Speculation Is What Other People Do

It’s a lot easier to understand the world once you recognize that:

1. Most people first divide up the world into good guys and bad guys, and then
2. Declare themselves to be one of the good guys.

Don Boudreaux explains:

During this morning’s 8 o’clock hour I heard one of the most ironic lines that I’ve heard in some time. That this irony was unintentional makes it all the more telling.

Asked by your “pump patrol” reporter about rising gasoline prices, a motorist at a gasoline station noted that “My tank is actually way more than half full now. I’m topping it off because I’m sure the price will be even higher this weekend.” When your reporter then asked her “What do you think explains these rising prices?” she replied “Speculators.” Your reporter followed up with “Do you think they should be stopped?” The motorist responded immediately: “Of course! They’re criminal.”

Speculating that the price of gasoline will rise, this motorist took action today – buying gasoline that she otherwise wouldn’t have bought today – that puts upward pressure on the price of gasoline today.

Had your reporter pointed out that this motorist herself is speculating in gasoline, I wonder if this motorist would have persisted in regarding speculation as being criminal.  I wonder, too, how she would react if government – heeding her advice to stop speculation – were to forcibly prevent motorists from topping off their tanks.

Note that it isn’t the action of speculation that is the defining feature of this motorists world view; rather, it is that their actions are good and the actions of others are bad.

Specifically, this isn’t an important topic for macroeconomics.

More generally, it’s hugely important for macroeconomists and policy-makers to be able to correctly spot this irony and not act upon it.