324 PRINCIPLES OF RURAL ECONOMICS 



bet on the state of the market at some future time as it would 

 be to bet on the state of the weather ; and one kind of betting 

 would serve about as important an economic purpose as another, 

 even though the one was done under the form of buying and 

 selling without any real transfer of goods. However, so long as 

 it is impossible to distinguish for legal purposes between legiti- 

 mate speculation and gambling under the form of buying and 

 selling products, it is generally considered best to allow them 

 both to go on together, since the one serves an important eco- 

 nomic purpose and the other affects only the parties who par- 

 ticipate, and does no one else any harm. 



Certain fallacies regarding the influence of speculation upon 

 prices have been given currency, not only on the popular plat- 

 form, but even in the halls of Congress. The opinion is ex- 

 pressed, for example, that the custom of " short selling "as it 

 is called, that is, of selling wheat on the board of trade when 

 one has no wheat to deliver, has the effect of depressing the 

 price of wheat. Since more "wheat" is offered for sale than 

 there is in existence, this inordinately large supply of fictitious 

 wheat must, it is argued, have some of the influence of an over- 

 supply of real wheat. The difficulty with this argument is that 

 it overlooks the fact that for every fictitious sale there is also a 

 fictitious purchase. One might argue, on the opposite side, that 

 the purchasing of more "wheat" than there is in existence must 

 have some of the effect of a real demand for real wheat, and thus 

 raise prices. As a matter of fact, these two processes counteract 

 each other. Perhaps it would be better to say that they have no 

 more influence on prices than would result when two gamblers 

 merely bet on the probable price of wheat at some date in the 

 future. While this betting would be reprehensible, it would 

 have no influence whatever upon the course of prices. 



What is known as a "corner," however, is quite a different 

 thing. If one of the gamblers in the foregoing illustration took 



