This morning a contact of mine called up to say he was attending an event discussing the so-called Tobin Tax, which is a levy on foreign exchange transactions named after the Nobel Prize Winning Laureate of 1981, James Tobin. The tax is proposed by such politicians of usually leftist anti-market hue as French Prime Minister Lionel Jospin, who favour the tax as a way of reducing the massive flows of foreign exchange business and hence, they hope, in reducing the power of global markets. It is a vain hope. For starters, any attempt to tax foreign exchange deals would be a massive boost for the offshore tax-haven market, already booming as investors wisely choose to domicile their businesses there to avoid paying tax. It is an idea that has, in my view, very little chance of taking form. It would be a particular blow to the City of London, which boasts a vast foreign exchange market on which many jobs depend.
Anyway, on Monday Professor Tobin, a former adviser to President John F. Kennedy, passed away. One should not speak ill of the dead, and on the whole my impression of Tobin is that of a distinguished economist. But let us hope the foolish levy that bears his name passes away also to the great dustbin of bad ideas in the sky.
