Jews and the Stock Market

Jewish ethics of stock-market investment and speculative activity


QUESTION: Gambling involves many ethical problems. Isn’t playing the stock market just another form of the same vice?

ANSWER: Most economists would probably insist that there is no connection between the dissipative activity of gambling and the vital constructive role of stock markets in the allocation of society’s productive capital. These markets provide a needed way for individuals to invest their savĀ­ings in productive assets.

However, this view is not quite unanimous. In 1935, the great English economist John Maynard Keynes looked at Wall Street and wrote that the capital development of the United States had become “the by-product of the activities of a casino,” and added, “It is usually agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of stock exchanges.”

Despite the indignant protests of some orthodox economists, it is pretty unlikely that the experience of the intervening 70 years would have done much to persuade Keynes to change his mind. Plenty of stock market investors pay scant attention to capital development and continue just taking a ride on the stock-market roller-coaster.

stock market ethics

However, before we draw any ethical conclusions from Keynes’s observation, we should recall that the main objective of the Torah is not the efficiency of capital markets but individual spiritual development. From this point of view, there is still a vast difference between the two kinds of speculation.

The Talmud points out two ethical problems with gambling. The Mishnah states that a habitual gambler is disqualified from giving testimony. The Talmud then asks, What is it that a gambler has done wrong? The passage proceeds as follows: “Rami bar Hama said, ‘Because it is a conditional commitment, and a conditional commitment is not binding.’ Rav Sheshet said, This is not considered a conditional comĀ­mitment. Rather, he is not occupied with settling the world.”

According to Rami bar Hama, the problem with gambling is that the winner often takes unfair advantage of the loser, who is not always fully aware of the adverse odds he faces. The professional gambler is generally a hustler who preys on the ignorance and weakness of the amateur.

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Asher Meir received his Ph.D. in economics from MIT, and received his rabbinic ordination from the Israeli Chief Rabbinate after 12 years of study at Israeli Rabbinic Institutions.

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