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October 22, 2008



The size of the DWL that the other side will no doubt try to argue would be produced by such a small tax has got to be tiny compared to the costs of working our way out of the current financial mess.
Such a tax would certainly have helped eliminate part of the more speculative movements associated with the present situation (e.g. perhaps the number of short term speculative bets placed by hedge fund managers). But I don't think it would have prevented troubles in the housing market such as we have seen.


I don't pretend to understand all this, but I remain stunned that the credit ratings agencies gave high marks to these sliced and diced loan packages whose weaknesses were being pointed out by Ned Gramlich and others. Why would anyone ever believe the credit ratings agencies again?


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that is the question


By putting a time limit on cap market products of 7 days you slow down the xfer of cap between countries. With the IT systems we have today it is no problem to re-close 52 times a year. With this shorter time frame the cap market is turned into a normal market with normal supply and demand forces. The unstable cap market becomes a thing of the past.


Thank you.

Bruce Wilder

I'd recommend a trip to the neo-dust-bowl of the Ohio-Michigan, or maybe the Yazoo Delta, before I got too carried away with idealizing one currency one world, but Tobin's point is well-taken.


Very interesting and enlightening post.


oh wow, I didn't expect you to come out in favor of this - not sure if you're aware of this, but Europe's biggest "anti-globalization" (more apropriately globalization critical) NGO - attac - was actually founded as a one-issue organization for the establishment of a Tobin tax. attac stands for "association pour une taxation des transactions financières pour l'aide aux citoyens".
So Dani has finally arrived in the camp of the anti-globalizers ;-)

dominic corva

"alter" globalizers, please. ATTAC was a key player in starting the World Social Forum, as an alternative to the anti-democratic WEF (World Economic Forum).

anyone for a Tobin tax is clearly pro globalization - the globalization and democratization of economic governance.

And yes, it is interesting to see Dani coming around (even if he doesn't realize it) to these ideas, which were revived at the end of the 1990s.


i guess this would work like England's stamp tax on stock transactions. Nobody pays it. Market makers are exempt because otherwise there would be no market. Retail players simply buy contracts for difference from market makers. Since these are not stocks, but derivatives whose return mimics stocks exactly, they aren't subject to the tax.

Sand in the wheels is an excellent analogy. Why people think they are smart enough (even Tobin) to muck with a societal structure that has evolved over thousands of years is beyond me. I guess we want to experimentally find out what happens if we don't have efficient capital markets. It's exactly equivalent to passing a law suspending gravity so we can save money on transportation costs. Ignorance abounds.

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Here is something i have about him.a, Tobin was widely known for his suggestion of a tax on foreign exchange transactions, now known as the "Tobin tax". This was designed to reduce speculation in the international currency markets, which he saw as dangerous and unproductive. He suggested that the proceeds of the tax could be used to fund projects for the benefit of Third World countries, or to support the United Nations.

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