Friday, February 26, 2010
Tim Harford has a fantastic column today talking about the campaign behind the Robin Hood tax. He argued previously that the campaign was misguided, but what scares him more are the ways in which those who support the campaign - bloggers, commenters, twitterers - have tried to 'argue' to support the tax. What did they do? They appealed to authority. How? The supporters reiterated that 'Nobel Laureate Paul Krugman said [X]' or 'Nobel Laureate Joseph Stiglitz said [Y]'. Harford playfully suggested the following three other Nobel Laureates and their ideas:
- We should not levy a price on carbon. Why? Because Nobel laureate Thomas Schelling thinks that cap-and-trade schemes are a silly way to think about climate change policy.
- We should be able to buy and sell kidneys. Why? Because Nobel laureate Gary Becker thinks that it would be a good idea. [pdf]
- We should stop laying into economists. Why? Because Nobel laureate Robert Lucas thinks macroeconomics performed well during the financial crisis.
So yes, be aware of Appeals to Authority, contrast such appeals with deference, and remain aware of arguments and evidence for and against a policy, especially on a topic as emotionally charged as a transaction tax on international banking.
What's my answer? I don't know. I don't know enough about international finance to be able to say whether it'll be good or bad. I have two opposing intuitions: first it may increase volatitily rather than decrease volatility because the tax will act as a disincentive to spread your risks, second, it may decrease volatility because there will be less currency speculation. Separately, as an international student I might be taxed by it personally - depending on the exact structure of the tax - because I have to move money between South Africa, the UK and the EU while doing my research. I don't have all that much money and the little I do is very valuable to me, so the tax will, in effect, act as a disincentive for me to do what I would like to do: high quality international research for which I have to move around a lot and move money around a lot. So, though I don't know too much about it, my personal attitudes are against it (but this is a very slight probabilistic twist in one direction). We'll see whether the tax gets popular and academic support as the year progresses.