– September 19, 2019
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I have an idea for a new hero for Phase 4 of the Marvel Cinematic Universe: the Speculator. Consider this scenario. A hurricane has decimated a city in Florida and left its residents without much drinkable water or gas. It has also leveled lots and lots of houses, businesses, and buildings, which means Floridians will need lumber, nails, and all sorts of other building materials that are now in very short supply.

This sounds like a job for … the Speculator!

She swoops into action and buys lumber, nails, water, and gas in places like Birmingham and Boston that haven’t been hit by the hurricane and where prices are still low. She then hires people to get all the supplies from where they are relatively abundant — Birmingham and Boston, again — to where they are relatively scarce and where they can be sold for a higher price. After paying for all the supplies, renting trucks, paying drivers, and so on, she is left with a very handsome profit.

To most eyes, this reads like the self-interested profit-seeking of a supervillain, not the selfless endeavor of a superhero. The scenario above is silent on the Speculator’s motives beyond “earn a profit,” and it is entirely possible that the Speculator lacks proper and appropriate beneficence. Maybe this means she is blameworthy in this respect. Identifying and measuring proper beneficence is hard, though, and it can’t be compelled.

Adam Smith put it this way in The Theory of Moral Sentiments (James Otteson explains why this matters in The Essential Adam Smith, which you can download for $0 courtesy of the Fraser Institute):

Beneficence is always free, it cannot be extorted by force, the mere want of it exposes to no punishment; because the mere want of beneficence tends to do no real positive evil. It may disappoint of the good which might reasonably have been expected, and upon that account it may justly excite dislike and disapprobation: it cannot, however, provoke any resentment which mankind will go along with.

Might her very narrow focus “justly excite dislike and disapprobation”? Perhaps, but it’s not punishable. The Speculator may not act from the most laudable of motives — and hence probably might not be the best candidate for superhero status — but she is doing exactly what we would want a superhero to do in this situation. Specifically, the Speculator is getting goods from where they are relatively abundant (and therefore not as valuable) to where they are relatively scarce (and therefore extremely valuable).

Consider another scenario: oil. You have heard, no doubt, that we are going to run out of oil. Is there any hope? Can we escape the calamity? Whatever might we hapless citizens do?

Once again, this sounds like a job for … the Speculator!

The Speculator reasons that a shrinking supply of oil coupled with rising demand as the world’s population grows and gets richer means that oil prices in the future will likely rise. In anticipation of these higher future prices, she takes oil off the market today and stores it for the future, when prices are higher. A few decades from now, when prices are higher, she sells the oil she has stockpiled and once again pockets a very handsome profit.

Storing oil, of course, is pretty expensive, and maybe she doesn’t want to do it. She can still act on her knowledge by buying futures contracts that allow her to take possession of oil at a future date. She could also buy options that would give her the right to buy oil at a future date at a predetermined price. In any of these cases, she would profit from her superior insight. She would also move oil from when it is relatively abundant (right now) to when it is relatively scarce (the future). Again, she may not act from the most admirable of motives, but she is doing exactly what we would want a superhero to do: get valuable resources from where they are abundant to where they are scarce.

In his Nobel Prize address, Vernon Smith pointed out that “markets economize on the need for virtue, but do not eliminate it.” Virtue is necessary if we are going to have what James Otteson describes as “a just and humane society” (see my review of his book Honorable Business here). When we leave prices free to change based on supply and demand, the Speculator can get rich by moving resources from where they are of low value to where they are of high value. Importantly, this frees up the time, energy, and attention of others — heroes or not — who can then concentrate on other things.

The Speculator, I contend, gets a raw deal in the court of public opinion. How she uses the profits from her ventures, whether in riotous living or perfect virtue, is beside the point. In a well-functioning market where people are guided by the profit motive, however, these examples show that you don’t need to wear a cape — or even be a particularly nice person — to do something heroic.

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Art Carden

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Art Carden is a Senior Fellow at the American Institute for Economic Research. He is also an Associate Professor of Economics at Samford University in Birmingham, Alabama.

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