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 scarce resources.
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 create hunger!
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