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 speculative
 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. Contrariwise,
 if the price rises, what he gains on his wheat transported
 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 enterprises,
 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 devices
 which aid in overcoming it — whether increased guaranties,
 safeguards, foresight, insurance, or legitimate speculation
 — 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 Wilsou,

 1902.