> The point of a financial market is to allocate capital to its most productive uses. Someone who is very good at allocating capital should be allocating a lot of capital, not her own Robinhood account.
These two facts are not connected at all. There's no reason to assume the market cannot work or reliably find the "most productive" uses of capital in the aggregate.
> And an efficient market would allocate a lot of capital to her
Then that would give a single individual more control over the market than is healthy and would naturally tend towards inefficiency. The basic presumption here is that centralization of the economy around a limited number of entities is great for efficiency. I can find no examples in history of this and I can find many where this actually just increases corruption.
Given everything we learned about the "too big to fail" era I find articles like this to be obvious and grotesque lies.
>These two facts are not connected at all. There's no reason to assume the market cannot work or reliably find the "most productive" uses of capital in the aggregate.
Right, but just because it works "in the aggregate" doesn't mean that's how things work "should" work. I'm sure the road network would still muddle on if we allowed drunk drivers to drive, but we still ban them from driving. The article isn't even arguing for government intervention; it's just describing how things plays out naturally.
i had similar objections to yours but i would phrase the corrections differently.
>The point of a financial market is
no, the point of a financial market is to be a place where people who need money for lucrative projects can get it, and a place where people who have money can invest it, decoupling those transactions from the term of the investments and the irregularities of the different economic opportunities. To put it in simpler terms, think of the market of a town in medieval england, a financial market would allow you to know nothing in particular about farming but invest profitably in the farming activities of the town, getting what portion you want of your money back whenever you want it.
>to allocate capital to its most productive uses
is in the nature of a market that has the features markets need to function efficiently.
The point of a financial market is capital allocation, and people will partake even if the market is inefficient. Consider illegal/black markets, they are often cited as truly free markets where you can invest large sums of cash or buy anything for a price, and even though the prices are high, there are customers. Those markets can be made more efficient, but the fact they exist shows the power of markets without efficiency.
>>And an efficient market would allocate a lot of capital to her
>Then that would give a single individual more control over the market than is healthy
one of the features a market needs for efficiency (think of efficiency as "goods at a fair price") is that no participant alone can affect the prices; for that to be true there needs to be competition, and without it you get "market failure", a market where participants receive no benefit from participating. (markets should operate at a point where sellers are saying "that price offer is too low" and buyers are saying "that price offer is too high", but all the "great deal, I'll take it" transactions that already took place to get it to that point are were the happiness is created from thin air.) as new information emerges, prices can shift up and down to maintain that "take it or leave it" equilibrium.
no system is perfect, not democracy, not the courts, etc., but regulations and people mostly acting sensibly even in self interest makes markets the best method we have of allocating happiness most effectively.
being cynical about market capitalism is understandable, but it doesn't get you anywhere, other systems demand even more cynicism.
>no, the point of a financial market is to be a place where people who need money for lucrative projects can get it, and a place where people who have money can invest it
But all things being equal, investors would like their money allocated into projects with the best returns. Borrowers of course would prefer that they get the money so that doesn't really tell us anything, but society as a whole would rather that worthy projects are funded rather than a linear city in the desert or whatever.
>and people will partake even if the market is inefficient. Consider illegal/black markets, they are often cited as truly free markets where you can invest large sums of cash or buy anything for a price, and even though the prices are high, there are customers.
A good that can't be acquired on regular markets has a price of infinity. A black market might be more expensive than some place where it's legal, but it's still cheaper than the alternative.
>But all things being equal, investors would like their money allocated into projects with the best returns. Borrowers of course would prefer that they get the money so that doesn't really tell us anything, but society as a whole would rather that worthy projects are funded rather than a linear city in the desert or whatever.
you are describing the process by which competitive "jostling for the best returns / cheapest capital sources" produces market efficiency, which makes it pointless to try to find better returns or cheaper capital. Not having to think about that is a reward itself. The price of oil is established by auctioning off more oil every day; if you buy some at an auction, you're doing the best you can do, there is no better place to invest in oil, you can focus on driving your fleet of delivery trucks.
These two facts are not connected at all. There's no reason to assume the market cannot work or reliably find the "most productive" uses of capital in the aggregate.
> And an efficient market would allocate a lot of capital to her
Then that would give a single individual more control over the market than is healthy and would naturally tend towards inefficiency. The basic presumption here is that centralization of the economy around a limited number of entities is great for efficiency. I can find no examples in history of this and I can find many where this actually just increases corruption.
Given everything we learned about the "too big to fail" era I find articles like this to be obvious and grotesque lies.