Question

Critically evaluate the following statement: Playing the stock market is like gambling. Such speculative investing has no social value, other than the pleasure people get from this form of gambling.Provide real world example

Answer 1

Speculation and gambling are two different actions by an investor to make high return under risky conditions and uncertainty.  Speculation is risky and expected to have a positive return. But Gambling, on the other hand, involves a negative expected return. Gambling is done for emotional high and the people will have a must-win attitude to create profits. But speculation is trading in a methodical and tested system unlike gambling. Moreover, the stock market is a positive sum game. There is a chance for everyone who participate, can win. But it is not possible in gambling. Unlike gamblers, the speculators provide liquidity to markets and help to promote economic growth. But Gambling is playing the odds. Thus speculative investing has social value since it facilitates functioning of financial market in the economy.

So it is not right to tell that speculating is simply like gambling and has no social value. Both of them are quite different.

For example : Speculative investing in Future contracts enhances efficiency of markets. Whereas Betting which is a type of gambling is confined to certain individuals and nothing to do with society.