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

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.