Wednesday, February 10, 2010

A Few Thoughts on the Robin Hood Tax


I rather like the idea myself, but I thought I'd say a few things about it and address a few criticisms that have headed it's way.

Firsly, my criticism, which is that I think hundreds of billions is too optimistic. I just don't think it will raise that much. My guess would be that it would lead to a serious reduction in the volume of foriegn transactions that took place. That said, I don't think that this is necessarily a compelling reason not to go ahead with it.

Now, on with some other criticisms:

Capital is mobile and this activity will just move elsewhere.
I think this one depends on how it was levied. If the tax was levied on actual foreign exchange transactions (changing one currency into another) then I think this would be the case. There's nothing to really stop someone setting up in a tax haven that ignores the tax and acting as a counterparty to foreign exchange transactions.

An alternative would be to force banks in their host nations to levy the tax on bank transfers to and from accounts outside the host nations's borders. This would prevent a nation that didn't want to play ball undermining the tax, money could be moved in and out of this nation untaxed but it would still face a tax if it was ever moved into a participating nation.

Following on from the above, there is an argument that imposing such a tax would give an advantage to those counties that choose not to participate, I don't see this as a huge problem. While a country without the tax might be a little more attractive to foreign investors, it's hardly likely to be the only factor an investor takes into account when making their decision.

It would create a huge new class of arbitrageurs seeking to exploit such price discrepancies
An argument put forth by Oliver Kamm. He's correct, but the same can be applied to plenty of other government interventions in the economy. The question is whether such aribitrage will be a massive problem or a minor irritation. My guess would be the latter.

If such an act did create a some kind of price discrepancy between participating and non participating countries we have to wonder how long the effect would last, once the tax became a fact of life would we still see distortions? Additionally, is it beyond the ability of regulators to deal with the worst forms of arbitrage? And if indeed it did affect asset prices, would this be viewed as a distortion or a correction?

The Last Word
I'm personally not sure exactly how a robin hood tax would work, my guess would be buy taxing transfers across international borders. I'm not sure if there are any holes in this approach but nothing obvious comes to mind. I accept some of the arguments put forward by critics, but personally I don't think they make a strong enough case against this tax.

Monday, February 08, 2010

A Small Matter of the Facts

Guido says of Gordon's coming visit to Greece:
At the end of last week Guido learnt that next week Gordon is scheduled to meet George Papandreou, the socialist Greek prime minister who has led his country to ruin.

I should point out that George Papandreou was in fact elected in October of 2009. The actual leading of the country to ruin happened under the rule of the centre right New Democracy party who not only led the country to ruin but also lied about the state of the economy.

A little basic fact checking might be in order.

Wednesday, February 03, 2010

A Few Words on Rod Liddle and the Independent

The folks over at libcon have been running a bit of a campaign against the idea of Rod Liddle as the editor of the Independent, the latest is an attempt to raise money for an ad in the Independent itself. I was being a bit of a spoilsport on Twitter about it so I thought I'd make my views a bit clearer.

So, first I have to say that given his numerous offensive comments and the like, Rod Liddle as a columnist comes across as a bit of a twat, more than just a bit actually. The thing is, much as I don't like what he writes I can't really say that is really enough to stir up the idea that Rod Liddle absolutely must not get the job.

His writing seems to have almost descended into some kind of wierd self parody to the point it's hard to tell what he actually believes. I also have to say that when he was editor of The Today Programme, I didn't really catch much of Rod Liddle the immense tosser.

I don't particularly like the guy, but I just can't bring myself to hate him enough start actively campaigning against his editorship.

Tuesday, February 02, 2010

Tom Harris, Compass and Product Placement

There's been a bit of a spat developing between Compass and Tom Harris over this whole product placement affair. Personally (and not particularly surprisingly), I'm with the Compassites rather than the proto Blairite.

Beyond the idea of protecting our children I think there are a few other reasons worth considering. Firstly, there's the issue of regulatory complexity. It's often the case that liberalising or deregulating rules on something can actually make it harder and more resource intensive to regulate and this is a good example.

At the moment, policing product placement is simple (what part of "no" don't you understand?). If the ban is lifted it requires a new series of rules to ensure the product placement is not used gratuitously, this will require both a new set of more complex rules and the recources to enforce them. By removing the ban we actually make regulation of television more complex.

Further to this there are some economic arguments. Advertising, can in some ways be viewed as a transaction cost with the external effect of increasing consumer demand. In a society that is underconsuming this might be considered a positive externality, but is that really ther case in the UK?

Robert Peston's figures show our national debt (personal, corporate & government) as 380% of GDP, the years leading up to the credit crunch were characterised by lifestyles financed on debt, people living beyond their means. Considering the consequences of our overconsumption previously, do we really want to happily embrace a change that is likely to further fuel that culture of consumption?