Anyone who studies The Wealth Of Nations hoping to glean insights on the mysteries and mechanics of the stock market will be disappointed. Adam Smith didnt discuss stock exchanges anywhere in the 1,100-plus pages of his foundational capitalist treatise. Nor did Karl Marx feel compelled to include the stock market among the damning contradictions and irrationalities of the capitalist system documented in Das Kapital.

The bestselling economics textbook ever written Paul Samuelsons adventurously titled Economics devotes just five of its 608 pages to the stock market, drawing the unhelpful conclusion: Anyone who can accurately predict the future course of business will prosper, but there is no such person.

Yet nothing captivates Americans like the stock market. We gape at the great fortunes won and lost on the exchanges, and broadcast the Dow Jones minor movements on the nightly news. This weeks wild swings in the market have alternately thrilled and alarmed us.

The stock market is a good story one of the best. But it doesnt mean what most people think it does. The stock market is not an important measure of national well-being, productive capacity or material wealth. It isnt even a reliable gauge for the health of specific companies, and is only tangentially related to helping them raise capital. The most iconic contemporary capitalist institution is, in truth, inessential to the operation of capitalism itself. The stock market, in the words of the late British economist John Maynard Keynes, is merely the outcome of the mass psychology of a large number of ignorant individuals.

The basics: A stock exchange is where people go to buy and sell shares of corporations. Buying stock gives you an ownership stake in a company, but this stake itself has no inherent value. It doesnt entitle you to proceeds from the firms earnings, or provide you with a stream of revenue. The stock is worth whatever you can get somebody else to pay for it.

Companies issue stock to raise money for personnel, equipment, research and everything else that goes into providing goods and services. But after the stock is issued, its price is no longer directly involved in corporate finance. A company doesnt see any additional revenue when its stock price increases, or lose cash when it falls. Stock prices are determined by bidders in the stock market whatever a willing buyer and seller agree on and the profits and losses on stock accrue to those speculators.