Speculation and regulation in commodity markets: The Keynesian approach in theory and practice

Marcuzzo, Maria Cristina (2012): Speculation and regulation in commodity markets: The Keynesian approach in theory and practice. Published in: Rapporto tecnico, Dipartimento Scienze Statistiche, Sapienza No. 21 (2012): pp. 1-272.

Abstract

The eleven papers collected in this volume present the results of the research activity undertaken by the participants in the project -The return to Keynes. Speculation and stabilization policies: money and commodities- financed by the Italian Ministry of Education (PRIN 2008). They focus on four main areas of investigation: Keynes’s ideas on speculation, case studies of Keynes speculative activity in selected commodity markets, measures of commodity price volatility and proposals for stabilizing commodity prices in the context of a wider macroeconomic framework. The main conclusions are that: i) there are strong links between fluctuations in prices of primary commodities and agricultural products on the one hand, and financial crisis and structural trade imbalances on the other; ii) in the absence of buffer stocks for commodities and with insurance against price volatility based only on market mechanisms the system is doomed to instability; iii) any policies aiming at stabilizing commodity prices and currencies must go hand in hand with reform of the international monetary system. These conclusions support the view that the original proposals put forward by Keynes are still a valid basis for reforms to cope with the current crisis.

• Item Type: MPRA Paper
• Language: English
• Keywords: Keynes; primary commodities; buffer stocks; future markets; speculation
• Subjects: N - Economic History > N2 - Financial Markets and Institutions; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925

References

Bose, S. (2009) ‘The Role of Futures Market in Aggravating Commodity Price Inflation and the Future of Commodity Futures in India’, Money and Finance, 4 (1): 1-28.

Carabelli, A. (2002) ‘Speculation and Reasonableness: A Non-Bayesian Theory of Rationality’,in S. Dow and J.Hillard (eds), Keynes, Uncertainty and the Global Economy: Beyond

Keynes, Vol. II, 165-85, Aldershot: Edward Elgar.

Carabelli, A. and Lanteri, A. (2011) ‘Beauty Contested. How much of Keynes’ Remains in Behavioural Economics’ Beauty Contests?’, European Journal of the History of Economic Thought, 18 (2): 269-86.

Cavalli, N. and Cristiano, C. (2012) ‘Keynes’s Speculation in the London Tin Market: 1921- 1930’, in this volume.

Chambers, D. and Dimson, E. (2012) ‘Keynes the Stock Market Investor’, Social Science Research Network Working Paper, available online at:<http://papers.ssrn.co/sol3/papers.cfm?abstract_id=2023011> (accessed 27 October 2012).

Dardi, M. and Gallegati, M. (1992), ‘Alfred Marshall on Speculation’, History of Political Economy, 24 (3): 571-94. De Hevesy, P. (1940), World Wheat Planning and Economic Planning in General, London: Oxford University Press.

Eastham, J.K. (1936) ‘Rationalisation in the Tin Industry’, Review of Economic Studies, 4: 13- 32.

Eastham, J.K. (1939), ‘Commodity Stocks and Prices’, Review of Economic Studies, 6: 100-10.

Fantacci, L., Marcuzzo, M.C., and Sanfilippo, E. (2010) ‘Speculation in Commodities: Keynes’ “Practical Acquaintance” with Future Markets’, Journal for the History of Economic Thought, 32 (3): 397-418.

Fantacci, L., Marcuzzo, M.C., Rosselli, A., and Sanfilippo, E. (2012) ‘Speculation and Buffer Stocks: The Legacy of Keynes and Kahn’, The European Journal of the History of Economic Thought, 19 (3): 453-73.

Foresti, T. and Sanfilippo, E. (2012) ‘An Analysis of Keynes’s Investments in the Wheat Futures Market: 1925-1935’, in this volume.

Keynes, J.M. (1971-1989) The Collected Writings of John Maynard Keynes (CWK), Managing Editors E.A.G. Robinson and D. Moggridge, London: Macmillan. CWK V. A Treatise on Money. Part 1. The Pure Theory of Money. CWK VI. A Treatise on Money. Part 2. The Applied Theory of Money. CWK VII. The General Theory of Employment, Interest and Money. CWK XII. Economic Articles and Correspondence, Investment and Editorial. CWK XIII. The General Theory and After. Part 1. Preparation. CWK XXI. Activities 1931-1939. World Crisis and Policies in Britain and America. CWK XXV. Activities 1940-1944. Shaping the Post-War World: The Clearing Union CWK XXVII. Activities 1940-1946. Shaping the Post-War World: Employment and Commodities.

Keynes, J.M. (1910) Lectures on the Stock Exchange, 8 Lectures on Company Finance and Stock Exchange, Lent Term 1910, MSS, UA/6/3, Notebook.

Keynes, J.M. (1923) ‘Some Aspects of Commodity Markets’, The Manchester Guardian Commercial, European Reconstruction Series, Section 13, 29 March, as reprinted in CWK XII, 255-66.

Keynes, J.M. (1923-30) Special Memoranda on Stocks of Staple Commodities, London and Cambridge Economic Service, in CWK XII, 267-647.

Hirai, T. (2008), ‘Aimed at the Stabilisation of Commodity Prices. Keynes’s Hopes Betrayed and the Transmutation Process of the International Control Scheme’, paper presented at 13th Annual Conference of the European Society for the History of Economic Thought (ESHET) on Technical change and economic analysis, Thessaloniki, University of Macedonia, Greece, 23-26 April 2009.

Lee, J.W. and Zhang, Y. (2009) ‘Evidence on Normal Backwardation and Forecasting Theory in Futures Markets’, Journal of Derivatives & Hedge Funds, 15 (2): 158-70.

Reitler, I. (1931) ‘The Metal Exchange’, Annals of the American Academy of Political and Social Science, 155 (1): 127-32.

Rappoport, P. and White, E. (1994) ‘Was the Crash of 1929 Expected?’, The American Economic Review, 84 (1): 271-81.

Santos, J. (2006) ‘Going against the Grain: Why Did Wheat Marketing in the United States and Canada Evolve So Differently?’ Business and Economic History (On-Line), 4: 1-21.

Sigl-Grüb, C. and Schiereck, D. (2010) ‘Returns to Speculators in Commodity Futures Markets: A Comprehensive Revisit’, International Research Journal of Finance and Economics, 44: 44-73.

Smith, J.G. (1922) Organized Produce Market, New York: Longmans and Green.

Stewart B. (1949), An Analysis of Speculative Trading in Grain Futures, Technical Bulletin, no. 1001, US Department of Agriculture Commodity Exchange Authority, Washington, D.C.

Working, H. (1942) ‘Quotations on Commodity Futures as Price Forecasts’, Econometrica, 10 (1): 39-52.