# Is the Stock Market a Hoax **URL:** \ **Category:** Great Debates\ **Created:** [July 1, 2005, 1:30pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677 "2005-07-01T13:30:29Z")\ **Posts on this page:** 14\ **Page:** 5
**Author:** ![Uncommon\_Sense](https://avatars.discourse-cdn.com/v4/letter/u/f9ae1b/32.png) [@Uncommon\_Sense](https://boards.straightdope.com/u/Uncommon_Sense)\ **Post date:** [July 6, 2005, 2:11pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/81 "2005-07-06T14:11:47Z")
[QUOTE=Shodan] Hi, **cmkeller** - And thus, in keeping with my policy of “questions only”, I will thank those who have defeated my ignorance, and finish by asking if the following is true: The price of a stock increases because [ul][li]stockholders expect to receive benefit in the form of dividends or other earnings distributions, or[/li][/quote] \*\*Don’t forget the _value_ of the stock may increase without direct benefit to the owner. You need not recieve direct compensation for the stock to benefit you. If the value of the stock increases, you become the owner of something that is more valuable than it was when you purchased it without recieving the actual dollars. > [@](#): > > [li]because they are employed by the company and expect to receive higher salaries or bonuses if they exert a positive influence on the direction of the company, or [_]because the company might be liquidated and the assets distributed among shareholders, or [_]because other people who want to own or control the company are willing to pay a premium so as to benefit as described in the previous points, or as a sort of bubble effect (my apologies if this is the wrong term), where the price rises because everyone expects the price to rise, so they are willing to pay a premium, expecting someone else to pay an even higher premium later on.[/ul][/li] > Yes? > > Regards, > Shodan Yes ---
**Author:** ![Roadfood](https://avatars.discourse-cdn.com/v4/letter/r/9fc348/32.png) [@Roadfood](https://boards.straightdope.com/u/Roadfood)\ **Post date:** [July 6, 2005, 5:49pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/82 "2005-07-06T17:49:58Z")
> [@Princhester](#): > > Why does the shirt have value? It has value because you can own it then wear it when you want to. But that value depends upon the agreement of society around you to let you keep it and wear it. No, that’s completely untrue. The utiltarian value inherent in the shirt doesn’t change because someone takes the shirt away from you. The value of the shirt is still in the shirt, it’s only that you no longer posses the shirt, and therefore can’t make use of the value. You’re confusing “ability to use” with “inherent usefulness”. > [@Princhester](#): > > You are trying to draw a distinction between shares and shirts saying that the value of one is dependant on legal systems but the value of the other is dependant upon usefulness. No, I’m saying that there are different kinds of “value”. As I already said in a previous posting, some value is inherent in an item, and some value exists only by agreement. The value of money exists only by agreement, do you dispute that? The “value” that money has was **created** by people; the very **concept** of money was created by people, fercrisakes. Before organized societies came into being, the very concept of money – and hence the value of money – didn’t even exist, it’s entirely a creation of intelligence and people and society. But long before there was any semblance of society, a rock was useful (as John Mace pointed out). Food was useful. The usefulness of such things does not depend on a group of people getting together and saying, “Ok, we’ll all agree that we’ll attach some value to these things.” Christ, this is such a simple, basic, obvious principle, why is it so hard for you people to just see it? > [@Princhester](#): > > In the current law abiding climate, both shares and shirts are useful. One can be worn, the other can be sold and the proceeds used. If the rule of law broke down, the usefulness of either might stop. Your distinction is created purely by choosing an arbitrary level of the breakdown of the rule of law. No, that’s not true at all. You are not making a distintion between the inherent usefulness that is a property of an item, and the ability of other people to take that item away from me. That the item can be taken away doesn’t remove the usefulness of the item, it just means that it’s no longer in my possession. Things like stocks and currency, however, just have no usefulness that resides in the item, their **entire** usefulness derives **only** from the agreement with other people. ---
