Value & Capital, CHAPTER X, Section 5

The previous section argued that the first two source of disequilibrium (namely, inconsistent price expectations across individuals and inconsistency between the planned levels of supply and demand) are absent in a "futures economy" where all transactions are conducted via forward trading.  In the present section Hicks argues that it is the desire for hedging (i.e. limiting risk) that limits the extent of forward trading in a capitalist economy.  Thus the ultimate reason why the first two sources of disequilibrium cannot be eliminated is "the unavoidable presence of the third and fourth" sources (namely, imperfect foresight as to wants and hedging behaviors in response to perceived risks).  Recall that in the previous section, these latter two causes are claimed to be present in any type of economic system.

Hicks argues that when the ends of society are certain, socialist organization "has a strong case on grounds of efficiency; but in the ordinary pursuit of peace-time economic welfare, immediate ends are likely to be much less certain, the natural method of economic policy being trial and error."  If a socialist dictator were to find himself "afflicted by those same sorts of uncertainty which impede co-ordination under capitalism," Hicks argues, the wise preference would be for "a loose and decentralized system" even though it may be "open to the charge of planlessness, and not clearly superior in its power of adjusting means to ends."  With these remarks Hicks leaves the "great debate" mentioned at the beginning of the previous section and turns to explaining the significance of this chapter's results for the discussion that will follow in upcoming sections.

He describes the 'Spot Economy' in which only spot transactions are taken into account as being a convenient place to begin, as well as "not really a very drastic simplification of reality."   While we know that "[a] certain proportion of the transactions which take place in reality have to be reckoned (in whole or in part) as forward transactions," we now know "enough about forward markets to be able to take them into account on occasion."

At the other the extreme, the pure 'Futures Economy' could "have no claims to be a good approximation to reality."  Instead its usefulness is theoretical:  the prices that maintain equilibrium over time in such an economy under changing conditions are exactly those that would result in equilibrium for a system in which all traders have perfect foresight.