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Quotation of the Day…

Posted By Don Boudreaux On April 6, 2013 @ 9:14 am In Complexity & Emergence,Prices,Seen and Unseen,Trade | Comments Disabled

… is from page 237 of the second edition (1976) of Leland Yeager’s magisterial International Monetary Relations: Theory, History, and Policy [1]:

Arbitrage moves something from a submarket or place where it is less valuable to a submarket or place where it is more valuable.  Speculation based on a correct diagnosis of fundamental supplies and demands is arbitrage in time.  Speculators “move” foreign exchange (and, ultimately, the foreign-trade goods corresponding to it) from a point in time of lesser value to a point in time of greater value.  The source of speculators’ profits is akin to that of arbitrageurs’ profits, or, for that matter, of truck drivers’ wages: speculators, arbitrageurs, and truck drivers alike share in the values that they almost literally create by transforming lower-valued into higher-valued goods through a relocation in time or space.

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[1] International Monetary Relations: Theory, History, and Policy: http://www.amazon.com/International-Monetary-Relations-Theory-History/dp/0060473231/ref=la_B001HPLVNC_1_2?ie=UTF8&qid=1347105358&sr=1-2

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