What’s the purpose that benefits the whole of the economy? I don’t understand it’s purpose other than to bet on a losing stock. Is it purely for hoping a business will fail? Where is the benefit outside of the individual shorting? The idea of shorting a stock seems unmoral and unethical. Basically why is shorting even allowed to be a thing?
In: Economics
1) Shorts have been more effective at discovering frauds than regulators have been. One might as well ask, “what is the social benefit of prosecutors, they just put people in jail”
2) Companies use land, machinery, and labor to produce products or services. That means society can’t use those resources for other things. Sometimes a company is using those things inefficiently, compared to their next best use. Without short sellers it would be *harder* to force poorly managed companies to give up those resources to better managed companies.
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