The growth of corporations would not have been possible without the corresponding growth of financial markets. Stock markets, for example, allow owners of stock a reasonable guarantee of liquidity for their holdings, thus making available to corporations the capital of those who are not necessarily interested in long term investments. Futures markets, to take another example, allow sellers and purchasers of commodities to make more accurate plans for the future by locking in some of their costs now. Speculators play a valuable role by providing liquidity and smoothing the rise and fall of prices as new information becomes available.
Financial markets have also generated much criticism, from charges that speculators make merely "paper profits," to claims that insider trading is unfair to outsiders, to suspicions that junk bonds deserve their name.
I am aware of no particular book that combines a thorough understanding of the functions of financial markets with a good moral discussion of the controversies surrounding them. "Gekko Echo," by David Kelley and Jeff Scott, shows how financial innovations in the 1980s —including leveraged buyouts and "junk" bonds—created wealth. Fenton Bailey's Fall from Grace and Daniel Fischel's Payback are good accounts of the Michael Milken saga. While weak on understanding Milken's moral standing, both are very good at explaining the enormous value and impact of junk bonds and at documenting the often malicious and arbitrary behavior of Milken's opponents in business and government.
There are, however, many books that explain how markets work, and the information they contain can be useful for setting straight many of the misconceptions about the role of markets.
