872 AGRICULTURAL ECONOMICS 



A third class of profits includes those which arise from speculation. 

 By speculation is meant the purchase or sale of anything in the hope 

 of profit from an anticipated change in its price. It differs from 

 ordinary trade only in degree, for all profit, as we have seen, has an 

 aleatory element. The difference, however, consists in the fact that 

 speculation concentrates and intensifies the forces which affect 

 demand and supply. So far as it has become the regular occupation 

 of a class, differentiated from other business men for this particular 

 purpose, it subserves a useful and in moderate times an indispensable 

 function. The expert dealer on the exchanges, who studies and pre- 

 judges the market, will in the long run secure profits by reducing 

 risks and steadying prices. In this wider sense speculative profits 

 are earned like other profits. On the other hand, numbers of indi- 

 viduals without experience or ability are constantly taking "flyers" 

 on the exchanges, and gamble in securities or commodities as they 

 would in cards. Speculation here is as demoralizing to earnest effort 

 and thrift as is the lottery. 



In the preceding discussion profits, whether ordinary, aleatory, 

 or speculative, have been assumed to be subject to competitive 

 influences. The free play of competition, however, is often obstructed 

 by natural or artificial barriers. When these obstacles are only partial, 

 we speak of economic friction; when they are complete, we are in the 

 presence of monopoly. In the case of friction, the fortunate possessor 

 of the temporary advantages secures an extra gain, which, as we know, 

 will ultimately disappear. In the case of monopoly the extra gain 

 seems to be permanent. In the deeper sense, however, even monopoly 

 profits are not permanent. This is due to the principle of capitaliza- 

 tion. As soon as the monopoly producer disposes of his business, the 

 profits are capitalized into the higher selling price, and the new 

 purchaser will secure only the interest on the capital outlay. Thus, 

 under modern economic conditions, even monopoly profits tend to 

 dissipate themselves. They are essentially transitory, except in the 

 hands of the original owners. With the continual shifting of owner- 

 ship, so characteristic of modern life, the original possessors soon 

 disappear. Since, however, the original owners at any given time 

 are an appreciable body, monopoly profits often assume a great 

 importance. 



