6 ms·

There is more to economics than supply and demand. This unnecessary gambling has too many negative externality and IMO no positive effects other than making som

There is more to economics than supply and demand. This unnecessary gambling has too many negative externality and IMO no positive effects other than making some people some money with no work.

RandomLensman 4y ago
How do you measure the amount of unnecessary vs necessary gambling?
- newswasboring 4y ago
  Necessary gambling is what helps the market figure out the real long term availability of something. I have not seen any necessary gambling in my years in manufacturing. So in my view all speculation on commodities seem unnecessary.
  - RandomLensman 4y ago
    Opening a new mine is nothing but speculation, for example, and price signals from markets play a role in such decisions. More narrowly, the ability to forward sell or buy things allows financing of production but in turn it needs people willing to take the other side. Derivatives money is a thing.
  - nindalf 4y ago
    > I have not seen any necessary gambling in my years in manufacturing. You need to manufacture a widget and it must cost no more than $5. You have a few inputs to your widget, some made with steel and some with plastic. If steel and plastic prices increase, your inputs cost more than $5 and you’re making a loss on every widget you sell. So you go to the futures market and take a bet that the input prices will increase. If you’re right, you win $, which makes your widget manufacturing profitable and you’re still in business. If prices fall you lose the bet, your profits are lower. But hey, at least you’re still in business. A responsible, well run manufacturing business benefits from the existence of such a market because it allows them to de-risk.
    - quote 4y ago
      I’d assume that hedging buy prices or long term buy contracts are not the same as gambling.
    - Reason077 4y ago
      In this example, the use of futures contracts isn't really gambling. Quite the opposite: it's insurance!
      - uoaei 4y ago
        You can try to play word games all you want but they are faulty in a very transparent way. No one is falling for it.
        Reason077 4y ago
        Faulty how?
      - JumpCrisscross 4y ago
        > it's insurance What’s the person on the other side of the trade up to? This debate reminds me of the lead up to the Onion Futures Act, where moral outrage over speculation led to a ban and subsequent lack of insurance (and higher price volatility) for onion farmers. To the point that the son of the farmer who first lobbied for the ban returned to Congress to ask for its repeal. [1] https://en.m.wikipedia.org/wiki/Onion_Futures_Act https://en.m.wikipedia.org/wiki/Onion_Futures_Act
        Reason077 4y ago
        > "What’s the person on the other side of the trade up to?" The same thing: hedging/insuring against price changes. The supplier (ultimately, a farmer, steel mill, gold miner, electricity generator, etc) is getting a guaranteed price for the commodity they're selling, reducing risk.
        JumpCrisscross 3y ago
  - bawolff 4y ago
    That's kind of begging the question. Essentially you are saying 100% of bad things are bad. Which is true, but also meaningless statement. Since it would still be true in a utopia with no bad things.
socceroos 3y ago
This sounds like a principled take. Can you explain the under-girding principles that drive you to hold this view?

There is more to economics than supply and demand. This unnecessary gambling has too many negative externality and IMO no positive effects other than making some people some money with no work.

RandomLensman 4y ago

How do you measure the amount of unnecessary vs necessary gambling?

newswasboring 4y ago
Necessary gambling is what helps the market figure out the real long term availability of something. I have not seen any necessary gambling in my years in manufacturing. So in my view all speculation on commodities seem unnecessary.
- RandomLensman 4y ago
  Opening a new mine is nothing but speculation, for example, and price signals from markets play a role in such decisions. More narrowly, the ability to forward sell or buy things allows financing of production but in turn it needs people willing to take the other side. Derivatives money is a thing.
- nindalf 4y ago
  > I have not seen any necessary gambling in my years in manufacturing. You need to manufacture a widget and it must cost no more than $5. You have a few inputs to your widget, some made with steel and some with plastic. If steel and plastic prices increase, your inputs cost more than $5 and you’re making a loss on every widget you sell. So you go to the futures market and take a bet that the input prices will increase. If you’re right, you win $, which makes your widget manufacturing profitable and you’re still in business. If prices fall you lose the bet, your profits are lower. But hey, at least you’re still in business. A responsible, well run manufacturing business benefits from the existence of such a market because it allows them to de-risk.
  - quote 4y ago
    I’d assume that hedging buy prices or long term buy contracts are not the same as gambling.
  - Reason077 4y ago
    In this example, the use of futures contracts isn't really gambling. Quite the opposite: it's insurance!
    - uoaei 4y ago
      You can try to play word games all you want but they are faulty in a very transparent way. No one is falling for it.
      - Reason077 4y ago
        Faulty how?
    - JumpCrisscross 4y ago
      > it's insurance What’s the person on the other side of the trade up to? This debate reminds me of the lead up to the Onion Futures Act, where moral outrage over speculation led to a ban and subsequent lack of insurance (and higher price volatility) for onion farmers. To the point that the son of the farmer who first lobbied for the ban returned to Congress to ask for its repeal. [1] https://en.m.wikipedia.org/wiki/Onion_Futures_Act https://en.m.wikipedia.org/wiki/Onion_Futures_Act
      - Reason077 4y ago
        > "What’s the person on the other side of the trade up to?" The same thing: hedging/insuring against price changes. The supplier (ultimately, a farmer, steel mill, gold miner, electricity generator, etc) is getting a guaranteed price for the commodity they're selling, reducing risk.
        JumpCrisscross 3y ago
- bawolff 4y ago
  That's kind of begging the question. Essentially you are saying 100% of bad things are bad. Which is true, but also meaningless statement. Since it would still be true in a utopia with no bad things.

socceroos 3y ago

This sounds like a principled take. Can you explain the under-girding principles that drive you to hold this view?