One of the more tiresome tropes of current times is that speculation is in some sense bad. The argument tends to come from those who would consider themselves Keynesians. There's this good stuff, investment, which means putting money into building something real and new. Then there's speculation which is just the buying and selling of second hand stocks or bonds. As there's no new money going into anything then this is bad and should be stopped or at least heavily regulated.
The problem with this as a Keynesian argument is that Keynes himself was very definitely a speculator. Indeed, we could in fact call him one of the first hedge fund managers.
The macroeconomics of John Maynard Keynes continue to dominate the global economic policy debate to this very day. But many have forgotten that the great intellectual was also one of the most active investors of his era.
He made and lost several fortunes, for himself, his friends, his college (King’s, Cambridge) and for City institutions which he chaired or founded. In some respects, he was an early hedge fund investor, first in macro in the 1920s, and then in equities in the 1930s. He ended as one of the most successful investors of the first half of the last century, but along the way he learnt many lessons which resonate to this day.
There's more to it than that as well. He invented some of the techniques which those much loathed hedge funds use today:
He also identified other risk premiums which have since proven durable, by investing mainly in small- or mid-cap stocks, high-dividend payers, and other “value” stocks. He became a contrarian investor, mainly buying stocks which had recently underperformed the general market. He used leverage, but by now applied concerted discipline to contain his risks. Many of these techniques are used by the most successful equity long/short funds today.
The truth is that there's nothing inherently wrong with speculation at all. Indeed, Adam Smith takes some pages to point out how much we prosper as a result of wheat merchants speculating in the price of wheat. What is actually happening in this confusion between investment/speculation and the identification with Keynesian ideas is that it's actually nothing at all to do with Keynes.
There's a large population of people who comment upon economics without actually being economists: I'm one of them. And in this population there's always a temptation to identify what you believe to be true for other reasons with the gurus of your sort of economics. Keynes is much more popular with those on the left of the political aisle than he is with those on the right (please note, this is not about economists, there are plenty of "right" economists who are quite happy with the modern versions of Keynesianism, indeed have helped develop it). The idea that investment good, speculation bad is similarly more popular as one moves left. But there's no connection between that idea and Keynes' economics. The two just happen to be believed by the same sort of people and thus one is ascribed to the other.
