# What's the benefit to society of stock speculation? \[edited title\] **URL:** \ **Category:** Great Debates\ **Created:** [November 4, 2011, 4:06pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864 "2011-11-04T16:06:06Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 4, 2011, 7:39pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/61 "2011-11-04T19:39:17Z")
> [@Rand\_Rover](#): > > But you haven’t even attempted to make an argument that the existence of stock trading is harmful to society. You just showed up and demanded that someone show you its benefit to society (implying strongly that you believe it shouldn’t exist if ýou don’t see any benefit). > > I call your mindset here “the necessity concept,” and it’s rampant among a certain large subset of posters here. It often shows up in pure form (eg, “you don’t need a gun/SUV!”), but is sometimes more disguised (as in your OP). I’m trying to get people to examine why they sthink something shold exist only if they personally find it necessary (not having much impact so far, I’m afraid). So, you’re saying that **yelimS** , who came here asking a question, listened to the answers, and found a convincing one, committed a thought crime for challenging your absolute worldview? ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [November 4, 2011, 7:42pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/62 "2011-11-04T19:42:11Z")
No, I think **Rand** is saying “question your assumptions”. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 4, 2011, 7:44pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/63 "2011-11-04T19:44:57Z")
> [@yelimS](#): > > No? **puddleglum’s** reply helped a lot, though. But as I said, I can see that shares are good, some trading is a necessary and not terribly harmful byproduct of this, but what I have problems understanding is how people making a living off just trading stock are contributing anything. I think I understand the bit now about smoothing the prices, but I’m ready for more arguments, if you have any. There is one more advantage I touched upon briefly. A stock price gives the opinion of the market on the health of a company. When Netflix announced it was going to split its DVD service from its streaming service people left and its price went down, which helped them to decide not to make this mistake. I’m sure the fact that HP’s stock price went down 40% helped encourage the board to fire the nitwit former CEO. And, if the board does not act, a low enough prices makes the company a target for a takeover which will result in the current management getting booted. Theoretically shareholders have this power, but practically speaking the stock price is more effective in enforcing even a little bit of accountability. Not as much as there should be, but some. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [November 4, 2011, 7:45pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/64 "2011-11-04T19:45:37Z")
> [@Alessan](#): > > Except that that’s a false analogy, as economics is a social science rather than a natural one. In fact, arguing about the nature of a financial system is no different than arguing about the nature of a political system. If a poster stated that they wished to cancel the Electoral College, you might disagree with them, you might say that their idea is stupid, but you couldn’t say that their proposition is \*objectively \*wrong. Advocating the cancellation of the current system of stockbroking is no different; both are human constructs defined by laws and by social behavior. There is no “right” or “wrong” to them in any objective sense. Not so; one can argue about the benefits and drawbacks of an institution such as the Electoral College, but as an institution, it has an objective reality to it as to what it is. If someone argues that the Electoral College is a bad thing because it does not train as many graduate students as other colleges, they are simply incorrect because they do not know what the “Electoral College” is or what it does. They are objectively wrong, because they do not understand what is under discussion. Similarly, in order to have an opinion that falls within a range of reasonableness concerning matters economic, you have to have a certain level of understanding about what a stock market is and how it works. If you lack that, you are going to be “wrong” for the same reason - you don’t know what, in fact, is under analysis. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 4, 2011, 7:50pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/65 "2011-11-04T19:50:21Z")
