The Function of Speculation

John Hicks

in A Market Theory of Money

Published in print August 1989 | ISBN: 9780198287247
Published online November 2003 | e-ISBN: 9780191596407 | DOI:
 The Function of Speculation

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This chapter argues that organized commodity markets need to occupy a central place in a general theory of markets because they are the most sensitive markets we know. They are the practical counterpart to the ‘perfect competition’ models of the textbooks; but they do more for the economist than those models can do, because they demonstrate that most prices are determined, not by mechanical matching of flow propensities, but by the way they are interpreted, thus by the state of mind of those who trade.

Keywords: economic theory; equilibrium; commodity markets; speculative markets; perfect competition

Chapter.  3064 words. 

Subjects: Macroeconomics and Monetary Economics

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