OPINION:
The virtue of the stock market is that it allocates capital where it’s most productive.
The investor votes with his money based on knowledge and good judgment. The idea for a new product comes from the producer. The producer develops the product, advertises it to inform potential buyers (perhaps based on market research) and sets an initial price to recoup the investment with a profit.
If the product doesn’t sell at the initial price, then he lowers it to recoup at least part of the investment. Depending on the size of the loss, he might never be able to attract capital again.
The consumer also votes with his money. Ultimately, it is the consumer who decides what is productive.
Naturally, a competent, honest and economical government is required to make sure the rules are followed.
ROBERT HANAHAN
Arlington, Virginia
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