> [@JohnT](#): > > No, I think **Rand** is saying “question your assumptions”. We have one mindset that maybe a massive part of the economy contributing nothing is a problem (not an issue since it does contribute something) versus the mindset that individual “liberty” trumps almost any type of harm that gets caused. Maybe everyone should questions his assumptions. But the thread wasn’t about that. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 4, 2011, 7:53pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/66 "2011-11-04T19:53:24Z")
> [@Alessan](#): > > Except that that’s a false analogy, as economics is a social science rather than a natural one. In fact, arguing about the nature of a financial system is no different than arguing about the nature of a political system. If a poster stated that they wished to cancel the Electoral College, you might disagree with them, you might say that their idea is stupid, but you couldn’t say that their proposition is \*objectively \*wrong. Advocating the cancellation of the current system of stockbroking is no different; both are human constructs defined by laws and by social behavior. There is no “right” or “wrong” to them in any objective sense. My daughter has a degree in economics from Chicago. My son-law has a degree in political science. The stuff my daughter studied was a lot closer to engineering and physics and especially psychology than it was to political science. I suspect it is closer to climate science also but that I don’t know. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [November 4, 2011, 7:54pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/67 "2011-11-04T19:54:59Z")
> [@yelimS](#): > > **Ravenman** : I don’t understand your beef… Please don’t mistake my enthusiasm for the debate topic as being offended by your asking the question. No hard feelings at all; I think it’s an interesting topic that I’m enthused to debate. ---
**Author:** ![yelimS](https://avatars.discourse-cdn.com/v4/letter/y/54ee81/32.png) [@yelimS](https://boards.straightdope.com/u/yelimS)\ **Post date:** [November 4, 2011, 8:01pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/68 "2011-11-04T20:01:17Z")
> [@Rand\_Rover](#): > > But you haven’t even attempted to make an argument that the existence of stock trading is harmful to society. You just showed up and demanded that someone show you its benefit to society (implying strongly that you believe it shouldn’t exist if ýou don’t see any benefit). > > I call your mindset here “the necessity concept,” and it’s rampant among a certain large subset of posters here. It often shows up in pure form (eg, “you don’t need a gun/SUV!”), but is sometimes more disguised (as in your OP). I’m trying to get people to examine why they sthink something shold exist only if they personally find it necessary (not having much impact so far, I’m afraid). We’re drifting off topic here, but as far as I’m concerned, the question is more or less resolved, so it’s probably no biggie. If I don’t personally find something necessary, there are basically two possibilities: Either I’m wrong, or it really isn’t necessary. If it isn’t necessary, but still costly to society (and the stock market certainly is, otherwise everyone making a living in it would be flat broke), then it should be challenged. But, allowing for the possibility that I’m wrong, I should examine my beliefs. I did. Your point is? ---
**Author:** ![yelimS](https://avatars.discourse-cdn.com/v4/letter/y/54ee81/32.png) [@yelimS](https://boards.straightdope.com/u/yelimS)\ **Post date:** [November 4, 2011, 8:03pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/69 "2011-11-04T20:03:12Z")
> [@Ravenman](#): > > Please don’t mistake my enthusiasm for the debate topic as being offended by your asking the question. No hard feelings at all; I think it’s an interesting topic that I’m enthused to debate. Granted, although now I understand you even less. If it’s an interesting topic, aren’t you glad I brought it up, even though my motivation was a suspicion something was rotten? Don’t you value the opportunity to tell me it’s not? ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [November 4, 2011, 10:38pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/70 "2011-11-04T22:38:03Z")
> [@yelimS](#): > > We’re drifting off topic here, but as far as I’m concerned, the question is more or less resolved, so it’s probably no biggie. > If I don’t personally find something necessary, there are basically two possibilities: Either I’m wrong, or it really isn’t necessary. If it isn’t necessary, but still costly to society (and the stock market certainly is, otherwise everyone making a living in it would be flat broke), then it should be challenged. But, allowing for the possibility that I’m wrong, I should examine my beliefs. I did. Your point is? My point is that there is a third possibility: that it simply doesn’t matter whether you personally believe that something is necessary or not. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [November 4, 2011, 10:42pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/71 "2011-11-04T22:42:19Z")
