Thursday, October 6, 2011

Taxing Financial Transactions

Throughout the financial regulation debate, I've always thought that there is a better way to reduce the scope for high-frequency trades in exacerbating a crash than by regulating the frequency (or volume) of trades themselves. If you want to reduce something in the least discriminatory and most transparent way possible, a tax is the way to go. A sufficiently small tax on financial transactions should limit the extent to HFTs magnify crashes while imposing the least amount of distortion in the market in general. Some better discussion here and here.
I feel similarly about campaign finance reform.

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