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World Finance and Economic Stability

World Finance and Economic Stability

Selected Essays of James Tobin

James Tobin

Nobel Prize winner James Tobin has made outstanding contributions to modern macroeconomics. In this final collection of his work he examines the economic policies of the United States and its relations with other major economies after 1990. In James Tobin’s view, the welfare of populations depends uniquely on these policies and it is important to be aware of their impact.

Chapter 5: Prologue to The Tobin Tax: Coping with Financial Volatility

James Tobin

Subjects: economics and finance, financial economics and regulation


* The publication of this book and the holding of the conference that preceded it testify to an active interest in my proposal for an international tax on foreign exchange transactions – the so-called Tobin tax. Bob Haq, once a student of mine, Inge Kaul, Isabelle Grunberg and their colleagues deserve great credit for their initiative in organizing this project – they assembled leading experts in international economics, development, global finance and world politics. They have certainly earned my gratitude. I appreciate immensely the serious consideration the authors of these excellent papers have given the proposal. Their research and analysis have certainly advanced understanding, mine in particular, of the issues raised by the proposal, while pointing out the need for further study. THE PROPOSAL AND ITS COOL RECEPTION, 1972–95 I dropped the idea of a currency transactions tax into the pool almost a quarter of a century ago – in my Janeway Lectures at Princeton in 1972 (published in Tobin, 1974). The tax was on my list of measures to enhance the efficacy of macroeconomic policy. In 1977, I was emboldened to devote my presidential address to the Eastern Economic Association entirely to it (Tobin, 1978). It did not make much of a ripple. In fact, one might say that it sank like a rock. The community of professional economists simply ignored it. The interest that occasionally arose came from journalists and financial pundits. It was usually triggered by currency crises and died out when the crisis passed from the headlines. The...

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