**Author:** ![Roadfood](https://avatars.discourse-cdn.com/v4/letter/r/9fc348/32.png) [@Roadfood](https://boards.straightdope.com/u/Roadfood)\ **Post date:** [July 6, 2005, 5:56pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/83 "2005-07-06T17:56:05Z")
> [@John Mace](#): > > “True intrinsic value” doesn’t exist. I’m an Aboriginal Australian who lives a traditional lifestyle. We don’t wear clothes, becase we don’t need them. In fact, it’s so hot that clothes are a negative. I see a White Australian wearing a shirt, so I know what it’s used for. I see a shirt on the ground in the desert. It has no value to me whatsoever. The only value it might have is that I can trade to a white guy for something that is of value to me. > > What happened to the “true intrinsic value”? All you’ve established is that the usefulness of an object can depend on the environment and circumstances. I have never and would never disagree with that. My point, yet again, pertains to whether the value of something derives **solely** from an agreement between people, or whether the object could possibly have a value that is completely independent of other people. That you live in an environment where a shirt is useless to you has nothing to do with any agreement among people, it just means it’s hot where you live. I notice that you’ve ignored my fill-in-the-blank question in post #74. Does that mean that you concede that there is nothing meaningful that can be put into that blank? ---
**Author:** ![Roadfood](https://avatars.discourse-cdn.com/v4/letter/r/9fc348/32.png) [@Roadfood](https://boards.straightdope.com/u/Roadfood)\ **Post date:** [July 6, 2005, 6:13pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/84 "2005-07-06T18:13:59Z")
> [@msmith537](#): > > I don’t wear shirts. I don’t have a job that makes me wear one. I don’t eat in restaurants that require shirts. I live somewhere where the weather is nice all year round. So how much is a shirt worth to me? Obviously, not much. But as I responded already, that just means that the usefulness of an object can depend on your environment and circumstances. That you have no need for a shirt is because of your environment, not because any agreement among people has changed. > [@msmith537](#): > > For ANYTHING to have value there must be an agreement between two people. Yes a shirt has a use. If no one needs to use it, it has no value. This is just demonstrably incorrect. I can use a rock to kill a rabbit. I can do that even if I’m the only person on Earth. The rock has value and usefulness that is completely independent of any other person. If I have a bow and arrow, then the usefulness of the rock is probably severely reduced. But it’s been reduced because of something else in my environment, not because of anything related to people. Are you really saying that – hypothetically – if you were the only person left on Earth that **nothing** would have any value to you? Nothing would be useful? You could eat an apple, and you’d get no nutrition from it because there aren’t any other people around to **agree** that the apple has nutrition? That’s rather silly. The fact that some objects have value that is completely independent of any agreements with other people, or even whether there **are** any other people, is as obvious as anything can be. > [@msmith537](#): > > You are getting into some abstract philosophical bullshit about “inherent value”, possibly for the sake of being difficult or argumentative. No, I’m making an extremely simple point that you fail to grasp. There is an inherent difference between the value that can be derived from an object in and of itself, and the value that can be derived only as a result of agreements among people. Go read what xtisme wrote in post #59. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [July 6, 2005, 6:53pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/85 "2005-07-06T18:53:34Z")
> [@Roadfood](#): > > I notice that you’ve ignored my fill-in-the-blank question in post #74. Does that mean that you concede that there is nothing meaningful that can be put into that blank? No, because the shirt example fails that test also. When you own stock, you own a piece of a company. Sure that requires other people to agree that you own it, but what if no one agrees that you own the shirt? It’s yours only so long as no one takes it from you. Same with ownership in the company. You cannot own or use a thing if other people don’t agree to let you. Not stock, not a company, not a shirt. Your argument might make sense if there were only one person in the world, but then ownership is meaningless, and of course there would be no such thing as stock. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [July 6, 2005, 7:05pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/86 "2005-07-06T19:05:51Z")
