Smart Take On The Stock Market

Matthew Yglesias:

"Lots of people have hobbies, especially if they're affluent, and men in particular seem drawn to a broad class of hobbies that's structurally similar to short-term stock market speculation. You obsessively track minutia of data. You gather "insider" information that doesn't actually make you well-informed enough to beat genuine insiders. You run risks based on systematic overconfidence. And basically the whole thing makes sense if you think of it as a entertainment that's harmless when engaged in by the sufficiently affluent, but potentially destructive to a minority of people who are sucked into addictive behavior and wager money they can't afford to lose. If you try to think of sports gambling as income-maximizing investment activity, it looks incredibly puzzling but nobody looks at it that way. Stock picking is much the same.

And it's all fine as far as it goes, though as Keynes noted a long time ago it seems problematic to let this process have an undue weight in driving a country's overall capital expenditures."