Futures Trading and Hedging

Abstract

A good deal of difference of opinion on the utility of futures trading persists even among economists who have studied the subject rather closely. Some, at least, of this disagreement is traceable to imperfect concepts that emerged in connection with early academic studies of futures trading. Such concepts have tended to survive on the strength of their partial validity, despite shortcomings evident to the well-informed. Businessmen and others who are intimately acquainted with futures trading and its consequences tend to realize (often unconsciously) the defects of such imperfect concepts, to employ the concepts so far as they are valid and useful, and to avoid drawing any seriously mistaken conclusions from them. People who have little direct knowledge of futures trading and its observable results have no such protection against false inferences. If, like most economists, they are accustomed to rely on deductions from what seem to be well-established premises, they are especially vulnerable to the imperfections of basic concepts.