John Kay

The macroeconomics taught in advanced economics today is largely based on analysis labelled dynamic stochastic general equilibrium. The unappealing title gives the game away: the theorists are mostly talking to themselves. Their theories proved virtually useless in anticipating the crisis, analysing its development and recommending measures to deal with it.

To learn from mistakes, you must first acknowledge them.

The assertion that depositors in Kaupthing and Landsbanki have a claim on ordinary people who were too prudent to put money there, or did not have any money to deposit in the first place, has little justice or legal basis.

“Too big to fail” insurance is likely to leave the non-financial economy with the worst of all possible worlds – less public control of risk and greater potential calls on taxpayers.

Tailgaters think the view that their behaviour is dumb is based on a purely theoretical analysis, which is refuted by the tailgater’s practical experience. And so the culture of self-confident, self-congratulatory tailgaters perpetuates itself.

In the name of free markets, we created a monster that threatens to destroy the very free markets we extol.

Every era spawns financial follies. Every era spawns observations that, with hindsight, protagonists wish they had not made.

Processes matter to us as well as outcomes, and so we genuinely appreciate gifts even if we don’t really care for the item.

The most effective control is other parties’ diligence in assessing the businesses with which they deal.