The problem with this analysis is that it ignores the existence of aspects of property law and taxation that create privilege at the expense of competitive market conditions. Economists such as Joseph Stiglitz and Mason Gaffney have zeroed in on the main public policies that reward "rent-seeking" (either by the hoarding of land and natural resources or engaging in speculations) where the gains in asset values are taxed at rates lower than the rates imposed on the actual production of goods or delivery of services. The reference to Adam Smith's "invisible hand" needs to be countered with Smith's own analysis of rent-seeking privilege contained in the pages of The Wealth of Nations. Smith was not the first to suggest that rents were particularly appropriate to be taxed, as rents are societally- rather than individually-produced.
+Edward Dodson hey friend. he is talking about economics principles and not on government intervention (lobbyists) sabotaging or changing the market economy principos to their advantage.
+Vanderlicamorim Camorim In the real world there is no state that can be described as pure competition. in every society the systems of property law, criminal law, regulation and taxation all combine as externalities influencing the production and distribution of wealth. Some reinforce competition, others restrict competition. As John Locke observed, we (by right) come together voluntarily to form communities and societies, then adopt the systems noted above and establish government to protect the rights we all share. One of the most fundamental of such rights is our equal birthright to nature. Rent-seeking violates this basic right, and any laws that protect rent-seeking behaviors fall in the realm of licence identified by Locke. What I urge you to consider is that the systems of property law and taxation that now dominate all societies achieve a massive redistribution of wealth from producers to non-producing rentiers.
@@joecurran2811 Of course. Getting our local officeholders to consider changing the way public revenue is raised is a daunting challenge, one that requires constant effort, renewed after every election results in different people "serving" the public interest.
This is a course on basic economic principles. If you want more advanced lessons covering how various policies impact the free market you'd have to take higher level courses.
Speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable at a future date. In finance, speculation is also the practice of engaging in risky financial transactions in an attempt to profit from short term fluctuations in the market value of a tradable financial instrument-rather than attempting to profit from the underlying financial attributes embodied in the instrument such as capital gains, dividends, or interest. Many speculators pay little attention to the fundamental value of a security and instead focus purely on price movements. Speculation can in principle involve any tradable good or financial instrument. Speculators are particularly common in the markets for stocks, bonds, commodity futures, currencies, fine art, collectibles, real estate, and derivatives. Speculators play one of four primary roles in financial markets, along with hedgers, who engage in transactions to offset some other pre-existing risk, arbitrageurs who seek to profit from situations where fungible instruments trade at different prices in different market segments, and investors who seek profit through long-term ownership of an instrument's underlying attributes.
How does this apply to real estate speculation? What do speculators store exactly? Land? Built property? These assets don't need storage. Storing/hoarding them means putting them out of market in the present from people who can use them for productive purposes. In the future, if there is some kind of crisis that makes demand on such assets much higher suddenly, their owners/users could sell them for those who really want them and are ready to pay more for them than the profit produced from the current user's activity. What is the economic logic that can defend real estate speculation?
What about when speculation on corn (in 2008) artificially inflates food prices and millions of poor people starve? Interesting to see the ways that the science of economics continues to use these models which only work on paper at the expense of the structurally disadvantaged.
Yeah isn’t it better to keep the low prices, then when the disaster comes, most people would change product substitution. I get with oil it’s a little difficult. But corn, you could buy rice instead. By artificially lowering prices of a shortage, you are robbing from substitution producers, which is part of natural booms and busts. this is better than increasing the price of corn artificially through speculation to keep people buying it in the shortage time. It’s artificial market manipulation. A bunch of valueless middle men stealing value and causing unnatural market economies
I know it's been four years, but I have an answer to that. The problem is, agriculture has to do a lot with seasons. The four seasons and two seasons (wet/dry) in tropical ones are known, but if you live near the Pacific in either side, e.g. Philippines or U.S., there is even an El Nino-La Nina across-years-seasonal effect. Storms and droughts are both a risk because of this. Substitution will alleviate problems but only to an extent, as when storms or droughts hit, the whole agriculture sector takes a hit. True, they lower prices by supplying in times of shortage, but think of the consumers who benefit. This is pointed too when rich people and some restaurants buy the luxury rice variants with stabler supply from Thailand, while the poor people and humbler businesses get to buy their average rice variant cheaper. Also, in times of abundance, farmers get lower prices by competition - to the point they just bury the crops again than sell. But farmers with contracts with speculators will have assured incomes in these times, not to mention less waste of the crops. Now don't you want that instead of crops buried and farmers crying ironically because of an abundance of harvest?
Futures is the only unclear topic I have encountered in the course so far. They sound like prediction markets but for prices. But how exactly are they a type of speculation equivalent to speculation in goods? I have a vague feeling that they may have the same effects as speculation in goods but I'm not sure why. For example, what are the means by which the futures increase welfare if the goods are not really bought and sold? This was not covered in the lecture.
My question as well. I understand the example when oil was actually purchased, stored and then sold. But in the case where only a 'contract' was purchased it seems the quantity of oil was not changed in the present or the future. IF the contracts were actually tied to a physical amount of oil I could understand it. As it is , it seems like a prop bet: I wager with my friend that the price of oil will be X in the future, and then we settle.
