John Kay

When the next crisis hits, and it will, the frustrated public is likely to turn, not just on politicians who have been negligently lavish with public funds, or on bankers, but on the market system. What is at stake now may not just be the future of finance, but the future of capitalism.

Markets are not a well oiled physical machine: they are a constantly changing, adaptive biological system. Pluralism is their motive force, their essence chaotic, their development inherently uncertain. If we could predict the evolution of markets, we would not need markets in the first place.

Bogus quantification attempts to compress complex problems and analyses into single observations.

If financial institutions are to survive, they must behave more like supermarkets

Government underwriting of deposits should be matched by assets of comparable quality. Otherwise the mismatch of risk provides an unjustifiable public subsidy to the banking sector.

The Reform of Banking Regulation
We should spend less time trying to ensure that our regulators can regulate financial behemoths with turnovers bigger than the GDP of many countries and more on trying to redesign the financial services industry so that regulation focuses on the interests of the public as consumers of financial services.
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If you want a book on economics to take to the beach, you are spoiled for choice at the airport bookstall. What you will find falls into three categories: Thump books, microeconomics books with little economics and the macroeconomic story-teller.

In practice, the only successful method of reducing public spending as a share of GDP has been to impose tight curbs while the economy is growing rapidly. We shall be lucky if such an opportunity appears.

The fall of the Berlin Wall in November 1989 was the defining economic event of our lifetime. It marked the end of the most extensive controlled experiment in the history of social sciences – the division of Germany into two economic zones, one centralised and planned, the other a market economy. After forty years, the gap in living standards between the two was so extreme that the experiment was terminated.

Liberal democracies of the modern world based on lightly regulated capitalism acknowledge two mechanisms of accountability – the marketplace and the ballot box.