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Taxing incompetent banks won’t fix them

Bankers have been awesomely incompetent and the financial system is broken. But a Tobin tax is not the answer

By Oliver Kamm   September 2009

Read our other exclusive online responses to Adair Turner from Tim Congdon, George Magnus, and Robert Kuttner

Lord Turner’s comments in this month’s Prospect are not “crackers” (in the pregnant phrase of Boris Johnson). The FSA chairman makes weighty criticisms about the role of finance in the wider economy. But he is wrong in his diagnosis of the problem and his recommendations on how to fix it.

Competitive markets work best. A complex economy comprises the decisions of innumerable buyers, sellers, consumers, investors, borrowers and lenders. No central authority can anticipate all these decisions, which is why planned economies are inefficient.…

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