I am not an expert but this seems different from the short selling we're talking about. In short selling of a stock, the stock is borrowed and sold immediately for profit. There is no productive action the short seller engages in to recover the stock, they just rebuy it on the open market, or not at all if the company has gone bankrupt.
If you are really stretching it, they can produce research that shows the stock should be worth less in this time, without committing any crime- which means it is based entirely on public information the market already has. Bashing a company could be considered a productive activity we are incentivizing from a certain point of view. But their incentives are all towards tearing down the underlying security.
In the agricultural example, the person selling the futures to their goods has to actually produce the goods. While someone might be borrowing the stock to resell it, ultimately the end farmer has to produce new value to deliver on their future contract. Otherwise, they would just sell futures to their crops, and then take their money to do nothing! But this is exactly what someone who short sells a stock does. They take the money, and they just sit around waiting for the stock to drop, no doubt resisting the urge to make it drop themselves through legally gray methods to increase their profits.
If I’m a farmer that has corn crops to sell, I receive immediate renumeration for production in the future (in the simplest contracts) if I don’t produce anything at all, I literally take the money and run, it what happens? What about if hail destroys my entire crop? What if it destroys half my crop but I claim it destroys all of it?
There are definite moral differences between those cases but in operational terms it’s better for everyone if I just payout everything as efficiently as possible. Presuming it’s all equal anytime I spend holding real claims because fraud might happen is a net bad. Now expand that to more complicated valuations of future value of money? Should I impede farmer John’s payouts to Farmer Bill because the rain was ever so slightly different on his acres than the other? What if farmer John is willing to forego that expedience for future consideration on his plot?
Multiply this by a billion. We have a complicated market where producers and consumers need to a) set a first price and then b) change their price as both the market conditions change _and also my own as an investor, decisions change_.
It is dramatically more efficient for everyone to just take positions in the market even if some of them are pessimistic.
The same thing is true of any product that had future value and also it’s efficient to make risk management easy. Stocks clear both hurdles trivially.
> I literally take the money and run, it what happens?
That can happen regardless, there are many scammers who did this with or without shorting. Shorting is not required to keep things in check, that's the job of law enforcement.
Taking a step back it's really quite simple. Shorting is literally a bet that provides no value other than that some people will profit at the misery of others. This is unethical and immoral. Furthermore, done at a large enough scale, it will cause harm to specific companies or firms. You bring up scammers that will take the money and run, yet don't discuss what happened with GME where the shorters piled on it like sharks to drive it down, it's literally a scam in the opposite direction. We shouldn't fix one wrong with another.
I accept that you and I have different moral positions. Mine is that a market without shorting is a fallacy.
That said, you are required to explain crop insurance in your world view. It is a fundamental part of modern agriculture. One I think of as existential. It’s a short position. If your religion doesn’t allow it I won’t argue. Similarly I won’t argue with Shakers who don’t believe in procreation.
If you are really stretching it, they can produce research that shows the stock should be worth less in this time, without committing any crime- which means it is based entirely on public information the market already has. Bashing a company could be considered a productive activity we are incentivizing from a certain point of view. But their incentives are all towards tearing down the underlying security.
In the agricultural example, the person selling the futures to their goods has to actually produce the goods. While someone might be borrowing the stock to resell it, ultimately the end farmer has to produce new value to deliver on their future contract. Otherwise, they would just sell futures to their crops, and then take their money to do nothing! But this is exactly what someone who short sells a stock does. They take the money, and they just sit around waiting for the stock to drop, no doubt resisting the urge to make it drop themselves through legally gray methods to increase their profits.