> [@Roadfood](#): > > Christ, this is such a simple, basic, obvious principle, why is it so hard for you people to just see it? Because it’s wrong? > [@Roadfood](#): > > No, I’m making an extremely simple point that you fail to grasp. There is an inherent difference between the value that can be derived from an object in and of itself, and the value that can be derived only as a result of agreements among people. Go read what xtisme wrote in post #59. I grasp the concept. I just don’t understand why you can’t grasp the concept that a piece of paper that says “good for one rock” is nearly equivalent as having the rock itself, provided you are living in an environment where such a contract is enforced. I also grasp the concept that having such a paper is inherently riskier than having the rock itself because there could arise a scenario where I am unable to cash out a rock when I need it. I mean what is your point anyway? That stocks are worthless because you can physically touch them? That people shouldn’t invest in the stock market because in your mind stock has no tangible value? Part of the risk of investing includes the possibility that the company you invest in or the nation it resides in may undergo some catastrophic collapse. Foreigners invest heavily in the US because we have a stable economy and a stable government and they expect that will continue. So yes, I get the concept that a shirt has inherent “value” because if nothing else, you can wear it. But since I also live in an advanced society, I can also take a risk and buy shares in the shirt making company and hopefully profit from the fact that they are making a product that so many people find useful. ---
**Author:** ![stupidfool](https://avatars.discourse-cdn.com/v4/letter/s/c57346/32.png) [@stupidfool](https://boards.straightdope.com/u/stupidfool)\ **Post date:** [July 6, 2005, 7:29pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/87 "2005-07-06T19:29:05Z")
> [@John Mace](#): > > No, because the shirt example fails that test also. > > When you own stock, you own a piece of a company. Sure that requires other people to agree that you own it, but what if no one agrees that you own the shirt? It’s yours only so long as no one takes it from you. Same with ownership in the company. > > You cannot own or use a thing if other people don’t agree to let you. Not stock, not a company, not a shirt. > > Your argument might make sense if there were only one person in the world, but then ownership is meaningless, and of course there would be no such thing as stock. The point that I was trying to make is that unless someone agrees to buy your stock, that stock, and your ownership, is useless. You can’t go to the company and demand, as part owner, your share of the profits. Nor as a part owner could you demand free soda from Coke or a free copy of Windows from Microsoft. What’s the usefullness is owning a tiny part of a company if you can’t get anything from that ownership? ---
**Author:** ![stupidfool](https://avatars.discourse-cdn.com/v4/letter/s/c57346/32.png) [@stupidfool](https://boards.straightdope.com/u/stupidfool)\ **Post date:** [July 6, 2005, 7:32pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/88 "2005-07-06T19:32:35Z")
> [@msmith537](#): > > Because it’s wrong? > > I grasp the concept. I just don’t understand why you can’t grasp the concept that a piece of paper that says “good for one rock” is nearly equivalent as having the rock itself, provided you are living in an environment where such a contract is enforced. I also grasp the concept that having such a paper is inherently riskier than having the rock itself because there could arise a scenario where I am unable to cash out a rock when I need it. > > I mean what is your point anyway? That stocks are worthless because you can physically touch them? That people shouldn’t invest in the stock market because in your mind stock has no tangible value? Part of the risk of investing includes the possibility that the company you invest in or the nation it resides in may undergo some catastrophic collapse. Foreigners invest heavily in the US because we have a stable economy and a stable government and they expect that will continue. > > So yes, I get the concept that a shirt has inherent “value” because if nothing else, you can wear it. But since I also live in an advanced society, I can also take a risk and buy shares in the shirt making company and hopefully profit from the fact that they are making a product that so many people find useful. My question, is why does it matter if that shirt making company does well or not? Basically, if owning stock really meant owning a part of the company, then you could do something with that ownership, but of course, you can’t. So you can claim to own something all you like, but what good does it do you? Stocks aren’t worthless because you can’t touch them, stocks are worthless because their value is a figment of everyone’s imagination. ---
**Author:** ![D\_Odds](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/d_odds/32/2882_2.png) [@D\_Odds](https://boards.straightdope.com/u/D_Odds)\ **Post date:** [July 6, 2005, 7:40pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/89 "2005-07-06T19:40:41Z")
> [@stupidfool](#): > > What’s the usefullness is owning a tiny part of a company if you can’t get anything from that ownership? If that question has not been answered to your satisfaction thus far in this thread, then my only suggestion to you is to stick to investments in tangible assets, such as precious metals or real estate. If you believe their value is a figment of everyone’s imagination, no amount of rational explanation will ever sway you. ---