@@seanbrown3000 Maybe the the sale of futures contracts can raise the price of the contracts themselves, but if the contract is settled in cash, how does the sale of a futures contract increase the current price of a good?
From an economic point of view there is no difference. The negative connotation of speculation is due to economically irrelevant facts: a) the speculators' not producing anything visible and b) the fact that increases in price are visible in the present, while the future decreases in price are less visible today. But (a) is irrelevant from an economic point of view since speculation creates value. And so is visibility (b). Moreover from an economic point of view the welfare or surplus created in the future is greater than the loss in welfare or loss in surplus today, because the speculator is servicing the higher portion of the demand curve.
Ever heard of "buy the rumors sell the fact"? That's because of when information is official, there's nothings left on the table. Assume that people believe the company gonna have a good earning next quarter, then they buy it, thus pushing price up. When the news release, if the result as expected, but price of stock is high enough to attract more people to buy. If the earning released is surprisingly good, then even be pushed up by speculators in the past, but additional good information can make the price shoot up even more. If the news is good but less good than expected, price will drop harder.
The good speculators have larger share of the market because they have much more money and combined can buy more shares, but they are few in numbers. Most speculators loose money and they still and will always be larger in numbers. So we have two problems here. Few people with huge money artificially manipulating markets prices like Hedges Founds, take money from the majority of speculators which are small individual speculators doing wrong prediction and falling in the misleading market manipulation of big speculators, inflating prices, creating higher volatility and crises. Well come to the world outside of pure theory.
So you take value from stable periods in time, store them, promote crisis, then sell them during crisis? Crisis becomes not a crisis but an opportunity if you are extremely rich.
in my opinion, i think not every crisis is created by speculators like, for example a thunderstorm which caused by weather that cannot be controlled by anyone. With or without speculation, thunderstorm will be happening anyway. so, it shows us how speculators that made a decision based on chances to earn a profit, could in turn increases welfare of the society as a whole..
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Continue learning with practice questions: mru.io/v34
The problem with this analysis is that it ignores the existence of aspects of property law and taxation that create privilege at the expense of competitive market conditions. Economists such as Joseph Stiglitz and Mason Gaffney have zeroed in on the main public policies that reward "rent-seeking" (either by the hoarding of land and natural resources or engaging in speculations) where the gains in asset values are taxed at rates lower than the rates imposed on the actual production of goods or delivery of services.
The reference to Adam Smith's "invisible hand" needs to be countered with Smith's own analysis of rent-seeking privilege contained in the pages of The Wealth of Nations. Smith was not the first to suggest that rents were particularly appropriate to be taxed, as rents are societally- rather than individually-produced.
+Edward Dodson hey friend. he is talking about economics principles and not on government intervention (lobbyists) sabotaging or changing the market economy principos to their advantage.
+Vanderlicamorim Camorim In the real world there is no state that can be described as pure competition. in every society the systems of property law, criminal law, regulation and taxation all combine as externalities influencing the production and distribution of wealth. Some reinforce competition, others restrict competition. As John Locke observed, we (by right) come together voluntarily to form communities and societies, then adopt the systems noted above and establish government to protect the rights we all share. One of the most fundamental of such rights is our equal birthright to nature. Rent-seeking violates this basic right, and any laws that protect rent-seeking behaviors fall in the realm of licence identified by Locke. What I urge you to consider is that the systems of property law and taxation that now dominate all societies achieve a massive redistribution of wealth from producers to non-producing rentiers.
@@nthperson We need a Land Value Tax. Very hard to avoid, or 'dodge'.
@@joecurran2811 Of course. Getting our local officeholders to consider changing the way public revenue is raised is a daunting challenge, one that requires constant effort, renewed after every election results in different people "serving" the public interest.
This is a course on basic economic principles. If you want more advanced lessons covering how various policies impact the free market you'd have to take higher level courses.
Speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable at a future date.
In finance, speculation is also the practice of engaging in risky financial transactions in an attempt to profit from short term fluctuations in the market value of a tradable financial instrument-rather than attempting to profit from the underlying financial attributes embodied in the instrument such as capital gains, dividends, or interest.
Many speculators pay little attention to the fundamental value of a security and instead focus purely on price movements.
Speculation can in principle involve any tradable good or financial instrument.
Speculators are particularly common in the markets for stocks, bonds, commodity futures, currencies, fine art, collectibles, real estate, and derivatives.
Speculators play one of four primary roles in financial markets, along with hedgers, who engage in transactions to offset some other pre-existing risk, arbitrageurs who seek to profit from situations where fungible instruments trade at different prices in different market segments, and investors who seek profit through long-term ownership of an instrument's underlying attributes.
speculation reduce volatility.....well, if they were wrong, they ll increase it...
Yes, but if they're wrong they'll lose money and go bankrupt leaving better speculators in the market.
Nice short video on this important and misunderstood subject. TNX.
