Not Worth the Gamble

Now consider an alternative scenario. Suppose that two individuals, neither of whom uses or produces oil, harbor different opinions about the future price of oil and decide to wager on it. Both parties willingly participate, because they think they?re each getting the best of their confused counterparty. Clearly, both of them cannot gain from this transaction, and the wager itself creates rather than reduces risk. While each party thinks it is getting the better of the other, both agree that on average both of them will be worse off because on average they will win and lose on the same number of bets, and both of their incomes will be less smooth and predictable on account of their wagering. As a consequence, this sort of speculation is socially harmful. That?s why gambling and wagers are heavily regulated or banned outright in nearly every country.

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