Nobel Prize–winning economist James Tobin has suggested that a method of decreasing unwanted sudden capital flows among countries would be to place a small tax on such flows. Post-Keynesian economist...

Nobel Prize–winning economist James Tobin has suggested that a method of decreasing unwanted sudden capital flows among countries would be to place a small tax on such flows. Post-Keynesian economist Paul Davidson argued against doing so because it won’t solve the problem, suggesting that it is like using a pebble when a boulder is needed. What might Davidson’s argument be? (Hint: It is related to the role of expectations.)