we harvest food." - early man
- rosser 8y agoI'm sure that's quite clever, but it's utterly orthogonal to my point.
- Matticus_Rex 8y agoNot really. Whether something "works" or not is a relative thing. If it works really well compared to all the alternatives, it's not a loose definition of "works." Yes, markets suffer from imperfect information and various other ailments. You can find issues with the solutions to all problems, and while it's occasionally interesting to talk about those problems, the real question is whether you can find better solutions.
- nostrademons 8y ago"In the short run, the stock market is a voting machine. In the long run, it's a weighing machine." -- Benjamin Graham One other property of markets is that they're very good at transferring wealth from those who get caught up in the herd mentality to those who do their own research and hold their own opinions. This may be bad for wealth inequality, but it does make them self-correcting when it comes to human emotions.