Keynes, Uncertainty and the Global Economy
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Keynes, Uncertainty and the Global Economy

Beyond Keynes, Volume Two

Edited by Shelia C. Dow and John Hillard

The revival of interest in Keynesian economics since the late 1980s reinstates the importance of Keynes’s contribution to economic theory and policy. This is the second of two volumes in which authoritative contributions are presented by an outstanding group of international experts to celebrate Keynesian economics, and to review and further the developments of post Keynesian economics of recent years.
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Chapter 13: Conflict in wage and unemployment determination in the UK

Beyond Keynes, Volume Two

Philip Arestis and Iris Biefang-Frisancho Mariscal

Extract

13. An evaluation of the Tobin transactions tax Philip Arestis and Malcolm Sawyer I INTRODUCTION There has been considerable interest in the idea of a tax levied on foreign exchange dealings, first suggested by James Tobin in his 1972 Janeway lecture at Princeton (Tobin, 1974; see also 1978). Some official interest in a transactions tax has been expressed by United Nations Development Programme (1994) and UNCTAD (1995) who have seen its possibilities for raising large amounts of money which could be used to finance development. The purpose of this chapter is to evaluate the proposals for a tax on foreign exchange dealings. We assume that levying such a tax on a national basis would not be feasible and do not discuss that possibility further. We also assume that the tax would be levied on any transaction which involved the exchange of a financial asset denominated in one currency for a financial asset denominated in another currency (cf. Tobin, 1978: 159; Akyüz and Cornford, 1995: 190). II RATIONALES FOR A TRANSACTIONS TAX Three rather different (but not mutually exclusive) sets of reasoning have been advanced in support of a transactions tax (which we will use as shorthand for a tax on foreign exchange dealings). The first is that there is a sense in which the volume of foreign exchange transactions is excessive, being many times greater than the volume required to finance trade. The most widely cited figures on turnover on the foreign exchange markets are summarized in...

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