The Jewish Ethicist: Speculation.
Is it ethical to make money without producing anything?
Q. Some people make a lot of money on speculation. Is it really ethical to
make money without producing anything, just by guessing which way prices
are going to move?
A. Fundamentally, speculating is an economically productive activity. But
there is no question that it does present some ethical challenges.
The economic importance of speculation is that it encourages the efficient
allocation of resources. When speculators hoard a commodity anticipating a
future shortage, the result is that when there is indeed a future shortfall
in supply, adequate stockpiles will exist. In the framework of modern
competitive markets, speculation contributes to effective exploitation of
Given this obvious economic function, it may seem surprising that sages of
the Talmud looked suspiciously on this phenomenon, and subjected it to
various restrictions. One obvious reason for these restrictions is
economic. While speculation is efficient in competitive markets, if
speculators collude then they may create an artificial shortage. Then
speculation is extremely damaging; instead of alleviating hunger it will
But there is also another, more profound reason for these laws. A very
basic principle of marketplace regulation in Jewish law is that economic
considerations were not in the forefront of the thinking of our sages. Most
often, they put human considerations first. This principle applies to the
restrictions on hoarding, as we can see from the source of the regulations.
The Talmud bases this prohibition in the following passage from the prophet
Amos (8:4-6): "Hear this, you who would swallow the needy and destroy the
downtrodden of the land; who say, When will the month pass so that we may
sell grain, and the Sabbatical year so that we may open our granaries?… So that we may buy the poor for money and the needy for a pair of shoes."
We see that the basis of this prohibition is not an economic one. What
interested the Sages was not the economic consequences of hoarding but the
tragic human consequences: the result is that the solidarity of society is
destroyed. The speculators, instead of sharing the general interest in
relief, now have a private interest in continued distress, which will
enrich them. They ask, "When will the month pass?" Rashi explains that they
can't wait for the harvest season to pass, when there will be a shortage of
grain in the market and prices will rise.
Furthermore, these individuals are enticed to go beyond their desire for
monetary enrichment, which is in justifiable within bounds, and to seek
dominance over others: "So that we may buy the poor for money." This is a
tendency which the Torah repeatedly condemns since we are all servants of
God. "For the children of Israel are slaves to Me" (Leviticus
25:42) -- slaves to Him, and not slaves to other human beings.
It is a basic human idea that we should try to ally our economic interests
and our human ones, so as not to be led by our desire for gain into
betraying our ideals. We can illustrate this concept with a simple example:
Imagine a member of a football team just preceding the Super Bowl. If his
team wins, he will earn a huge sum of money; if they lose, the sum will be
far less. Economic theory states that in order to hedge his risks, the
player ought to bet against his own team. But human nature would view such
a course of action as a shocking betrayal of loyalty even if the bet were
small enough that it doesn't create an incentive to throw the match.
Likewise, our sages were concerned that one particular kind of
speculation -- namely betting on disaster -- may sometimes have a negative
effect on the solidarity of our society.
Most kinds of speculation are not regulated by Jewish law and are considered perfectly proper. However, ideally each individual speculator should occasionally examine his investments and make sure that he hasn't created a situation where he is "betting against the home team" and subtly alienating himself from the community.
SOURCES: Babylonian Talmud Bava Batra 90b; Kiddushin 22b
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