20 ANARCHY OF AGRICULTURE 



spin cotton, but who are interested simply in making a profit out of the rise 

 or fall of its price. Whatever justification there may be for the speculator 

 lies in the fact that he stands ready to take a large share of the risk. His 

 function is to (1) forecast future natural conditions affecting supply and de- 

 mand, (2) to obtain as accurate information thereon as possible, (3) to make 

 the price for future deliveries based on such information, and thus (4) to dis- 

 count in advance as far as possible, for the benefit of the trade in general, the 

 effect of such future conditions and thereby (5) keep prices free from violent 

 fluctuations which otherwise would occur from unforeseen natural causes." 



While this report of the government pertains to the cotton 

 industry, it holds true in all essential respects for all commodities 

 on the various exchanges. And it makes clear the very significant 

 fact that this organized speculation lessens price fluctuations 

 instead of increasing such fluctuations. 



This same report quotes with approval the well-known treatise 

 of Emery on the Stock and Produce Exchanges of the United 

 States, especially that section of the treatise which makes the 

 distinction between gambling and speculation. The objective 

 economic distinction between the two, says Emery, is this: gam- 

 bling consists in placing money on artificially created risks of 

 some fortuitous event. Speculation consists in assuming inevitable 

 economic risks of changes in value. 2 



Yields and Prices. By means of insurance farmers are able 

 to shift certain risks. Crops are frequently protected by hail 

 insurance, livestock by livestock insurance. There still remain, 

 however, inevitable economic risks which come from changes in 

 supply, changes in demand, and changes in price. A farmer's 

 prosperity has at least four variable factors in it as follows: 



1. Good crops and good prices. 



2. Poor crops and good prices. 



3. Good crops and poor prices. 



4. Poor crops and poor prices. 



The relation between yields and prices has been too much 

 neglected. The Experiment Station Record 3 reviewing a work in 

 this subject contains these words: "The author criticizes the views 

 which he states are generally assumed by many writers and speak- 

 ers, that large yields are always profitable and the best farmers 

 are those who raise the largest crops; that large yields are a natural 

 antidote for the high cost of living; that we should now copy the 



2 Emery, Speculation on the Stock and Produce Exchanges of the U. S., 

 p. 102. 



3 Experiment Station Record, Feb., 1915, p. 191. 



