Seo. 22] THE RISK ELEMENT 299 at a fixed price which they consider high. Such a contract to sell is often made in the form of an option, in which case it is known as a “put.” To show how such contracts will shift risks, a few examples will suffice. A building contractor who had taken a large contract was asked if he were not taking large risks, since he could not foreknow the cost of building. He replied, “No, I am taking no risks at all except on ‘labor’; I have made contracts to be supplied with all materials when needed, at fixed prices.” Those who made these contracts thus assumed the risk of fluctuation in price in the special materials in which they dealt, relieving the contractor of the necessity of informing himself of the special market conditions for stone, brick, timber, etc., and enabling him to make a closer bid for the contract, inasmuch as there was less need of the element of caution. The public, of course, get the benefit of such a shifting of risk in the form of reduced cost of building. Similar results follow from most other “short” sales. Again, a woolen manufacturer need not carry so large a stock of wool if he can make a contract by which some one will sell short, or agree to supply the wool at fixed prices and at certain dates. He can afford to use up his present stock fearlessly, with the certainty that when it is gone he can obtain a new supply.! Without such a contract, he would be under the necessity of carrying a large and idle stock. An important method of shifting risks is “hedging,” whereby a dealer, for instance in transporting wheat, may be relieved of the risk of a change in price. He buys wheat in the West intending to ship it to New York and sell it there at enough to cover cost of transportation and a small profit. In consequence of a sudden fall in price he might find all his profit wiped out; or he might, on the other hand, by a rise in price, make much more than normal profits. But, being of a cautious disposition, 1 Cf. Hadley, Economics, Putnam’s, 1896, p. 106.