Paul Krugman, in the New York Times , writes this about a Tobin tax, the idea of taxing financial transactions such as the buying and selling of stock:

[I]t would deter much of the churning that now takes place in our hyperactive financial markets. This would be a bad thing if financial hyperactivity were productive. But after the debacle of the past two years, there’s broad agreement — I’m tempted to say, agreement on the part of almost everyone not on the financial industry’s payroll — with Mr. Turner’s assertion that a lot of what Wall Street and the City do is “socially useless.”

Krugman is trying to tap into the American—perhaps human—desire to blame someone for anything that seems to go wrong. Here the boogeyman is the “speculator.” The solution to every imagined wrong is always the same for a certain kind of people: government coercion. Krugman is saying that if government taxed what a speculator does, namely trade securities, then the wrong will be righted.

Every sentence, and perhaps every word, in this short quote from Krugman is packed with invalid assumptions, logic-defying emotion, and hubris. It is a newspaper opinion article, so I don’t expect to see citations to claimed “facts” as I do in law journals or refereed articles, but this trick of saying something like “every thinking person not allied with the bad guys agrees with what I’m saying” gets tiresome. Krugman has his life invested in the notion that any (liberal) bureaucrat employed by any government can control all social functions better than society itself can.

I am convinced that any college graduate with a  one semester course on what free market economics really means could explain to Krugman how speculators actually benefit the markets by anticipating and cushioning extreme action. For example, when there is panic and the majority of people are trying to sell at the same time, who buys? The only people buying during a panic are speculators who see emotion all around them, and with cooler heads they speculate that a properly timed purchase will yield them profits later. If you tie the hands of those speculators, the reasoning mind will be left out of the panic and prices will plummet faster.

I cannot imagine that Krugman misses this rational value of speculators. So why do you think he uses emotion-packed terms like “churning” and “hyperactive markets” and “debacle” and “socially useless” when referring to Wall Street?

I can only speculate.