This paper explores the role of secondary financial markets and the proliferation of speculation. In The General Theory, Keynes identifies speculation as a social bad that can increase volatility. This paper extends Keynes’ analysis to comment on two additional possible consequences of increased speculation. The first consequence is a redistribution of income. This change in the income distribution is shown to have long run employment effects in a Post-Keynesian model. The second consequence is a possible externality caused by increased speculation, a misallocation of human capital. Using the Integrated Postsecondary Education Data System’s Survey of Institutional Characteristics and Survey of Degree completions, some suggestive empirical evidence is presented. The primary finding is that US states that have a high proportion of college graduates with finance related degrees grew more slowly on average between 1990 and 2012.
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