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Because strawberries are about to become much scarcer, it is important to conserve them now while we have them so that strawberries don’t entirely disappear when the disease fully hits. Fewer strawberries are consumed now, but more of them will be available later. In essence, that information about future strawberry crops is now being factored into present prices. Who is responsible for this change in price? The speculator.

https://mises.org/wire/hail-speculators-they-take-necessary-economic-risks-our-economy

J.W. Rich

There are few individuals as reviled and vilified in our modern age as speculators. Economic turmoil of all shapes and sizes are placed squarely on their shoulders. Why do we have recessions from time to time? Because of the irrational speculators, of course. Why do economic bubbles exist? Because of wild overspeculation, undoubtably. Why are prices rising so quickly? The ceaseless activity of the speculators, no doubt. Yet it is seldom—if ever—asked in the public consciousness whether the speculator serves any valuable purpose. Most believe him to be a pointless and unwanted parasite in society, but is this really the case?

First, what is a speculator? A speculator is someone who leverages money on the outcome of future events. One can speculate over almost anything imaginable: that a company will succeed, that a company will fail, that the economy will boom, that the economy will bust, and on and on. If a speculator is relatively more correct in his view of the future, then he will make money. If he is relatively less correct, then he will lose money. In essence, the speculator appraises what future market conditions will be and invests according to that judgement.

With this description of the role of the speculator, the charges leveled against him are understandable. The speculator doesn’t produce or create anything at all! Why do we need speculators? If what everyone says about them is true, they seem to be much more trouble than they are worth. We can clearly see the economic purpose of farmers, bakers, manufacturers, and so on, but what economic purpose does the speculator serve?

First, it must be noted that the speculator with his forward-looking outlook isn’t unique from an economic point of view. All action, including action on markets, is always forward-looking. Action itself is the desire to utilize means for the attainment of ends. This means-ends interaction is one of cause and effect. Causes and effects never occur simultaneously, meaning that some passage of time is unavoidably involved. This unavoidable passage of time applies to all action. Because action deals in these cause-and-effect relationships, action itself cannot avoid the passage of time. Action always looks to the future, even if only the very near future. This applies to actions in markets as well; buying and selling, whether for production or consumption, are always future oriented.

Even so, we are not all speculators. We might engage in speculation through our actions, but this is qualitatively different than doing so as a profession. Given that speculation is a part of our daily lives, what social value is there in speculation done in pursuit of money? What does the speculator do for any of us?

The speculator, in his estimations and appraisements, alters market prices so that they factor in not only information about the present but information about the future as well. For instance, suppose that scientists announce that a deadly disease has started to spread among the strawberry crop, and that in several years, strawberries will be increasingly hard to find. At this point, the speculator leaps into action. He will start to purchase many of the strawberries being sold now in the hopes of selling them later at a higher price. This increase in present demand, along with the supply now decreased, will increase the price of strawberries. This higher price, however, acts as a signal.

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