The Capitalist Glory

Published November 22, 2006

To the Editors:

Michael Kinsley’s article [Nov. 21] calling the stock market a “Capitalist Swindle” represents just the sort of economic illiteracy that is all too pervasive in mainstream media.

It is true the stock market is very close to “laboratory conditions” for capitalism, but nobody who participates in the markets believes every market is efficient all the time. Indeed, in any human endeavor there are periods of “irrational exuberance” or excessive pessimism which account for overpricing or underpricing of assets. This is not a flaw in the system; this is the beauty of the system.

A critical factor that market-haters like Mr. Kinsley ignore is that at any given time the market represents freely-arrived-at prices, at which both buyer and seller are making a voluntary trade. Of course one of them will be wrong in the short term, and they may both be wrong at different points in the longer term, but the trade will have been made voluntarily.

But, most important of all, Mr. Kinsley never answers the question “Compared to what?” If he does not like some of the outcomes of free markets, what would he propose as a solution? Another system? Of course not, because a better system does not exist; just ask Mssrs. Lenin, Mao, and Marx. History, logic, and morality all point to the imperfect marketplace as the finest economic institution ever conceived.

Ross Kaminsky is a professional derivatives trader and a fellow of The Heartland Institute.