Econ 101 für G8-Finanzminister

Auf einem Finanzministertreffen der G8-Staaten soll nach Angaben der Tagesschau die Rolle der Spekulanten bei der Preisexplosion für Erdöl und Lebensmittel geklärt werden. Dafür ist es jedoch nicht nötig, dass hochrangige Regierungsbeamte mit einem Flug nach Osaka die preistreibende Nachfrage nach Erdöl auf Kosten der Steuerzahler noch weiter erhöhen. Ein Blick ins Internet genügt. So erklärt der amerikanische Ökonom David D. Friedman in seinem Online-Lehrbuch „Price Theory“ das Thema Spekulation, wobei er auch auf die Frage nach der ebenso intuitiven wie fatalen Abneigung gegen Spekulanten eingeht:

How Speculation Works

A speculator buys things when he thinks they are cheap and sells them when he thinks they are expensive. Imagine, for example, that you decide there is going to be a bad harvest this year. If you are right, the price of grain will go up. So you buy grain now, while it is still cheap. If you are right, the harvest is bad, the price of grain goes up, and you sell at a large profit.

There are several reasons why this particular way of making a profit gets so much bad press. For one thing, the speculator is, in this case at least, profiting by other people’s bad fortune, making money from, in Kipling’s phrase, „Man’s belly pinch and need.“ Of course, the same might be said of farmers, who are usually considered good guys. For another, the speculator’s purchase of grain tends to drive up the price, making it seem as if he is responsible for the scarcity.

But in order to make money, the speculator must sell as well as buy. If he buys when grain is plentiful, he does indeed tend to increase the price then; but if he sells when it is scarce (which is what he wants to do in order to make money), he increases the supply and decreases the price just when the additional grain is most useful.

A different way of putting it is to say that the speculator, acting for his own selfish motives, does almost exactly what a benevolent despot would do. When he foresees a future scarcity of wheat, he induces consumers to use less wheat now. The speculator gets consumers to use less wheat now by buying it (before the consumers themselves realize the harvest is going to be bad), driving up the price; the higher price encourages consumers to consume less food (by slaughtering meat animals early, for example, to save their feed for human consumption), to import food from abroad, to produce other kinds of food (go fishing, dry fruit, . . .), and in other ways to prepare for the anticipated shortage. He then stores the wheat and distributes it (for a price) at the peak of the famine. Not only does he not cause famines, he prevents them.

More generally, speculators (in many things, not just food) tend, if successful, to smooth out price movements, buying goods when they are below their long-run price and selling them when they are above it, raising the price towards equilibrium in the one case and lowering it towards equilibrium in the other. They do what governmental „price-stabilization“ schemes claim to do–reduce short-run fluctuations in prices. In the process, they frequently interfere with such price-stabilization schemes, most of which are run by producing countries and designed to „stabilize“ prices as high as possible.

At least part of the unpopularity of speculators and speculation may reflect the traditional hostility to bearers of bad news; speculators who drive prices up now in anticipation of a future bad harvest are conveying the fact of future scarcity and are forcing consumers to take account of it. Part also may be due to the difficulty of understanding just how speculation works. Whatever the reason, ideas kill, and the idea that speculators cause shortages must be one of the most lethal errors in history. If speculation is unpopular it is also difficult, since the speculator depends for his profit on not having his stocks of grain seized by mob or government. In poor countries, which means almost everywhere through almost all of history, the alternative to speculation in food crops is periodic famine.

One reason people suspect speculators of causing price fluctuations is summarized in the Latin phrase cui bono; a loose translation would be „Who benefits?“ If the newspapers discover that a gubernatorial candidate has been receiving large campaign donations from a firm that made $10 million off state contracts last year, it is a fair guess that the information was fed to them by his opponent. If a coup occurs somewhere in the Third World and the winners immediately ally themselves with the Soviet Union (or the United States), we do not have to look at the new ruler’s bank records to suspect that the takeover was subsidized by Moscow (or Washington).

While cui bono is a useful rule for understanding many things, it is not merely useless but positively deceptive for understanding price movements. The reason is simple. The people who benefit from an increase in the price of something are those who produce it, but by producing, they drive the price not up but down. The people who benefit by a price drop are those who buy and consume the good, but buying a good tends to increase its price, not lower it. The manufacturer of widgets may spend his evenings on his knees praying for the price of widgets to go up, but he spends his days behind a desk making it go down. Hence the belief that price changes are the work of those who benefit by them is usually an error and sometimes a dangerous one.

Speculators make money by correctly predicting price changes, especially those changes that are difficult to predict. It is natural enough to conclude, according to the principle of cui bono, that speculators cause price fluctuations.

The trouble with this argument is that in order to make money, a speculator must buy when prices are low and sell when they are high. Buying when prices are low raises low prices; selling when prices are high lowers high prices. Successful speculators decrease price fluctuations, just as successful widget makers decrease the price of widgets. Destabilizing speculators are, of course, a logical possibility; they can be recognized by the red ink in their ledgers. The Hunt brothers of Texas are a notable recent example. A few years ago, they lost several billion dollars in the process of driving the price of silver up to what turned out to be several times its long-run equilibrium level.

It is true, of course, that a speculator would like to cause instability, supposing that he could do so without losing money; more precisely, he would like to make the prices of things he is going to sell go up before he sells them and of things he is going to buy go down before he buys them. He cannot do this by his market activities, but he can try to spread misleading rumors among other speculators; and, no doubt, some speculators do so. His behavior in this respect is like that of a producer who advertises his product; he is trying to persuade people to buy what he wants to sell. The speculator faces an even more skeptical audience than the advertiser, since it is fairly obvious that if he really expected the good to go up he would keep quiet and buy it himself. So the private generating of disinformation, while it undoubtedly occurs, is unlikely to be very effective.

I once heard a talk by an economist who had applied the relationship between stabilization and profitable speculation in reverse. The usual argument is that speculators, by trying to make a profit, provide the useful public service of stabilizing prices. The reverse argument involved not private speculators but central banks. Central banks buy and sell currencies, supposedly in order to stabilize exchange rates (an exchange rate is the price of one kind of money measured in another). They are widely suspected (by economists and speculators) of trying to keep exchange rates not stable but above or below their market clearing levels.

If profitable speculation is stabilizing, one might expect successful stabilization of currencies to be profitable. If the banks are buying dollars when they are temporarily cheap and selling them when they are temporarily expensive, they should be both stabilizing the value of the dollar and making a profit. One implication of this argument is that the central banks are superfluous–if there are profits to be made by stabilizing currencies, speculators will be glad to volunteer for the job. A second implication is that we can judge the success of central banks by seeing whether they in fact make or lose money on their speculations. The conclusion of the speaker, who had studied precisely that question, was that they generally lost money.


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