The amiable Nigel Stanley draws my attention to a new approach from the defenders of the Robin Hood Tax. First, let me remind you of the basic view of those opposing this well-intentioned but naive attempt to make everything better:
- the tax will be on transactions, not bankers
- transaction taxes tend to hit end users – they don’t zero in on wicked people like bankers with the unerring accuracy of some sci-fi weapon;
- hitting transactions hits liquidity, which passes itself on in higher costs of capital, which damages productivity
- it causes attention to be focussed on the wrong thing. The right thing gets away, be it complexity, overhigh leverage, off-balance-sheet jiggerypokery, tax evasion, whatever.
Various versions of this can be found in comments by Tim Worstall, Tim Harford, me, other people called Tim, and so on. None of us have found Richard Murphy’s answers meet the standard. In the nicest way, RM sometimes seems to fall back on a “they would say that wouldn’t they” position.
Now Nigel has crystalized the view of the Robin Hood Campaign:
“many of its critics have build vast superstructures out of arguments necessarily simplified to ensure the campaign goes wider than the wonk community.”
So by taking it seriously, and thinking hard about what the Robin Hood tax would actually do, we are missing the point.
But the criticisms are not “(minor)”; they are the difference between aiming at the right target and the wrong target. ( I struggle for an appropriate analogy. Pick any you like that has a doctor treating an epidemic with the wrong medicine, and then insisting that this is just a detail. )
Nigel undermines his case when he links to the Oxfam post. It is a classic example of “go to the first iteration” – like my shoplifting example earlier. The writer thinks he can identify a priori who will pay the tax:
“in the first instance, the tax will fall on high frequency traders like hedge funds and the proprietary trading houses of investment banks, not on low frequency traders like retail investors, people changing money to go on holiday, or high street banks. “
And then the second instance? Spreads widen. Speculators who can trade in a lot produce narrower-spread markets. The retail punters then with their occasional trading pay a larger spread. None of the RHT people seem willing to even think about that.
The writer reveals his attitude towards those people pernickety enough to go to the 2nd and 3rd instance: they are nerds, who would need a ‘separate geek website for debate.’ Yes, that classic dichotomy: there are the good people who by sheer power of emotion and inner glowing goodness can divine the True Way Forward – being clean of the dirty low motivations of, you know, people involved in the business. These people by sheer ethical magnetism attract The Gods – people who star in Richard Curtis movies and are clearly Good because they are, you know, famous.
And then there are geeks with their minor objections. Like “this would screw up the financial system to no good end, and impose a stealth tax on honest businesses and pensions”. Silly stuff like that. Yes, these experts who think only they have the right to express themselves. (If I ever go to an oncologist, maybe I should insist he throws his diagnosis over to the man in the street).
Tim Harford sounds as frustrated, in particular with arguments from authority.
Sadly for the RHT advocates who’ve tried to bamboozle me with appeals to Professor Stiglitz’s authority, I actually interviewed Stiglitz a couple of weeks ago and asked him what we should do about the banks. He didn’t mention an RHT. He’s also just published a 300 page book which doesn’t seem to mention the tax
And he repeats an obvious point I made before:
One other argument that has been made is that many financial institutions operate in a competitive market and thus they won’t pass on the tax. I am genuinely baffled by this argument, which seems entirely backwards. Competitive businesses make zero profits; if a tax is levied on them, they must all raise prices or else go bankrupt. It’s that simple.
But then, he’s an expert, so his views don’t count.
I expect my next report to be on this. What is that? What was my last report about? Oh, here it is.