If only they'd listened.

Pershing Square Capital's Bill Ackman thinks a lot of destruction in our capital markets could have been avoided if corporate management, regulators, legislators, investors, and the media had listened to short-sellers.

Take Lehman Brothers. The hedge fund manager (and Lehman short-seller) David Einhorn made his first public remarks about the bank's questionable numbers back when the stock was around $62.

Since then, he's given speeches before influential investors, he's made his case time and again on CNBC, and he's faced critics who say outspoken short-sellers are little more than rumormongers talking their books.

And during all that time, Lehman's share price kept falling. After yesterday's bloodbath, the stock is now down more than 60 percent since the start of the year, to $23.75.

Say what you will about David Einhorn. But the guy has made a tidy sum on a single bet. And if Lehman had listened to Einhorn back in 2007, Ackman said yesterday during a conference sponsored by the Wall Street Journal, they could have avoided much of the pain they are now feeling.

To hear Ackman tell it, short-sellers have all of the answers. He thinks that officials from the Treasury Department and the Federal Reserve should be grilling short-sellers for information on a regular basis. Short-sellers should be reporters' best sources. Small investors should appreciate the well-researched investment ideas from the professionals.

But, in reality, it seems no one wants to hear from them. No chief executive wants to listen to an investor who is betting on the fact that he's running his company into the ground. And the government has shown more interest in going after short-sellers for market manipulation than listening to their ideas for potential regulatory action. (Einhorn has been probed by the S.E.C., while Ackman has endured investigations by the New York Attorney General's office and the S.E.C.)

Shorts should always disclose their positions when speaking publicly, Ackman says. And spreading false rumors is indeed crossing a legal line that the authorities rightfully should investigate.

But Ackman's point is that the market is well served by shorts—a long-only market would simply result in one bubble after another. He illustrates it with housing as an example: There was no way to short the price of single-family homes, and a bubble formed. Last year, the banks created the ABX Index to do just that, and the bubble popped.

And what about when corporate management attacks the shorts, as many C.E.O.'s have done in the past and will no doubt continue to do in the future? Ackman says here is where investors should really consider motivation.

"Short-sellers have a choice in what stock they are short," he said. "Management doesn't have a choice about what company they are long."

Ackman makes some good points, most notably that no one seems to mind that long-term investors talk their books in the press all the time. A short-seller opens his mouth, and eyes roll.
 
Unless it becomes illegal to sell stock short and freedom of speech gets obliterated by a constitutional amendment—neither of which is likely to happen anytime soon—then C.E.O.'s, investors, the media, and the regulators should all get used to the idea that outspoken short-sellers have a place in this market.

Of course, if management and regulators really do start to listen to the shorts like Ackman wants, he may find that profiting from his positions could become a lot more challenging.