The Ethics of Banking: Conclusions from the Financial Crisis (Issues ...

The Functions of Speculation in the Capital Market 49
analytically, in real capital market practice it is the case that speculators can only
speculate if they also invest in corporate shares, i.e. if they are investors.
Capital market speculation is ethically permissible since it fulfills an objective
function in the economy: it reduces uncertainty about the marketability of corporate
shares on the stock exchange. Profits from speculation are thus payments for the
service that speculation makes available to the public on the stock exchange, and it
is justified by the economic added value that speculation creates.
Since professional speculation can claim an economic and ethical justification
by virtue of its contribution to the common good by reducing uncertainty, the converse
implication is that speculation is not economically or ethically justifiable if it
does not actually reduce some uncertainty which cannot be reduced by any other
means than speculation. Speculation is justified by its task of absorbing uncertainty
in situations in which there is no other means of doing so. Where uncertainty can be
reduced by less costly means than speculation, those are the means that should be
used. Where speculation does not really reduce uncertainty, it is not justified.