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Financial Markets Are Their Own Justification

In my most-recent column for AIER, I’m inspired by Tim Worstall’s reaction to American Compass’s new project, “Coin-Flip Capitalism.” Here’s my conclusion:

The ultimate justification for financial markets is simply that they arise when adults voluntarily save and invest. Period. As long as participants in these markets behave peacefully and use only their own funds (or funds voluntarily entrusted to them), their activities need no further justification, regardless of how closely or distantly these markets perform in comparison to some benchmark.

If pundits at American Compass, or professors at Wharton or Wherever U., don’t like the way these markets perform, they are free to offer financial market products that they believe will improve performance. These pundits and professors are free also not to participate in these markets. And they are free to identify the many ways that government interventions distort the operation of financial markets. This latter effort would be welcome and genuinely productive.

But no one has any business advocating, or even hinting at, the use of state coercion to mold financial markets into some different, fancied forms. Such coercion is sure to diminish the positive contributions that financial markets make to the larger economy. Even worse, such coercion would violate the rights of the property owners whose voluntary choices give rise to financial markets.


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