Is the hedging economic purpose test ambiguous?
Not to say that hedging, insurance and reducing variance in wealth are actually identical concepts. For one thing they are not treated the same in terms of accounting and taxation, but with some refinement this sort of idea could be useful for proponents of financial innovation in the United States.
[Cross-posted from Midas Oracle. JC Kommer later linked to a speech by Leo Melamed, in which he asserted that financial pioneering needs no economic justification. I largely agree, but offer this argument as a matter of pragmatism.]