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The New Tobin Tax

I think part of the problem with financial markets is that transactions are almost costless. That's a problem because it lowers the incentives for people to keep the assets on their books for any length of time. It also diverts capital and talented people into the financial sector when they otherwise would make great mathematicians, physicists or professors.

I think financial transactions should be taxed to reduce that tendency. If it's more costly to buy and sell and day trade, it would make people do more due diligence. Part of the problem with asset bubbles is that people expect the ponzi scheme to go on, but it's less likely if the transactions get stuck in the molasses of government taxation. The taxes can go into a fund that insures systemic risk rising from unfettered asset bubbles. The more bubble-icious the market, the more money there would be to bailout that sector of the economy.

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