46 OUTLINES OF AGRICULTURAL ECONOMICS 



PROBLEMS 



i. "Distribution of agricultural products in the United States 

 has become largely identified with a speculative class of trading capi- 

 talists, because it has been found best for the producing and the con- 

 suming interests of the community that the risks of distribution should 

 be localized in a separate commercial class whose members are in a 

 position to inform themselves as to all the factors, past, present, and 

 prospective, affecting the future course of prices. If the risks fell 

 upon the farmer, it would increase materially the risks of capital 

 required, thus raise the rate of interest he would have to pay, increase 

 the cost of production, and consequently tend to reduce consumption 

 by rise of price to consumers/ ' Is this statement correct? Does it 

 constitute a defense of the middleman ? 



2. "This bill [Cotton Futures act] legalizes and licenses gambling 

 in cotton futures, which we promised to suppress. Do you dare go 

 to the raiser of cotton the farmer who makes from i to 20 bales of 

 cotton a year and say, 'I voted to legalize gambling on the New 

 York Cotton Exchange. I voted for a bill that will increase the 

 number of "phantom" bales dealt in'? Such gambling in futures 

 increases the supply by the addition of the paper supply sold by the 

 ' short ' speculators who are bearing the market, a practice which it is 

 admitted depresses the price of cotton." Do you admit all these 

 statements ? Is any factor overlooked ? Should all exchange trans- 

 actions be limited to spot dealings ? Give full reasoning. 



3. Is speculation the same thing as gambling? "The American 

 system of distributing farm products is essentially a speculative system 

 from beginning to end speculative in the sense that after the products 

 pass out of the producers' hands until they pass into the consumers' 

 control there is not a moment nor a stage in the distributive move- 

 ment during which the one who has legal control of the goods does 

 not run the risk of a rise or fall in the value of the property." Show 

 clearly where the line is to be drawn between speculative operations 

 which are beneficial and those which are harmful. 



4. Show the relation and the distinction between speculation and 

 the manipulation of prices. "There is need of the greatest care in 

 reasoning upon the complex play of cause and effect in the emergence 

 of prices. Shall we say next winter that eggs are high because the 

 men who store eggs get together and boom the price? Or shall we 

 say they are high because exports from Russia and Denmark have 

 been cut off and some of the home supply called for by South 

 American markets, and be glad that the foresight of dealers led 

 them to accumulate so large a stock as they did last April ? " Answer 

 this riddle. 



