Re: Volatility

[Paul Davidson <pdavidson@xxxxxxx>]

At 08:16 AM 04/06/2000 -0700, you wrote:
> Harry Veeder wrote:
>
> <<SNIP>>
>
> > I am forwarding some more thoughts on this subject
> > that I exchanged with Henry C.K. Liu off line. I hope Henry does not mind.
> > The point is taxation can be designed to improve the quality of growth
> > without being an *overall* hinderance to the level of growth.
> >
> > --------------------
> > >
> > >
> > >Harry Veeder wrote:
> > >
> > >>
> > >> Why does nobody (in government) ever consider taxation as an
> instrument of
> > >> stock market regulation? A system of stock market taxes would be
> effective
> > >> if they used the speed of electronic feedback rather than relying on the
> > >> speed of human (eg. the FED) feedback. Such taxes could deflate
> "bubbles"
> > >> before they "burst".

As the talk returns to the use of taxes on financial transactions to reduce
volatility (bubbles?), I wonder why no one look at the empirical evidence
which shows that a transactions tax ALWAYS increases volatility measured as
variance.  I cited studies done by others on this matter and then explain
why this is NECESSARILY true in my  paper "Volatile Financial Markets
and  The Speculator" in  the journal ECONOMIC ISSUES, September 1998.  This
paper can be obtained from mu home page.

Paul
Paul Davidson
Holly Chair of Excellence in Political Economy
Editor, JOURNAL OF POST KEYNESIAN ECONOMICS [JPKE]
Economics Department -- 523 SMC
University of Tennessee
Knoxville, Tennessee 37996-0550
email: Pdavidson@xxxxxxx;   phone: (865)974-4221;    fax: (865) 974-4601
http://econ.bus.utk.edu/Davidson.html