The shares are owned though? I don't know why people are confusing real shorting with naked shorting. The latter of course should not be permitted, but the former is simply the result of shares (which are owned) being sold by another person, with the permission of the owner. The owner cannot sell these shares again until they are repurchased on market. There is no artificial creation of shares, it is no different to the original owner selling these shares. People just don't like that someone's betting against them. That's fair enough, but people should be able to accept this as the reason for their anti-shorter sentiment rather than make up lies about how it works.
And short selling is certainly not lazy, it requires substantially more effort than going long in fact. You have to be absolutely sure that your thesis is correct, because you have many things going against you. There are the high fees, unlimited risk and the facts that on average, stocks rise in the long term so it is inherently a short term strategy (you can't simply short and hold).
The benefits massively outweigh any negatives (if there even are any, I can't think of any logical negatives though!). It is obviously incredibly important for liquidity. There can be no dispute made in relation to that, it takes stale shares typically invested by large funds and keeps them moving. Liquidity is important for many things beyond simply facilitating the buying and selling of shares, it helps also with price discovery and reducing the risk of manipulation. More importantly (in my view), shorting helps with price discovery. You talk about this auction system and how that should work on its own, but in reality the auction rarely works. People are irrational, buyers will bid up prices sometimes simply because they've seen them go up already in the past, and hope there will be a greater fool. We see this with Bitcoin, an absolutely worthless and useless asset which has been pumped to significant heights purely due to irrational and over exuberant speculation. The housing market as well, with no mechanism to bet against it investors just pile in, using leverage to buy multiple investment properties with the assumption that it will just keep going up as other people will continue to buy more and more. If there was a greater ability to short in the housing market, perhaps we wouldn't be experiencing this housing crisis. When there is no method to bet against something, often times speculation will become rampant and prices will quickly move away from their fundamentals (ie a bubble). Whilst it's nice having prices only go up, this isn't sustainable and the bigger the bubble gets, the bigger the consequences in the future. People, seeing prices only go up, pile in using huge amounts of leverage and whatever other means they can to increase their exposure. This only eventually ends in tears, as we saw in 2008.
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