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Competitive Stock Market Results

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How does a competitive stock market accomplish the result that Adam Smith described? Should the stock market be regulated? How and why?

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Solution Summary

This solution examines competitive stock market, as described by Adam Smith, and answers whether or not stock markets should be regulated.

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How does a competitive stock market accomplish the result that Adam Smith described?

The stock market is based on supply and demand, or survival of the fittest concept; exactly what Adam Smith's writings, such as The Wealth of Nations, were based on. Stock prices are a subjective evaluation of what a company is worth. Prices are dependent on its foreseeable profitability by the stockholders. A firm that is in a lucrative market will have a larger customer base, and that stock price will consistently rise as more and more stockholders ...

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