**Author:** ![Uncommon\_Sense](https://avatars.discourse-cdn.com/v4/letter/u/f9ae1b/32.png) [@Uncommon\_Sense](https://boards.straightdope.com/u/Uncommon_Sense)\ **Post date:** [July 6, 2005, 8:29pm UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/90 "2005-07-06T20:29:30Z")
> [@stupidfool](#): > > My question, is why does it matter if that shirt making company does well or not? Basically, if owning stock really meant owning a part of the company, then you could do something with that ownership, but of course, you can’t. The hell you can’t. You can sell the stock or trade it. If you own a great deal of stock you become a controlling holder and actually have a say in the future of the company. > [@](#): > > So you can claim to own something all you like, but what good does it do you? Stocks aren’t worthless because you can’t touch them, stocks are worthless because their value is a figment of everyone’s imagination. Not true. Again, you ACTUALLY OWN A PART OF THE COMPANY. A company that offers stock to the public is owned by the public. You are part owner. There is a limited supply of the stock, usually in proportion to the value of the company or some percentage thereof. Your stock value increases as the company grows. If the company tanks so does the stock. Hopefully the stock increases in value so you have something that has MORE value in the future when you sell it and if you own enough you can actually control the future of the company. How does that fall under ‘figment of imagination’? ---
**Author:** ![Roadfood](https://avatars.discourse-cdn.com/v4/letter/r/9fc348/32.png) [@Roadfood](https://boards.straightdope.com/u/Roadfood)\ **Post date:** [July 7, 2005, 12:05am UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/91 "2005-07-07T00:05:25Z")
Well, as fun as this has been, I’ve reached my limit. It’s clear that there are some people who just cannot grasp the simple distinction between a physical object that can be put to use, and a societal contract that only exists because of agreement. So I’m outa this one. I reached a solid agreement with one person (xtisme), which is rare enough around here to take comfort in. ---
**Author:** ![JRDelirious](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jrdelirious/32/9531_2.png) [@JRDelirious](https://boards.straightdope.com/u/JRDelirious)\ **Post date:** [July 7, 2005, 12:20am UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/92 "2005-07-07T00:20:32Z")
From all this, my conclusion to the title question: no, it’s not “a hoax”. Just an artificial construct, like just about ANYTHING in organized society. It may _look_ like “a hoax” because so many of the people participating (even enthusiastically participating) are doing so under a totally wrong idea of what’s going on, and losing their shirt (with or without intrinsic value) at it; and even many of the ones making money are not really sure of how it truly goes. I think the irritation comes when we use phrasings like “hoax” (with its connotation of deliberate deception) and “figment of imagination” (with its connotation of irrationality), or even “instrinsic value”. In capitalism, the _economic_ value of a good, service, or exchangeable instrument is the only value, and it’s assigned by the market and measured in price. ---
**Author:** ![JRDelirious](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jrdelirious/32/9531_2.png) [@JRDelirious](https://boards.straightdope.com/u/JRDelirious)\ **Post date:** [July 7, 2005, 12:31am UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/93 "2005-07-07T00:31:07Z")
\*&^%$ twice in a week I post halfway through my own article… (continued) That does not make market-value (not just of stock but of goods, services, and even currency) nothing but smoke-and-mirrors. The market is an emergent phenomenon of human behavior in complex societies, so it’s as “real” as any other social construct. Stocks have value because we agree on it – yes. But _in this society, in this place and time_ that IS value; classifying it between “intrinsic” or “agreed upon” is angels on heads of pins. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [July 7, 2005, 5:05am UTC](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677/94 "2005-07-07T05:05:05Z")
10 shares in Microsoft has zero use-value, about $250 of exchange-value, zero congealed labor (I think), and I’m-not-sure-how-much “Intrinsic Value”. I’m defining “Intrinsic Value” as the PDV of future earnings. As for the other definitions, they can be found [here](http://en.wikipedia.org/wiki/Exchange_value) and [here](http://www.workers.org/ww/1998/stock0827.php). Really gang, I’m seeing a lot of discussion above that is, at bottom, an argument concerning definition. [Previous page](https://boards.straightdope.com/t/is-the-stock-market-a-hoax/310677.md?page=4)