Comments on y-intercept blog: Dialectics of the Short Sell

Madison argued that good government could only exi...

2008-12-03T19:19:00.000-07:00

Madison argued that good government could only exist in a broad society when a large number of varied factions competed with each other in the marketplace of political ideas. In other words, he felt that good government could only exist in the presence of conflict between multiple factions.

My staunch libertarian friends argue to a degree against this philosophy. They suggest, rather, that society will do a better job of ordering itself and that conflicts will mostly disappear if we permit maximum individual freedom and allow free exchange however individuals wish.

This seems blissfully utopian. An authority would still be required to resolve the inevitable conflicts that arose and we'd be back to considering Madison's thesis.

Indeed, having multiple exchanges is itself a form of competition (a form of conflict). Such a system would produce superior options to what are now available. This is how markets function, and we are all beneficiaries of this type of functioning. So, while certain types of conflict are counterproductive, not all conflict is bad.

In this post I was trying to figure out how to mak...

2008-12-02T23:36:00.000-07:00

In this post I was trying to figure out how to make an argument about the foundations of reason.

The point I am trying to make is that the very desire for short selling is the product of ideology.

There is a chain of philosophers who believe that one must organize society around conflicts. In this ideology, one wants to organize the market so that it is dialectical conflict between two groups called shorts and longs.

Debates about short selling should recognize that regulatory regime that allows short selling is the creation of an ideology that society progresses by pitting groups within the society against eachother.

The Dialectics, of course, is the common thread between Communism and Fascism.

A debate on short selling really should start at the philosophical level by asking if this ideology is what we want as the foundation of our society?

I believe that we would be better off to scrap this ideology that sees the market as a dialectical conflict between shorts and longs, and to work to create an economy built on the development of equity.

Of course, there is nothing wrong with having more than one exchange. There could be the New York exchange built on the material dialectics, and independent exchanges around the world that prohibit short selling. By having more than one exchange, we could find out which system works better.

It seems that the problem with short selling, then...

2008-12-02T16:58:00.000-07:00

It seems that the problem with short selling, then, is a lack of clear title to the stocks being sold. It seems that some simple rule changes could remedy that problem.

Then short selling could continue to act as a price discovery mechanism, but there would be far more transparency in the transaction. Everyone would be fully aware of what is going on and who owns what.

I suspect, however, that rules such as this would be staunchly opposed by those that benefit from the current lack of transparency.