Speculation: A History of the Fine Line between Gambling and Investing

by Stuart Banner

Overview

What is the difference between gambling and speculation? This difficult question has posed a legal problem throughout American history. Many have argued that periodic failures by regulators to differentiate between the two have been the proximate causes of catastrophic economic downturns, including the Great Depression and the 2008 global financial crisis. In Speculation, Stuart Banner provides a sweeping history of how the fine lines separating investment, speculation, and outright gambling have shaped America from the 1790s to the present. Advocates for risky investments have long argued that risk-taking is what defines America. On the other side, critics counter that unregulated speculation results in bubbles that draw in the most ill-informed investors, creating financial chaos. The debate has been a perennial feature of American history. The Panic of 1837, the speculative boom of the roaring twenties, and the real estate bubble of the early 2000s are all emblematic of the difficulty in differentiating sober from reckless speculation. Some, chastened by the most recent crash, argue that we need to prohibit certain risky transactions, but others respond by citing the benefits of loosely governed markets and the dangers of over-regulation. Economic crises have generated deep ambivalence, yet Americans' faith in investment and the stock market has always rebounded quickly after even the most savage downturns. Speculation explores a suite of themes that sit at the heart of American history-the ability of courts and regulators to protect ordinary Americans from the ravages of capitalism; the periodic fallibility of the American economy; and the moral conundrum inherent in profiting from speculation while condemning speculators. Banner's engaging and accessible history is invaluable not only for understanding the fault lines beneath the American economy today, but American identity itself.

Product Details

ISBN-13:	9780190623067
Publisher:	Oxford University Press
Publication date:	12/01/2016
Sold by:	Barnes & Noble
Format:	eBook
Pages:	288
File size:	551 KB

About the Author

Stuart Banner is Professor of Law, UCLA, and author of How the Indians Lost their Land, American Property (Harvard), The Death Penalty, Possessing the Pacific, Who Owns the Sky?, Anglo-American Securities Regulation, and The Baseball Trust. He is based in Los Angeles, CA.

Table of Contents

Introduction Chapter 1: The Land of Speculation Chapter 2: Betting on Prices Chapter 3: The Anti-Option Era Chapter 4: Selling Blue Sky Chapter 5: Aftershocks of the Crash Chapter 6: Land and Onions Chapter 7: Inside Information Chapter 8: Speculation or Investment? Chapter 9: Deregulation and Crisis?

Editorial Reviews

10/17/2016
Banner takes the long view of the last two centuries of American ambivalence around the role of speculation in finance in this entertaining if narrow historic exploration. He focuses not so much on the actual crises wrought by financial gambling but on how public opinion responded to and shaped attempts at speculation. For the last 200 years, Americans have tried to balance the risk and the reward of speculation by experimenting with different forms of regulation. In the meantime, speculation is still viewed with suspicion, if not outright disapproval or even religious condemnation. Banner walks readers through the changing views on risk throughout the 19th and early 20th century, from the rabidly antispeculation Lincoln, to the anti-option era when farmers lobbied against speculation, to the 1929 Wall Street Crash and the lesser-known 1925 Florida real estate bust. In the 20th century, investment started being seen with less suspicion, as long as a conservative, long-term approach was taken. And regulators—who have typically encouraged investment while discouraging speculation—started to shift their focus from legislation to taxation. Banner concludes that Americans still don’t really know how to view speculation, or how to handle it. Readers interested in financial history will appreciate the lively narrative, but the thesis itself is too narrow for the space allotted. (Jan.)

Publishers Weekly

2016-10-05
A mostly chronological history of a slippery financial concept combined with something akin to a lengthy law review article.Banner (Law/UCLA; The Baseball Trust: A History of Baseball's Antitrust Exemption, 2013, etc.) exhibits his fascination with “a dilemma that has troubled the legal system for a long time”—the idea of speculation, which “lies somewhere between investment and gambling,” possessing “attributes of both.” From the opening of the book, the author cites common sense, conventional business wisdom, Congressional legislation, and court rulings in an effort to distinguish “the good risky transactions from the bad.” Although the narrative involves sometimes-dense financial and legal concepts, Banner negotiates the jargon with clear prose and compelling anecdotes. He opens with a controversy dating to the American Civil War, when the buying power of the paper currency issued by the Union began to slip, perhaps because of the unpatriotic, greedy speculators blamed by President Abraham Lincoln, Secretary of the Treasury Salmon Chase, and other officials. As stock markets developed increasingly complicated products, debates about the boundary between good speculation and harmful gambling increasingly focused on the New York Stock Exchange and the Chicago Board of Trade. The market crash of 1929, which precipitated the Great Depression, led to sweeping legislation but could not alter human behavior. As a result, the line between positive and risky investment remains blurred. Unfortunately, this blurring gives Banner's treatise an unfortunate on-the-one-hand/on-the-other-hand cast. The author brings the history up to date by discussing the roles of financial speculation in the 2008 financial crisis; he proposes that although the vast level of speculation did not cause the meltdown, it did contribute to its size. A somewhat narrowly focused book that will not likely appeal to a broad swath of readers but will repay those who invest their undivided attention.

Kirkus Reviews