266 SPECULATION 



is the difference between wholesale and retail prices. On the 

 other hand, the speculative buyer is one who expects the price 

 to rise, and is willing to back up his belief with his money. His 

 profit, if any, must come from a rise in price. Or conversely, the 

 speculative seller (short seller) is one who believes prices are going 

 to fall, and who sells for future delivery, expecting to buy at or 

 before delivery time at less than his sale price. These definitions 

 omit the original grower of farm products from the category of 

 speculator. This is an arbitrary rule. For the essence of specu- 

 lation is risk, and the grower is the first risk taker. 



Webster's definition of gambling is also given, since these two 

 terms are commonly juggled together as though they were syn- 

 onyms. This confusion should not be tolerated. Professor Emery's 

 distinction between speculation and gambling is now quite widely 

 accepted. Speculation he makes the assumption of inevitable 

 economic risks. In other words, if the crop is produced, the price 

 is likely to change is, in fact, certain to rise or fall, and hence 

 the owner for the time being is the risk taker. The risk may be 

 shifted to a speculator, who is the person who prefers to assume 

 the risk. Such risks may be shifted or distributed, but can never 

 be abolished. Gambling is, according to Emery, the assumption 

 of a "chance" or "risk," which risk the gamblers themselves have 

 manufactured. It is artificial. Thus two men may sit down in a 

 back room and bet, for instance, one hundred dollars each on the 

 outcome of a horse race, or on a foot ball game, or on the election 

 of the President of the United States, or on the price of grain 

 next week, or on the state of tomorrow's weather. Obviously the 

 risk of winning or losing the hundred dollars was manufactured 

 by the wills of these gamblers themselves, and that without the 

 bet, the money would have remained safe in their pockets. But 

 the owner of a commodity is by his ownership the bearer of an 

 inevitable risk, whether he wills it or not. To the superficial 

 observer, trading in futures on the great Grain Exchanges is mere 

 betting on the price of grain. This was true of the late bucket 

 shops of the country, for in these places "orders" to buy and sell 

 grain were not executed on any market. These fake "orders" 

 were bets, and hence gambling transactions. The five or six 

 important grain exchanges, where future trading in grain is carried 

 on in the United States, do not come in this class, since every buy 

 or sell order is actually executed, and thus has its proportionate 

 influence on the market. Each order is payable in actual grain, 

 although most of them will not be so paid, just as the twenty 



