[gizmo686]

Price discovery doesn't rely on short selling. An active investor with stock in a company is already motivated to monitor if the company is overvalued and sell their stake. Short selling may improve the efficiency of price discovery but given the relativly high costs of needing to pay interest on the borrowed stock while you hold a short position (in contrast to a long position where you get payed dividends), I'm skeptical on how much selling actually helps with this.

There are certainly ways to use short selling as a hedge for other positions. But in those cases, loosing money on the short is typically good because it (hopefully) correlates to making more money on your main investment.