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Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Oct. 29, 2007 / 17 Mar-Cheshvan 5768

Smart and Rich

By Rabbi Dr. Asher Meir


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It's okay to profit from superior knowledge if it was fairly obtained


http://www.JewishWorldReview.com | Q: Stock picking means finding and buying undervalued shares. Isn't this taking advantage of the buyers' ignorance?


A: While Jewish law does include many regulations ensuring fair prices, the overall approach is that commerce is not a "zero sum" game. In a good exchange both sides benefit, and the fact that the buyer wins doesn't mean the seller loses.


One fascinating expression of this approach is found in the laws of vows. The Mishnah states that if a person has vowed (perhaps in a fit of pique) not to obtain any benefit from another person, then he is forbidden both to sell to and also to buy from that person. (1) The assumption is that in a normal transaction, both sides benefit. (In the language of economists, there is both consumer surplus and producer surplus.)


In this case, the buyer finds the sale advantageous because based on the information he has obtained he thinks the stock is undervalued, and the seller finds it advantageous based on his own knowledge. This situation is unfair only if the buyer's information advantage is itself obtained unfairly. For example, if the buyer is a company insider who has special knowledge of the company's prospects, this information really belongs to the owners, or shareholders, and not to the insiders who have this knowledge only because of their work on behalf of the owners. It's obvious that company managers are not getting paid to obtain information that they then conceal from the owners themselves in order to obtain a bargaining advantage. That's why securities regulations make insider trading a severe transgression.


Another example of an unfair advantage is if the knowledge of the stock's value is widely known but this particular owner is unaware of it. The Torah tells us, "When you sell to your fellow or buy from the hand of your fellow, don't oppress each man his brother" (Leviticus 25:14). From this the Talmud learns that it is forbidden charge a price significantly different than the accepted market price. (2) So if the stock is "undervalued" because you are making a private sale for less than the exchange price, because the exchange price is unknown to the seller, then your information advantage would be considered unfair.


While your question relates specifically to buying an undervalued item, both considerations apply equally to selling an item for more than its value, as the verse states, "When you sell to your fellow or buy". So selling a stock based on inside information that it is about to decline in price or because the buyer is ignorant of the market price is also unethical.


But superior information obtained because of your special knowledge or study belongs to you, and you have the right to benefit from it. We find an example of this in a ruling cited in the Shulchan Aruch (authoritative Code of Jewish Law). A person knows of a special bargain and asks someone else to buy the merchandise on his behalf. If the agent reneges and buys for himself, this is considered unethical dealing. (3) We see that the intended buyer is ethically entitled to benefit from his special knowledge, vis a vis the agent and the seller alike.

SOURCES: (1) Mishnah, Nedarim 4:6 (2) Babylonian Talmud, Bava Metzia 47b. (3) Shulchan Aruchn, Choshen Mishpat 183:4 in Rema glosses

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JWR contributor Rabbi Dr. Asher Meir, formerly of the Council of Economic Advisers in the Reagan administration, is Research Director of the Business Ethics Center of Jerusalem, Jerusalem College of Technology. To comment or pose a question, please click here.

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