This Post by knzn adequately explains both contango and backwardation, though he sounds as if he is somewhat mystified by it. The Keynesian definition of both term relationships has always left a little to be desired, as it is at heart speculation driven as to future Demand for a Product. No risk-free investment could ever be realized, as movement in the market to meet risk-free contango conditions would automatically raise the Spot price. Backwardation is basically future Price-locks to ensure a base Price for immutable Demand–that Demand which is structurally Constant, as contretemps mutable Demand–which alters given then-current Market conditions. The current Spot Price in any Product reflects two factors in the market: the level of mutable Demand, and the amount of speculation funds in the Market; either of which can impact Spot Prices. The key feature here, as unexplained by knzn or James Hamilton, is that future prices basically set Production Schedules with guaranteed Underwriting of those Schedules, while mutable Demand is fulfilled by those Production Schedules, while Spot prices only indicate Profits-taking and excess speculation funding.
John Quiggin turns a less than straightforward Point of Discussion into something somewhere off the Deep End. Greg Mankiw says that Economists cannot understand Tipping, Matt Yglesias thinks it should be based on utility theory, while John attempts to change the Whole into expression of preferences and rational choice. No one has yet adopted the simple formulation that Tipping is simply Custom, exercised as peer pressure to perform a lesser charity to laborers on your behalf. Maybe there is a need for more Sociology, and less Economics.
Here is Arnold Kling’s review of Shannon Brownlee’s book Overtreated. I enjoy Arnold so much because I don’t really disagree with him, but I always can’t really agree with him either; he reminds me of my Doctor. Don’t imagine that I agree with Shannon Brownlee; maybe I just don’t agree with Anyone. I tend to agree with Paul Krugman’s Single Payer Health Care system, though I know I could not agree with him on its structure. I think Doctor’s compensation should be determined by his total Patient load’s good Health Days, say a Dollar per day when a Patient didn’t have to see the Doctor, pop an extraordinary amount of moderative Pills, or call his Boss to claim ill health. I do know that We should establish a Bonus program to Doctors who provide adequate treatment to Patients at under $30 per day of Treatment. Is Everyone laughing? lgl