Academics Funded for Supporting Financial Speculation: MBA News

Leading business and economy academics who continue to support financial speculation have drawn criticism for their financial affiliations with Wall Street.

Professor Craig Pirrong is the director of the Global Energy Management Institute, a center within the Bauer College of Business at the University of Houston, where he also teaches finance. On his blog he denies suggestions that the funding he gets from the Chicago Mercantile Exchange and banks such as Citibank and Bank of America, which profit from financial speculation, is in any way a conflict of interests. He told the New York Times that his consulting work gives him insight into real-life case studies which helps improve his research and teaching. He goes on to say that his “compensation doesn’t depend on [his] conclusions.”

Also defending the speculation (of agricultural markets) is Professor Scott Irwin who teaches commodity price analysis and futures market research at the University of Illinois, Urbana-Champaign. He also acts as a consultant for investment banks, commodities speculators and a company involved in hedge funds. It is for this reason then that some academics and critics have questioned the donations, adding up to more than one million dollars, that the university’s business school (the College of Business at Illinois) has received from the Chicago Mercantile Exchange along with several other key traders in the commodities market. The money has been used to pay for scholarships, classes and a laboratory which resembles a commodities market trading floor.

The question of whether financial speculation within the commodities market is to blame for the price rises of oil, food and other societal commodities is a long contested one. After the commodities market was deregulated in 2000, financial companies have been involved in much speculative investment. Speculation can help stabilize the market with capital by spreading risk and offering price insurance for buyers and sellers. Recently, however, concerns have been voiced by a number of academics and consumer advocate groups which suggest that with the acceleration of financial speculation in 2003, the market is at risk of faltering.