144 WHEAT PRODUCTION IN NEW ZEALAND 



no reference to actual trade. Secondly, speculation is 

 said to be so prevalent in exchange that it is now all- 

 powerful in trade, ''which has become demoralised 

 by its subjection to fictitious trade conditions." The 

 difference between speculation and gambling is not 

 clearly defined, but it arises from the fact that the latter 

 is artificial, and creates no new value (in fact, it destroys 

 utility) while the former assumes real risks, and often 

 does create value. The subsequent exposition will be 

 an attempt to illustrate this function of speculation, and 

 to estimate its importance in the wheat market. 



(a) The Rise of the Speculative Market. The initial 

 feature in the economic organisation of modern society 

 is the market. The exchange of commodities regulates 

 their production and distribution. This is done through 

 the medium of value. The producer pays attention to 

 those goods, which, in his opinion, command a higher 

 price, just as the merchant sells at the time and place 

 of highest price. Now this adjustment of production 

 and distribution is accurate only in proportion to the 

 degree of success producer and consumer attain in ascer- 

 taining these values. Thus the test of the perfection of 

 the organisation of trade is the promptness with which 

 changes in value are learned, and the accuracy with 

 which they are predicted. Where each individual pro- 

 duced for himself alone, no such element of risk entered 

 into the producer's consideration. Later on, when the 

 individual had a marketable surplus he, at first, combined 

 the function of producer and trader. The next stage in 

 the social economy marks the gradual evolution of the 

 trader who assumed part of the risk. But with develop- 

 ments in transport and communication the market for all 

 the great staples became a world market. Thus local fluc- 

 tuations were lessened, for local scarcity or abundance 

 might be offset by opposite conditions elsewhere. These 

 distant fluctuations, however, began to influence price 