> [@Rand\_Rover](#): > > My point is that there is a third possibility: that it simply doesn’t matter whether you personally believe that something is necessary or not. That depends entirely on how many people agree with him. ---
**Author:** ![yelimS](https://avatars.discourse-cdn.com/v4/letter/y/54ee81/32.png) [@yelimS](https://boards.straightdope.com/u/yelimS)\ **Post date:** [November 4, 2011, 10:53pm UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/72 "2011-11-04T22:53:35Z")
> [@Rand\_Rover](#): > > My point is that there is a third possibility: that it simply doesn’t matter whether you personally believe that something is necessary or not. No. If my belief happens to be true, then it matters, not because it is my belief, but because it is a fact. Granted, in this case, it turned out to be (mostly) false, but if it had been the case that speculation was a squander of resources in a world where people are dying of hunger and the climate is threatened, then that’s hardly irrelevant. So the point isn’t my personal beliefs, but that they _might_ be justified, and if they are, they do matter. Still OT, but it seems this thread has died for its original purpose. Are we allowed to highjack our own topics? ---
**Author:** ![Bricker](https://avatars.discourse-cdn.com/v4/letter/b/977dab/32.png) [@Bricker](https://boards.straightdope.com/u/Bricker)\ **Post date:** [November 5, 2011, 12:10am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/73 "2011-11-05T00:10:57Z")
> [@Alessan](#): > > Except that that’s a false analogy, as economics is a social science rather than a natural one. In fact, arguing about the nature of a financial system is no different than arguing about the nature of a political system. If a poster stated that they wished to cancel the Electoral College, you might disagree with them, you might say that their idea is stupid, but you couldn’t say that their proposition is \*objectively \*wrong. Advocating the cancellation of the current system of stockbroking is no different; both are human constructs defined by laws and by social behavior. There is no “right” or “wrong” to them in any objective sense. Which would be relevant if I had said anything about right or wrong. Instead I said it wasn’t a zero-sum game, which is not a human construct – or at least insofar mathematics is not a human construct. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [November 5, 2011, 1:47am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/74 "2011-11-05T01:47:57Z")
> [@yelimS](#): > > No. If my belief happens to be true, then it matters, not because it is my belief, but because it is a fact. Nope. It is impossible for “x is necessary” to be a fact–it can only be an opinion. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [November 5, 2011, 2:52am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/75 "2011-11-05T02:52:05Z")
> [@Rand\_Rover](#): > > But you haven’t even attempted to make an argument that the existence of stock trading is harmful to society. You just showed up and demanded that someone show you its benefit to society (implying strongly that you believe it shouldn’t exist if ýou don’t see any benefit). Your problem is that you expect people to behave rationally, when it is very clear that people are not rational. This article might spur some thinking: [http://www.wired.com/wiredscience/2011/11/does-inequality-make-us-unhappy/](http://www.wired.com/wiredscience/2011/11/does-inequality-make-us-unhappy/) ---
**Author:** ![Naxos](https://avatars.discourse-cdn.com/v4/letter/n/50afbb/32.png) [@Naxos](https://boards.straightdope.com/u/Naxos)\ **Post date:** [November 5, 2011, 2:57am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/76 "2011-11-05T02:57:19Z")
> [@yelimS](#): > > So, what is the service to society that wall street brokers are being paid top dollar for? No service to society. The service is to the ego of gamblers, and the vast ocean of ignorant people who are not aware that it is them who create wealth, and the gamblers who monopolize and use it to their benefit. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [November 5, 2011, 7:46am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/77 "2011-11-05T07:46:53Z")
