Austrians lead debate on bank taxation

July 8, 2010


Ex post analysis and the verdict is in: more sophomoric regulations. Austria is full steam ahead with a proposed taxation of financial transactions on banks. Christoph Leitl, the head of Austria’s Federal Economy Chamber (WK??), is the man behind the endeavor which is raising a few eyebrows.

I can tell you exactly what will happen. Any results that may eventually come out of this session from last week’s European Business Summit will irrefutably be passed on to the consumer and the investor. Any burden that comes to the bank is registered as a cost and all transaction based costs are marginally based and when margins are planned, all costs are considered and they are passed on to the client. Where will this thus take the economy? Nowhere.

The indented plans of Mr. Leitl et al. are to create some sort of fund for future bank bailouts. Despite the fact that the awareness of a system that is bound to fail again is apparent, they seek to further deteriorate the system even more with taxation. We have to rid of this idea that we can somehow engineer the perfect system, a utopia. Only fools can claim such an idea.

I will not go on to point the hypocrisy in Mr. Leitl’s interview but will leave you with this passage from Taleb:

The idea is simply to let human mistakes and miscalculations remain confined, and to prevent their spreading through the system, as Mother Nature does. Reducing volatility and ordinary randomness increases exposure to Black Swans-it creates
an artificial quiet.

My dream is to have a true Epistemocracy-that is, a society robust to expert errors, forecasting errors, and hubris, one that can be resistant to the incompetence of politicians, regulators, economists, central bankers, bankers, policy wonks, and epidemiologists. We cannot make economists more scientific; we cannot make humans more rational (whatever that means); we cannot make fads disappear.