Regular Cafe patrons will recognize my current column in the Pittsburgh Tribune-Review as echoing a Cafe blog post from a few months back. This column reviews some basic economics of speculation. In it, I explain that speculators, seeking only to make as much profit as possible for themselves, cause people enjoying unusual abundance to share their good fortune with people who would otherwise be cursed with unusual dearth. The market makes economic well-being more equal than can be appreciated by simple snapshots of income “distribution.”
And those simple snapshots present at picture that is especially distorted if the very high income earnings of successful speculators are read in ignorance of the fact that these earnings are themselves the result of economic activities that create more equality of well-being for large swathes of ordinary people than would exist in the absence of the successful efforts of these speculators.
Here’s a slice from my column:
When speculators buy today hoping to sell tomorrow at higher prices, they move goods across time; goods are moved from a time when they are relatively more abundant to a time when these goods are relatively less abundant. Successful speculation obliges people in times of great abundance to share their good fortune with people existing in times of great scarcity.
Markets spread burdens and benefits more equally across space and time. Beautiful, isn’t’ it?!