Taming Speculation: The Tobin Tax

Abstract

James Tobin’s contributions to monetary macroeconomics, notably portfolio balance models and the q theory of investment, did not emphasize open-economy macroeconomics. To the wider public who are interested in economic issues without being professional economists, however, Tobin’s name brings to mind his proposal to tax quicksilver international capital flows, which from 1984 onward he linked to J. M. Keynes’s plan to inhibit stock market speculation by taxing securities trades. Tobin first suggested what became known as “the Tobin tax” in passing in 1972 during a series of lectures honoring his teacher, Joseph Schumpeter — lectures that Tobin chose to use to reflect on his experience on President Kennedy’s Council of Economic Advisers (published as Tobin 1974b).