As this example illustrates, long-run speculative profits are neither arbitrary nor accidental. Such profits can be thought of as the market's reward for the service of improving the information-signaling capacity of the price system. 
| In the long run, such speculation does not affect the market price one way or the other. In the short run, however, it serves to smooth the market transition, helping producers to adjust the structure of production in a gradual and efficient manner, and enabling consumers to avoid sudden unexpected changes in the price they pay. For example, if G is a consumers' good, then speculation provides an early signal to producers that demand for G is increasing, enabling them to allocate greater quantities of factors in the production of G—factors which otherwise would later prove to have been less efficiently allocated.
As this example illustrates, long-run speculative profits are neither arbitrary nor accidental. Such profits can be thought of as the market's reward for the service of improving the information-signaling capacity of the price system. |
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