Which consequences do the speculation on agricultural commodities have on food prices? Is it morally wrong to speculate on agricultural commodities? Are policy makers ethically obligated to regulate the speculation of agricultural commodities? The following paper will face these issues.
First of all, I will define the greatest happiness principle by Jeremy Bentham, agricultural commodities, commodity futures and futures markets as well as speculation. Afterwards, I will analyze the consequences of speculation on agricultural commodities for all concerned parties. Doing this, I will examine the effects of the speculation on commodity trading firms, banks, investors and the price development of agricultural commodities. On the basis of the results of my examination, I will apply the greatest happiness principle. Given this analysis, I will state my advice for policy makers.
Table of Contents
1. Introduction
2. Definitions
2.1 Greatest Happiness Principle by Jeremy Bentham
2.2 Agricultural Commodities
2.3 Commodity Futures and the Futures Market
2.4 Speculation
3. Analyzing the Consequences of Speculation on Agricultural Commodities for all Concerned Parties
3.1 Analyzing the Consequences of Speculation in Commodity Trading Firms
3.2 Analyzing the Consequences of Speculation on Banks and Investors
3.3 What impact does speculation have on the price development of agricultural commodities
4. Application of the greatest happiness principle
5. Advice for policy makers
6. Conclusion
Research Objectives and Core Themes
This academic paper examines the ethical implications of financial speculation on agricultural commodities by applying Jeremy Bentham's "Greatest Happiness Principle." The primary research question addresses whether such speculation is morally justifiable, given its potential influence on global food prices and its role in modern financial markets.
- Theoretical foundation of utilitarianism and its application to market speculation.
- Economic analysis of commodity trading firms, banks, and private investors.
- Empirical evaluation of the impact of speculation on agricultural price levels and volatility.
- Ethical cost-benefit analysis regarding the global consequences of food commodity speculation.
- Formulation of policy recommendations based on the utilitarian evaluation.
Excerpt from the Book
2.4 Speculation
Speculation, for the purposes of this article, is the purchase (or sale) of goods or financial instruments with the intention to re-sale (re-purchase) at a later date, with the motive to earn money through the difference between the purchase and the re-purchase price. The speculator sees the goods he purchases or sales only as a tool for financial gain. The sole motive of action for speculators is the expectation of an imminent change in the ruling market price; this distinguishes speculative purchases and sales from other kinds of purchases and sales.
In food markets, two forms of speculation are the most significant:
- the purchase and/ or hoarding of commodities in the hope that their value will continue to rise.
- the purchase of agricultural futures and options, purely as an investment strategy (see above in 2.3).
When speculators hold large stocks of commodities within the market during a time of shortage, they have the aim to drive up the prices for the purpose of a higher resale value. One aggressive strategy entails speculators combing hoarding and trading practices to create or aggravate shortages. An example of such an approach is “Cornering”; the speculator purchases enough of a commodity to effectively control its price.
Summary of Chapters
1. Introduction: Outlines the ethical dilemma surrounding speculation on agricultural commodities amidst global hunger and presents the thesis that such speculation is ethical.
2. Definitions: Defines the utilitarian framework, agricultural commodities, the function of futures markets, and the nature of speculation.
3. Analyzing the Consequences of Speculation on Agricultural Commodities for all Concerned Parties: Explores the roles and motivations of commodity trading firms, banks, and investors, while evaluating empirical evidence regarding price volatility.
4. Application of the greatest happiness principle: Utilizes a self-developed "utilitarian three-step analysis" to weigh the economic benefits of speculation against potential moral costs.
5. Advice for policy makers: Suggests that, in the absence of conclusive scientific proof linking speculation to food price inflation, market regulation should be avoided to protect necessary market liquidity.
6. Conclusion: Summarizes the moral evaluation, reiterating that while the ethical impact of speculation remains contested, current evidence does not support restrictive regulation.
Keywords
Speculation, Agricultural Commodities, Utilitarianism, Jeremy Bentham, Commodity Futures, Food Prices, Global Hunger, Commodity Trading Firms, Hedging, Market Volatility, Ethics, Financial Markets, ETFs, Policy Making, Cost-Benefit Analysis.
Frequently Asked Questions
What is the fundamental focus of this publication?
The work focuses on the moral and ethical evaluation of financial speculation involving agricultural commodities through the lens of Jeremy Bentham’s Greatest Happiness Principle.
What are the primary themes discussed in the paper?
The paper covers the mechanics of commodity futures markets, the economic roles of traders and banks, the influence of speculation on food prices, and the ethical weighing of these activities against global humanitarian concerns.
What is the central research question?
The research seeks to answer whether it is ethically justifiable to speculate on agricultural commodities, considering the conflict between profit-seeking behavior and its potential impact on the cost of basic food staples.
Which scientific methodology is employed?
The author uses a normative ethical approach, specifically utilitarianism, supported by a literature review of empirical studies and his own conceptual "utilitarian three-step analysis" to assess consequences.
What topics are covered in the main body?
The main body examines the definitions of market terms, the motivations of various market participants (trading firms and banks), a critical review of academic debates on price volatility, and a practical application of moral philosophy to these findings.
Which key terms characterize this research?
Key terms include utilitarianism, agricultural commodities, financial speculation, price volatility, global hunger, and hedging strategies.
How does the author define the "utilitarian three-step analysis"?
It is a self-developed framework that assesses the moral utility of an action by evaluating the probability of a consequence, the number of sentient beings affected, and the degree of that effect.
Why does the author conclude that speculation is currently ethical?
The author argues that because scientific consensus remains elusive regarding whether speculation causes higher food prices or world hunger, the proven economic benefits—such as liquidity and hedging opportunities—outweigh the unproven moral harms.
What is the author's primary recommendation for policy makers?
The author advises against regulating the futures market, arguing that premature regulation might disrupt essential market functions without actually solving the issues of hunger or price stability.
- Arbeit zitieren
- David Höhl (Autor:in), 2018, A moral evaluation of speculation on agricultural commodities. Consideration of the greatest happiness principle by Jeremy Bentham, München, GRIN Verlag, https://www.grin.com/document/437159
