[quote=harvey]Speculate is a subjective term – when does investment become speculation? Nevertheless, I’ll allow it…
To speculate, one must buy something and sell it later (or the reverse.)
Every transaction has a counterparty. To buy something there must be a seller.
The seller wants something – to sell at a particular price. The buyer gives the seller what he/she wants. The seller’s wants are fulfilled by the buyer.
Simply buying something – for any purpose – fills the need of the seller. It creates value.
Value is also created when the “speculator” sells the asset to some other party.
The speculator, the party that sells to the speculator, and the party who buys from the speculator all transact at the price they agree upon. All three get what they want.
No zero sum. It’s win, win, win.[/quote]
This is how I define it:
It’s speculation if a person is buying (or selling) an existing asset in the anticipation of selling (or buying) at a higher (or lower) price. I also think of rent-seeking as speculation if the activity takes more from the economy than it provides and/or if it causes adverse effects for those who are the original providers or consumers of those goods.
It’s investing if a person is providing funds or other resources that create or expand productive capacity.
