I’m sure that economists and others would flesh this out, but it seems like a solid and simple introduction to this strange thing that is part of our daily lives:
The stock market is where people go to lend and borrow accumulated resources. For example, if you have a savings account, you are lending your resources to your bank during the time you do not plan to use them. The bank takes your deposit and invests it in productive investments, so your money grows and is available when you decide to use it.
Socially, the stock market works to allocate society’s surplus capital to the most productive use. We ask “What should society make, how much should it make and how should it make it?” The stock market answers these questions by allocating capital to the “right” firms and sectors. “Right” being whichever investments yield a high return. —Robert Ross