The Tobin Tax: Coping with Financial Volatility

The Tobin Tax: Coping with Financial Volatility

The Tobin Tax: Coping with Financial Volatility

The Tobin Tax: Coping with Financial Volatility


In his 1972 Janeway Lectures at Princeton, James Tobin, the 1981 Nobel Prize winner for economics, submitted a proposal for a levy on international currency transactions. The idea was not greeted with enthusiasm, as the 1970s were a period of optimism and confidence in floating exchange rages. Yet, whenever currency crises erupted during the past decades, the proposal for a levy on international currency transactions would once again arise. In the 1990s, two additional facts have sharpened interest in the Tobin tax proposal. First is the growing volume of foreign exchange trading. Second, interest is coming not only from policymakers and experts concerned with the smooth functioning of financial markets. It is shared by those concerned with public financing of development--the fiscal crisis of the state as well as the growing need for international cooperation on problems such as the environment, poverty, peace and security. This work makes a systematic analysis of the proposal for a foreign exchange transactions levy. Its chapters examine the economic desirability of such a levy, its technical and political feasibility, its revenue potential, the possible uses of that revenue, and related administrative and institutional aspects.


James Tobin

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 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 . . .

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