why ideal stabilization by speculators is optimal

we can now use the tools of marginal utility to show how speculation would maximize total utility over time. Suppose every consumer has a utility schedule that holds for each year independently of any other year. Now suppose that in the first of two years there were a big crop-say, 3units per person- and in the second a small crop of only 1 unit person. if this crop deficiency could be foreseen, how should the consumption of the two-year 4-unit total be spread over the two years?
if we agree,for simplicity,to neglect all storage,interest,and insurance charges and all questions of utility commen sur ability over time,we can prove this: Total utility for the two years together will be maximized only if consumption is equal in each year.
Why is uniform consumption better than any other division of the available total? Because of the law of diminishing marginal utility. Here is the reasoning:"Suppose i consume more in the first year than in the second.My last unit,s marginal utility in the first year will be low,and then in the second it will be high. So if i carry some crop from the first to the second year,i shall be switching from low to high marginal utilities-and that will maximize my total utility."
But is not that exactly what the following ideal speculation pattern would accomplish? Yes,it is
If speculators can neglect interest,storage,and insurance charges and happen to forecast accurately next year,s low crop,what will they do? They will figure it pays to carry goods over from this year,s low price resulting from the high crop,hoping instead to sell at next year,s scarcity price. But as each speculator subtracts from this year,s supply and adds to next year,s what must finally happen?Equilibrium can be reached only when the two prices have been equalized!Then there will be no further incentive to carry over more crop. (Of course,a small payment for the speculator,s effort might have to be included-but we have agreed to waive all costs just to keep the example simple.)flesh-and-blood speculators can guess the future infallibly. They often make mistakes and often are prey to rumors and mass enthusiasms.So the process is not as ideal as here pictured. Still,to the degree that speculators can intelligently foresee the future-and those who have a terrible batting average may get eliminated fast as their capital is lost-they (and for that matter,farsighted government agencies,too)may help to provide a useful stabilizing function.