ing of another crop. If it were not so, people would buy at low prices while the crop was diminishing, and the community might suddenly face a famine for which it had made no preparation. The operation of the produce exchanges in thus discounting the future, by gradually raising prices to meet a scanty supply, or gradually letting them fall to meet an excessive supply, is beneficial not merely to producers and consumers, but to the community as a whole.

It matters little whether physical delivery of the products dealt in is made in all these cases or not. The action taken by speculators, so called, in buying and selling wheat and cotton for future delivery is simply the expression of their judgment as to certain future contingencies. They are willing to pay for errors in that judgment out of their own pockets. If, when the time comes at which they have agreed to deliver a certain quantity of wheat or cotton, the price has gone higher than the price at which they sold, they are bound to make the delivery or pay the difference.

But what does it matter which course they pursue?

The broker is only the intermediary in any event. If he has agreed to deliver 1000 bushels of wheat for $1000 on a given date, and the price rises to $1.20 a bushel, he and every producer know that he can. obtain the wheat only at $1.20 a bushel, or 1000 bushels for $1200. If it is mutually convenient for the broker to pay the buyer the difference in cash which will enable the latter to buy the wheat at the net cost which he contracted for, it comes to exactly the same thing in the end as if the man who had given the order insisted upon a physical delivery of the wheat by the person who promised him future delivery. The buyer has simply been insured. Having contracted to receive a certain quantity of wheat for $1000, he gets it at that net cost to himself. The broker acts as insurer by paying the difference between the actual present price and the contract price made with the buyer. The latter is protected by his purchase for future delivery against the

risk of a rise which he foresaw. If, on the other hand, the price has fallen to ninety cents per bushel, it is the same to him if the seller accepts ten cents per bushel as the price of the insurance he granted and sends the buyer into the open market for his wheat. In either case the buyer obtains the wheat at the price he was willing to pay when he originally bought, and he has been insured against fluctuations of price in either direction.

The produce exchanges thus afford a form of insurance. They enable a man with contracts to execute in the future to ascertain to-day what will be the cost of his raw material in the future, and to know that he will get the raw material at that cost, even though it may rise in the open market above the price which he could afford to pay for it in view of the price at which he has contracted to deliver his finished products. Prudent dealers in great staples go into the market and buy and sell futures in such a way as to protect themselves, just as the prudent man of family goes to the insurance company

and pays a premium in order to get a guarantee that his family will be protected against what may occur through the failure of his capacities, his disability, or his death. In the language of the critics of the exchanges, it might be said that the man taking insurance bets with the insurance company that he will die sooner than their mortality tables indicate, and thereby make a profit for his family. The operation is more like betting than transactions on the exchanges, because insurance cannot alter the length of human life. It is simply a speculation on what life will be. But society sanctions insurance, because it distributes risks among those who are willing to assume them and who have made calculations which lead them to believe that they will not on the average be losers by their transactions. That is to some extent the character of legitimate dealings on the produce exchange. The fact that physical delivery by the particular individual making the sale is not insisted upon has no bearing upon the case.

Physical delivery is not insisted upon in a hundred transactions which do not fall under the criticism of persons like the writer on ethics quoted above. If a retail coal dealer in July agrees to deliver to a patron in December ten tons of coal at a certain price, he probably does it on a purely speculative basis. He has not on hand the coal with which to fulfil his contract when the time comes. Does he commit any crime against the social order if he transfers the order to the shipping company and directs them to make the delivery direct from the cars to the purchaser? Can fault be found with the fact that the retailer does not insist upon the coal passing through his hands, involving extra handling and expense, in order to avoid the charge of indulging in a speculative transaction?

Such an operation is typical of what is happening constantly on the stock and produce exchanges. Physical delivery is made to the people who want the products. Between intermediaries the transactions are cleared against one another.