[rahimnathwani]

It's analogous to the reason coal was necessary even after we had electricity: short positions enable the production of put contracts. By selling you a put option, I'm taking a long position on the underlying stock. So I probably want to hedge that by selling a bit of my existing stock. But if I don't already own stock in that company then, without short selling, I can't provide that liquidity.

Short selling typically involves the sale of borrowed stock, mediated through dealer-brokers, so the stock that's sold short does exist. So there's no issue with supply.