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CLASHING ANALYSES OF SPECULATION AND THE EARLY REGULATION OF US FUTURES MARKETS

Published online by Cambridge University Press:  18 December 2018

John Berdell  and
Jin Wook Choi
John Berdell
Affiliation:
DePaul University.
Jin Wook Choi
Affiliation:
DePaul University.
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Abstract

This article examines the early regulation of futures markets in the 1920s and 1930s. We contrast the analysis of speculation developed by the Grain Futures Administration (GFA) with Holbrook Working’s. Within the GFA we focus on Paul Mehl, who directed the statistical analysis of order flows, trade volumes, and positions that supported the GFA’s policy recommendations. In retrospect Working was the most prominent academic analyst of futures markets. The relationship between the GFA and Working was complex and at times intimately collaborative, but the New Deal provoked sharp disagreement. Working rejected the tighter trading rules advocated by the GFA as counterproductive and tried to persuade the Secretary of Agriculture to embrace a discretionary approach to regulation based upon his analysis of neighboring futures prices (the Working curve) and his distinctive conception of “perfect markets”—a nuanced version of the subsequent efficient market hypothesis.

Type
Articles
Information
Journal of the History of Economic Thought , Volume 40 , Issue 4 , December 2018 , pp. 539 - 560
Copyright
Copyright © The History of Economics Society 2018 

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Footnotes

We acknowledge funding from the Driehaus College of Business and the Chicago Mercantile Exchange Group (CME) Foundation, which is affiliated with the CME. The CME is regulated by the CFTC, the successor to the CEA and GFA. The views presented here are strictly those of the authors alone. We thank Ryan Cummings and Alex Kfoury for excellent research assistance. Pamela Anderson of the National Archives in Kansas City provided essential guidance and assistance with the GFA/CEA archive. Jae Lurie, Project Archivist for the CME Group of records at the University of Illinois Chicago, was an invaluable ally in tracking down relevant material in the Chicago Board of Trade (CBOT) archives. We thank as well Daniel May, librarian of the CFTC. We thank Mary Morgan, Scott Irwin, Paul Peterson, Steven Stigler, Jim Ciecka, Virginia France, Joe Persky, and Humberto Barreto for comments. Anonymous referees provided very helpful comments.

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