The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

300 NATURE OF CAPITAL AND INCOME [Cmar. XVI he prefers an intermediate course, — a small profit which’ is sure, rather than the chances of both gain and loss. Consequently he “hedges.” He enters into some specu- lative market, knowing that it will move in sympathy with the New York market, and there he “speculates” for a fall, or sells “short.” In case the price in New York falls, what he loses on the wheat which he has transported he gains through his speculative short selling. Contrari- wise, if the price rises, what he gains on his wheat trans- ported he loses in the speculative market. In other words, he is, as it were, betting on both sides of the market at once, and therefore eliminating all risk, so that he only obtains his normal profit, commission, or percentage on the actual wheat handled, having imposed the burden of risk of speculation on the speculative dealers to whom he “sold short.” The effect of hedging on those who engage in it, such as the wheat dealers, is evidently to enable them to work on a smaller margin of profit. In consequence the public receives a benefit in lowered prices. The case is thus very similar to those respectively of the builder and of the woolen manufacturer. Short selling, binding the future to the past, enables the specialist to guarantee to the general public a definite foreseen series of events. The beneficial effect to the public, in saving useless stocks and reserves, in producing more intelligent direction of en- terprises, and in encouraging accumulation through greater certainty of its future benefits, is both obvious and great. Risk is one of the direst economic evils, and all of the de- vices which aid in overcoming it — whether increased guar- anties, safeguards, foresight, insurance, or legitimate specu- lation — represent a great boon to humanity. 1 See “Speculations on Stock and Produce Exchanges of the United States,” by Henry C. Emery, Publications of American Economic Asso ciation. For the development of insurance-speculation in England, see “ The Put and Call,” by L. R. Higgins, London, Effingham Wil- sou, 1902.

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