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Actually there's a pretty nice natural experiment in the US, because of the Onions Futures Act. There are several studies and some division between the experts
by xondono 6y ago
Actually there's a pretty nice natural experiment in the US, because of the Onions Futures Act. There are several studies and some division between the experts on the details, but there's a strong case to be made for futures contracts reducing the volatility in these markets.
One thing that people don't tend to realize is that speculation happens anyway, it's just not made in a public manner and through other types of contracts. In fact, if futures do reduce volatility then they reduce speculation, since it's volatility what drives speculation profits.
- jacobwilliamroy 6y agoWater is not onions. Bechtel managed to acquire control over water rights in Cochabamba, Bolivia in 1999. They started charging a licensing fee just to collect rainwater. Within a year there were hundreds of thousands out on the streets demonstrating, as the speculation didn't actually fix the water scarcity in the city. It just made it worse, with over half the population lacking access to fresh water. Water is not onions. You cannot just talk about onions and pretend like you've said anything substantial about water futures.
- xondono 6y agoWhat you are talking has nothing to do with a futures market, in fact is exactly the opposite, since what you are talking is a monopoly on water. By the way, the reason the US has a prohibition for onion futures is that someone did actually corner the market for onions. Off course that would be very hard to reproduce nowadays.