John Kay

Following on from John’s paper, The Map Is Not the Territory: An Essay on the State of Economics, Giovanni Dosi, Professor of Economics at the Sant’Anna School of Advanced Studies in Pisa,  offers his response entitled, Elements of an Evolutionary Paradigm, in which he contends that the current economic paradigm – at its core the notions of equilibrium, utility maximization, and stable preferences – needs to be replaced by an alternative evolutionary paradigm.

On the 24th September John gave an after dinner speech as part of the Center on Capitalism and Society’s 9th Annual Conference entitled,  ’Philosophical Foundations of Economics and the Good Economy: Individual Values, Human Pursuits, Self-Realization and Becoming’. Other speakers included Martin Seligman, Amartya Sen and Joseph Stiglitz. Watch John’s speech here.

As the eurozone crisis deepens and political leaders flail in the face of the huge debts that have left financial institutions and member states teetering on the brink, it is important to understand how we got here if we are ever to figure a way out. In 2005, well before the financial crisis, when the EU was confidently pursuing expansion, John was contemplating the consequences of increased integration without genuine economic discipline in his article, The right to join Europe’s club is not a reward. A year later, in an incredibly insightful piece,  he considered what would happen if Italy had to leave the euro, in If Italy thinks the unthinkable about the eurozone. In 2006 it was almost unthinkable, now it is a very real possibility.

In his more recent articles on Europe John discusses the fudamental flaw in continually providing resources to enable member states to fight markets in Europe’s elite is fighting reality and will lose. He also asks what we might learn from the US in American lessons in how to run a single currency.

John discusses credit default swaps on the today programme. Listen here.

On the 18th October John gave evidence to the Treasury Committee on the proposals put forward in the Independent Banking Commission’s Final Report. Also in attendance were John Hitchins, PricewaterhouseCoopers, John Grout, Association of Corporate Treasurers, Matthew Fell, CBI and Peter Hahn, Cass Business School. Watch full coverage here.

On October 14th at Merton College, Oxford, Professor Robert Frank gave a talk exploring the potentially illuminating role of Darwin in economic theory. John was asked to give his response, along with biologist, Sunetra Guptra. Watch the event here.

On October 11th John gave evidence to the joint committee on the draft Financial Services Bill. Others in a attendance were, the former chancellor, Alistair Darling, Professor Charles Goodhart and Professor Eilis Ferran. The committee discussed the future of regulation in the financial services industry, the Vickers report and the details of the bill. Watch full coverage of it here.

On the 4th October INET published a paper, written by John, that deals with the relationship between economics and the world we live in. The Map Is Not the Territory: An Essay on the State of Economics spells out methodological critiques of economic theory in general, and of DSGE models and rational expectations in particular.

INET forwarded John’s paper to a handful economists and invited them to respond. Harald Uhlig, Chairman of the Economics Department of the University of Chicago, replied with his recent paper Economics and Reality.

Michael Woodford, John Bates Clark Professor of Political Economy at Columbia University, offered his perspective in What’s Wrong With Economic Models? A Response to John Kay.

You can also read the editor of the Journal of Post Keynesian Economics, Paul Davidson’s response here.

John’s latest book Obliquity has now been released in many different languages, in countries all over the world. They include the US, Germany, Brazil, Italy, China, Korea, Taiwan, Turkey, Holland, Japan, Hungary and Portugal.

After the 2007-8 financial crisis, the most common response from politicians and other public figures was for more regulation. John argued that what was needed was not more regulation, but better regulation. In 2009 The Centre for the Study of Financial Innovation published Narrow Banking, in which he discussed the reform of banking regulation. It focused on structural reform that would ’separate the Casino from the Utilty’, allowing banks to fail whilst safeguarding retail deposits. This concept has since won widespread support, and was a central theme in the Independent Banking Commission’s report, led by Sir John Vickers, which was released on the 12th September 2011. Read John’s latest thoughts on this subject in this FT article, Don’t listen to the lobbyists: they never go away.