MEDIEVAL AND MODERN PRODUCE MARKETS 843 



markets. There are various forms of hedging designed to free 

 the manufacturer or middleman from the risk of a change in 

 price during the process of manufacture or sale. Arbitrage deal- 

 ings thus result in small but certain gains ; hedge transactions 

 are properly neutral, involving neither a net gain nor a net loss. 

 When the manufacturer or middleman hedges, it is his purpose 

 to confine the chance of profit to his mercantile transactions. He 

 avoids all risk of gain or loss by reason of changes in the price 

 of the raw material in order to confine his attention to the tech- 

 nical problems of the process of manufacture and sale. These 

 types of non-speculative transactions are dependent upon the 

 mechanism that is usually thought of in connection with specula- 

 tion. The various forms of future contracts are essential, and 

 the practice of buying or selling in a particular place when the 

 goods are physically located elsewhere is also characteristic. 

 These transactions are not possible unless there are speculative 

 and spot markets drawn together in a closely organized market 

 system. The non-speculative transactions involve the same tech- 

 nical elements as the speculative transactions ; the different 

 results are due to the different combinations of the basic transac- 

 tions. A future contract may be speculative or non-speculative, 

 or speculative for one party and non-speculative to the other. A 

 short sale may constitute part of a hedge or part of a daring 

 speculative coup. The meaning of a particular purchase or sale 

 cannot be deduced from its form ; all its connections must be 

 known. The much-discussed future contracts and short sales are 

 indeed mere incidents of larger transactions, parts of a larger 

 whole to which they are inseparably related. The larger aspects 

 of marketing, too, are so closely associated that the non-speculative 

 aspects cannot exist independently of the speculative aspects. It 

 is this complex web of interdependent elements that constitutes 

 the difference between the loosely related markets of the Middle 

 Ages and the integrated market system of to-day: The arbitrage 

 transactions and the hedge are of fundamental importance in 

 maintaining the close correspondence between prices on differ- 

 ent markets that is characteristic of our organized market system. 

 The most typical form of arbitrage brings together a spot 



