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The utility is always the same. The stock market provides price discovery, which drives efficient resource allocation (in theory). Theoretically, more gamblers
by everforward 18d ago
The utility is always the same. The stock market provides price discovery, which drives efficient resource allocation (in theory).
Theoretically, more gamblers should mean better price discovery because the payouts for correctly taking the opposing side of the trade are higher.
The market solution would be that the gambling will eventually solve itself. They’ll either learn enough to be trading on knowledge rather than vibes, fueling price discovery, or they’ll exit the market when they’ve lost too much or everything.
My sticking point is that a lot of brokers offer leverage to people they really shouldn’t. I could have sworn you had to be a qualified investor to get leverage, but if that isn’t law it should be. Show the brokerage your certification, or a pile of cash large enough to convince them you can afford to lose the whole thing.
- inigyou 18d agoI don't know if "theoretically" is good enough here. The theory hasn't really been tested or proven. It's more of a hypothesis, and an ideologically driven one at that.
- everforward 17d agoI'm not positing that as a moral good or bad. It's possible for stock market gambling to be bad for society but have better price discovery, in the same way that dictatorships are bad but tend to have faster response times to events. My theory is mostly that "gambling" seems like it inherently means "buying stocks based on something other than their concrete value". More gambling means stocks drift further from their "true value", which means a higher payout for correcting them back to what their price should actually be. The whole thing does get very fuzzy because of the "market can stay irrational longer than you can stay solvent" aspect. It's not enough to know what the correct price is, you have to know when other people will realize that as well, or else convince people that your price is "correct".