How does this apply to real estate speculation? What do speculators store exactly? Land? Built property? These assets don't need storage. Storing/hoarding them means putting them out of market in the present from people who can use them for productive purposes. In the future, if there is some kind of crisis that makes demand on such assets much higher suddenly, their owners/users could sell them for those who really want them and are ready to pay more for them than the profit produced from the current user's activity. What is the economic logic that can defend real estate speculation?
What about when speculation on corn (in 2008) artificially inflates food prices and millions of poor people starve? Interesting to see the ways that the science of economics continues to use these models which only work on paper at the expense of the structurally disadvantaged.
icad9722 vt
The video already answers your question, you just didn't comprehend it.
Thanks for Arabic translation
Awesome explanation
7:15 The outstanding contract is settled by the method cheapest in transaction costs.
What an insight!!! Superb presentation
He said himself that resources are not actually saved for the future to offset increase in cost. This is gambling with money lol
Yeah isn’t it better to keep the low prices, then when the disaster comes, most people would change product substitution. I get with oil it’s a little difficult. But corn, you could buy rice instead. By artificially lowering prices of a shortage, you are robbing from substitution producers, which is part of natural booms and busts. this is better than increasing the price of corn artificially through speculation to keep people buying it in the shortage time. It’s artificial market manipulation. A bunch of valueless middle men stealing value and causing unnatural market economies
I know it's been four years, but I have an answer to that.
The problem is, agriculture has to do a lot with seasons. The four seasons and two seasons (wet/dry) in tropical ones are known, but if you live near the Pacific in either side, e.g. Philippines or U.S., there is even an El Nino-La Nina across-years-seasonal effect. Storms and droughts are both a risk because of this.
Substitution will alleviate problems but only to an extent, as when storms or droughts hit, the whole agriculture sector takes a hit.
True, they lower prices by supplying in times of shortage, but think of the consumers who benefit. This is pointed too when rich people and some restaurants buy the luxury rice variants with stabler supply from Thailand, while the poor people and humbler businesses get to buy their average rice variant cheaper.
Also, in times of abundance, farmers get lower prices by competition - to the point they just bury the crops again than sell. But farmers with contracts with speculators will have assured incomes in these times, not to mention less waste of the crops. Now don't you want that instead of crops buried and farmers crying ironically because of an abundance of harvest?
Futures is the only unclear topic I have encountered in the course so far. They sound like prediction markets but for prices. But how exactly are they a type of speculation equivalent to speculation in goods? I have a vague feeling that they may have the same effects as speculation in goods but I'm not sure why. For example, what are the means by which the futures increase welfare if the goods are not really bought and sold? This was not covered in the lecture.
My question as well. I understand the example when oil was actually purchased, stored and then sold. But in the case where only a 'contract' was purchased it seems the quantity of oil was not changed in the present or the future. IF the contracts were actually tied to a physical amount of oil I could understand it. As it is , it seems like a prop bet: I wager with my friend that the price of oil will be X in the future, and then we settle.
The "betting" raises the prices now, so less is consumed. That means more is available later on when it's needed. Same impact
@@seanbrown3000 Maybe the the sale of futures contracts can raise the price of the contracts themselves, but if the contract is settled in cash, how does the sale of a futures contract increase the current price of a good?
Good work , as always.👍👍
I love this channel .
great explanations!
So how is speculation different from buying and selling stocks?
From an economic point of view there is no difference. The negative connotation of speculation is due to economically irrelevant facts: a) the speculators' not producing anything visible and b) the fact that increases in price are visible in the present, while the future decreases in price are less visible today. But (a) is irrelevant from an economic point of view since speculation creates value. And so is visibility (b). Moreover from an economic point of view the welfare or surplus created in the future is greater than the loss in welfare or loss in surplus today, because the speculator is servicing the higher portion of the demand curve.
Ever heard of "buy the rumors sell the fact"? That's because of when information is official, there's nothings left on the table. Assume that people believe the company gonna have a good earning next quarter, then they buy it, thus pushing price up. When the news release, if the result as expected, but price of stock is high enough to attract more people to buy. If the earning released is surprisingly good, then even be pushed up by speculators in the past, but additional good information can make the price shoot up even more. If the news is good but less good than expected, price will drop harder.
biased crony capitalism bullshit. was a good video for the first minute 50 seconds
The good speculators have larger share of the market because they have much more money and combined can buy more shares, but they are few in numbers. Most speculators loose money and they still and will always be larger in numbers. So we have two problems here. Few people with huge money artificially manipulating markets prices like Hedges Founds, take money from the majority of speculators which are small individual speculators doing wrong prediction and falling in the misleading market manipulation of big speculators, inflating prices, creating higher volatility and crises. Well come to the world outside of pure theory.
Speculation is morally dubious
So you take value from stable periods in time, store them, promote crisis, then sell them during crisis? Crisis becomes not a crisis but an opportunity if you are extremely rich.
in my opinion, i think not every crisis is created by speculators like, for example a thunderstorm which caused by weather that cannot be controlled by anyone. With or without speculation, thunderstorm will be happening anyway. so, it shows us how speculators that made a decision based on chances to earn a profit, could in turn increases welfare of the society as a whole..
So the existence of speculation, in this example, promotes incentives for warfare? How is that not morally wrong?