Sunday, December 26, 2010
The Social Function of Futures Markets
November 29, 2006
In a previous article, I described the "social function" of stock speculators. In the present piece, we'll explore the role of healthy futures and forward markets in a modern economy. Of course, both parties to any voluntary exchange expect to benefit, at least ex ante — otherwise the exchange wouldn't be voluntary. But beyond this truism, it is at first unclear how anything is added when intelligent workers are sucked out of other occupations and devote their careers to trading "futures contracts." After all, these intangible financial instruments can't be eaten or used to build a house, so what good are they? The present article seeks to answer just this question.
Posted by Yulie Foka at 11:12 AM