Speculation

[Labor Shall Rule]

Is it universally bad? Would a socialist economy have speculation at all, especially in the transition phase where elements of the market are still prominent in certain sectors?

[Dean]

Is it universally bad? Would a socialist economy have speculation at all, especially in the transition phase where elements of the market are still prominent in certain sectors?
Generally, speculation is associated with monetary economies. Most people agree that socialism precludes a transcendence of money in the first place.

But there is disagreement about this transition phase and what it will encompass. Suffice it to say that if there is speculation, capitalism would be alive and well, and socialism would have to fight that.

Also speculation, like capital, is a tool, nothing more. It can be good or bad, depending on context.

[Vladimir Innit Lenin]

Speculation serves to alter the intrinsic value of an organisation, on the stock market, based on nothing more but buy/sell or bid/ask movements, the most naked form of supply/demand free market you'll ever come across.

The damage - rising oil and food prices - that speculation has done is clear for all to see, and there is absolutely no need for speculation on equities.

Speculation on currency is obviously something that would not be needed as it simply serves to undermine government control over currency, monetary policy etc.

Speculation on bonds/debt. Well, see the 2008 banking crisis and the current economic crisis for why that will not be needed.

Speculation, when related to the stock market, is almost universally bad in terms of its intentions and almost as often, its consequences.

[Kotze]

It's complicated.

Imagine another dimension where a bunch of people make claims about what celestial bodies are going to do, contracting church dogma, and Miss Pope says, "You wanna bet on that?"

So people don't just make claims, they put their money where their mouth is, by betting on who is right. Those who are more or less sure are now motivated to show it by betting more or less, and not only altruistic people are motivated to do research. What's bad about that?

The problem is this: Unlike celestial bodies who probably don't give a fuck about what we think about them, much about economic reality isn't independent of observers. So the question is to what extent a reality check happens here. Do fundamentals prevail in the long run or is one craze simply replaced by another?

Saying speculation is bad in general strikes me as very dogmatic and vague. Those who are buying or selling insurance are engaging in a sort of speculation, and surely the very concept of insurance isn't bad without exception. Depending on what the institutional arrangements are, speculation can lead to instability or stability.

Which types of financial instruments are more bubbleriffic than others? Are bonds that bad?

Is it bad to reward people for having insider knowledge? What's the alternative? After all, this type of reward gives people incentive to make insider knowledge public. Giving people rewards for hacking systems might also sound counter-intuitive to some, but this can be used to make stuff more secure. If a strict limit to how many chips individuals and small groups have in that kind of betting game and good transparency can be enforced, I don't think one should rule out all such mechanisms for a future society.

[MarxSchmarx]

I would go further than koetze does - doesn't a planned economy require "speculation" about how things are going to work out?

[jake williams]

In socialist society, no person will think thoughts about future.


Seriously though, "speculation" in the narrow sense of capitalist finance refers to the extraction of profit from the market activity of bets placed on the direction in price of a given asset or group of assets. The use of the term "speculation" is limited to this because in every advanced economy, including any socialist one, economic actors will make decisions about the allocation of economic resources based on predictions about the future. It doesn't make any sense to call this "speculation". It has to happen, and happens in all kinds of cases that, in capitalist economies, we don't call speculation.

In fact, speculation is almost the first thing to disappear in a socialist society, because the removal of private profit from the financial system, especially from unproductive activity (which again, almost by definition, speculation is), is one of the immediate prerequisites of a society even thinking about transitioning to a socialist society. It just doesn't make any sense. So no, you're not going to have financial speculation, even in the messy land of "socialist finance" (of course we're talking about societies with money, which whether we like it or not are going to exist for some time). No one is going to make billions of dollars "predicting" that some foreign currency is going to collapse, and then engineering its collapse. That's absurd.