When speculators are right, they make society better off.

Question

Quizplus · Accepted Answer

Speculators play an important role in allocating resources and risking their capital to obtain profits from future price movements. When they correctly anticipate market trends and risks, they influence market prices, provide liquidity, and facilitate hedging activities that can benefit producers, consumers, and investors. This improves the efficiency of markets, reduces price volatility, and enhances the overall welfare of society. However, when speculators are wrong, they may incur losses and cause market disruptions that can harm economic growth and stability.

When Speculators Are Right, They Make Society Better Off