John Kay

This month’s budget in Britain will provoke yet another round of debate on austerity versus stimulus. But the issue of how we spend what we have is more important than the issue of what we spend.

In conditions of ignorance, people seize on any information available, even if their reason should tell them that it is irrelevant. Just watch the occupants of the airport lounge fiddling with their BlackBerrys.

Governments will in the end always put voters ahead of prior commitments or external obligations. That democratic imperative has costs and benefits – but, overall, the benefits of popular accountability far exceed the cost.

The highwayman who offers “your money or your life” leaves you free to choose – in a sense. There is a spectrum, not a sharp distinction, between free exchange and coercion.

Legal tender is a concept with no practical relevance. The currency that is accepted is the currency people are willing to accept.

Currency is a confidence trick: its value depends entirely on the belief that it has value.

Adam Smith had not imagined a world in which the Wealth of Nations would cross the world digitally at the click of a mouse. Nor had he envisaged one in which legislation would be drafted by paid lobbyists.

Our intuition is that a centrally planned allocation of resources will be more efficient than an uncoordinated one. In a market economy, that error constantly leads us to overestimate the economic advantages, and longevity, of large companies.

Modern titans derive their authority and influence from their position in a hierarchy, not their ownership of capital.

Good strategy begins with diagnosis. And diagnosis is analysis, not a description of symptoms. You don’t go to your doctor to be told you have a sore throat.