Economics Dictionary of ArgumentsHome
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| Speculation: Speculation in economics involves buying or selling assets, such as stocks, commodities, or currencies, with the expectation of profiting from future price changes. Speculators take on higher risks, often driving market liquidity and price discovery. While speculation can stabilize markets, excessive or uninformed speculation may lead to volatility and economic imbalances. See also Time, Risks, Interest rates._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Speculation - Dictionary of Arguments
Rothbard III 132 Speculation/Rothbard: To the extent that buyers foresee the final equilibrium price, (…), they will not buy at a higher price (even though they would have done so if that were the final price), but will wait for the price to fall. Similarly, if the price is below the equilibrium price, to the extent that the buyers foresee the final price, they will tend to buy some of the good (…) in order to resell at a profit at the final price. >Price/Rothbard. Elasticity/speculation/demand: (…) the new demand curve, including anticipatory forecasting of the equilibrium price, is [more flattened], ((s)starting at a lower price). It is clear that such anticipations render the demand curve far more elastic, since more will be bought at the lower price and less at the higher. Rothbard III 133 Thus, the introduction of exchange-value can restrict demand above the anticipated equilibrium price and increase it below that price, although the final demand - to consume at the - equilibrium price will remain the same. Supply: ((s) here the curve, too, is more flattened, starting at a higher price.) Erroneous speculation: (…) we have assumed that this speculative supply and demand, this anticipating of the equilibrium price, has been correct, and we have seen that these correct anticipations have hastened the establishment of equilibrium. Suppose, however, that most of these expectations are erroneous. Suppose, for example, that the demanders tend to assume that the equilibrium price will be lower than it actually is. Does this change the equilibrium price or obstruct the passage to that price? Solution: As soon as the price settles at ((s) around the equilibirum price), the demanders see that shortages develop at this price, that they would like to buy more than is available, and the overbidding of the demanders raises the price again to the genuine equilibrium price. The same process of revelation of error occurs in the case of errors of anticipation by suppliers, and thus the forces of the market tend inexorably toward the establishment of the genuine equilibrium price, undistorted by speculative errors, which tend to reveal themselves and be eliminated. >Utility/Rothbard. Rothbard III 158 Errors: Human action occurs in stages, and at each stage an actor must make the best possible use of his resources in the light of expected future developments. The past is forever bygone. The role of errors in different stages of human action may be considered in the comparatively simple case of the man who buys a good for direct use. Example: Say that his estimate of his future uses is such that he purchases a good - e.g., 10 quarts of milk - in exchange for 100 barrels of fish, which also happens to be his maximum buying price for 10 quarts of milk. Suppose that after the purchase is completed he finds, for some reason, that his valuations have changed and that the milk is now far lower on his value scale. He is now confronted with the question of the best use to make of the 10 quarts of milk. The fact that he has made an error in using his resources of 100 barrels of fish does not remove the problem of making the best use of the 10 quarts of milk. Rothbard III 160 It is important to recognize that it is absurd to criticize such an action by saying that he suffered a clear loss of X barrels of fish from the two exchanges. To be sure, if he had correctly forecast later developments, the man would not have made the original exchange. His original exchange can therefore be termed erroneous in retrospect. But once the first exchange has been made, he must make the best possible present and future use of the milk, regardless of past errors, and therefore his second exchange was his best possible choice under the circumstances. If, on the other hand, the price of milk has fallen below his new minimum buying price, then his best alternative is to use the milk in its most valuable direct use. >Market/Rothbard, >Price/Rothbard, >Stock keeping/Rothbard._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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