Do I need to be able to short bananas for the market to settle on the price of a banana?
If you're confident the price of bananas will fall tomorrow you absolutely can sign a contract to deliver bananas next week at the current price and then buy them when the price drops...
Yes, you can but does that ability benefit the population/nation/market as a whole?
Yes, because the guy buying your bananas is able to make banana-buying decisions for next week based on the price you give him.
You’re not going to make up a silly low number because you actually have to buy the bananas yourself at some point, and you help price discovery because now that guy isn’t buying bananas at a higher price than someone is willing to sell them for.
Just as a thought experiment, would you say there are any (societal) negatives to the possibility of thr price of bananas (or the share price of spacex) being able to fluctuate wildly based on semi-abstract economic manipulations, like shorts and futures and such.
What I'm getting at is when does it go from investing, "I think this entity is going to take my money and use it to build a profitable factory that will then return to me a share of the profits", to just gambling "I think this stock price will change by the end of the day and I'm going to bet on it", and what are the positives and negatives of that?
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Well yes, to the extent the possibility to do that helps stop silly price spikes from a very short term shortage of bananas.
yes because shorts can also be wrong, and the buyer knows they have a stable price