It’s too bad SDMB makes it hard for nested quotes. I complained about [QUOTE=shiftless] Whenever someone says, “those [fill in the blank] are making outragous profits”, I have to wonder why that person doesn’t buy stock in that company, then they could make outragous profits too. [/QUOTE] and got this response: > [@shiftless](#): > > You are mixing executive pay with stockbroker compensation for reasons I don’t understand. > > If you don’t like the executives siphoning off profits then buy the stock and vote them out. I know that is overly simplistic but just complaining that the rich guys take all the money and I (or we) can’t do anything about it and stocks are at fault is extremely flawed. The market is far from perfect but I can’t see how that would be corrected by getting rid of the brokers… > > The stock holders of AIG and Lehman Bros have themselves to blame… The septimus post you’re responding to said nothing about brokers; it merely pointed out a fallacy in your earlier post. (And it wasn’t I who conflated stockbrokers, OP using the term when he seemed to really mean day-traders/market makers.) And your follow-on seems to imply that as a small retail investor who wants to buy stock in a corporation to benefit from the profit it (or its employees) is taking, then I need to buy 51% control. :smack: ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [November 5, 2011, 7:51am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/78 "2011-11-05T07:51:17Z")
> [@Trom](#): > > The onion market is a good example of the volatility of a commodity market with no futures market (no speculators, just growers and end users).[Here’s](http://blog.american.com/wp-content/uploads/2011/05/onionsoil4.jpg) a great chart. The graph shows onions spiking in price every March or so, almost like clockwork. Help us out here; is this just showing that onions spoil quickly compared with commodities that can be stored for long periods? ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [November 5, 2011, 8:05am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/79 "2011-11-05T08:05:14Z")
(I think OP has already clarified that he wrote “stockbroker” where he meant “day trader and/or market maker.” Do let’s not get further confused by that conflation.) [off-topic] When chessplayers play a chess game for a $1000 purse provided by a 3rd party, the game isn’t “zero-sum” – it’s $1000-sum! But it’s still fixed-sum, and their strategies will be same as if they were only wagering with each other.[/off-topic] Similarly when a stock rises from $40 to $50 for reasons that have nothing to do with the activities of Bob and Alice, Bob’s and Alice’s trading shares with each other will be “fixed-sum” (read: "the same as “zero-sum”) even though one or both will share in the $10 profit. > [@Ravenman](#): > > Perhaps you could explain the difference. The only references I can find to “fixed-sum” seem to be as a synonym for “zero-sum.” > > In my example, it seems that wealth is being created, which would most certainly not be a zero-sum (or fixed-sum) game. Déjà vu. I suggested the same substitution (“fixed-sum” for “zero-sum”) in an earlier thread, and got the same response (Google doesn’t like “fixed-sum”). Since I, believe it or don’t, am sometimes considered an expert on game theory, I like to think I’ve the right to invent my own terms. 😃 I hope the comment above clarifies. Your “wealth is being created” gets to the important point. Yes, a successful corporation creates wealth but OP is focusing on the contribution of the trader/broker. The stock price might have gone from $40 to $50 without help from brokers and day traders. As I stated in prior posts, stock speculators serve a useful purpose. But let’s not commit the same fallacy as those who write: “Chocolate is tasty, so we should eat nothing but chocolate.” or “If increasing minimum wage from $10 to $11 is a good idea, then it must be good to increase it to $100,000.” > [@Voyager](#): > > The recession and the flash crash shows that there is a problem - but something like 200 years of stock trading shows that the problem isn’t stock trading per se. They piled derivative on derivative on derivative until the head of the Fed didn’t even understand what was going on, not to mention the heads of the companies doing it - who were happy as long as they were making money. The real question is where to draw the line. This is the point I’ve been trying to make. As usual, **Voyager** makes it much more eloquently. ---
**Author:** ![yelimS](https://avatars.discourse-cdn.com/v4/letter/y/54ee81/32.png) [@yelimS](https://boards.straightdope.com/u/yelimS)\ **Post date:** [November 5, 2011, 10:05am UTC](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864/80 "2011-11-05T10:05:47Z")
> [@septimus](#): > > (I think OP has already clarified that he wrote “stockbroker” where he meant “day trader and/or market maker.” Do let’s not get further confused by that conflation.) If a mod could change the title to ‘What’s the benefit to society of stock speculation,’ then that would be great. [Previous page](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864.md?page=3) [Next page](https://boards.straightdope.com/t/whats-the-benefit-to-society-of-stock-speculation-edited-title/601864.md?page=5)