John Kay

The eurozone’s difficulties have been created by member states not markets, giving members more resources to fight markets makes things worse, not better.

Rational expectations fail for the same reason communism failed – the arrogance and ignorance of the monopolist.

The skill of the statesman is to distinguish situations in which ambiguity makes coexistence possible from those that will make the future more troublesome. In this respect, politicians who have steered world affairs through the financial crisis have not served us well.

The reputation of economics and economists, never high, has been a victim of the crash of 2008. The Queen was hardly alone in asking why no one had predicted it. An even more serious criticism is that the economic policy debate that followed seems only to replay the similar debate after 1929. The issue is budgetary austerity versus fiscal stimulus, and the positions of the protagonists are entirely predictable from their previous political allegiances.

The jobs and growth the bankers claim will be in jeopardy are their own: the pressing needs of the real economy point not to delaying change, but to implementing it as speedily as possible.

A few failed components may bring about collapse in a complex interdependent system. As in the Gulf of Mexico spill, or at the Fukushima disaster, or in the credit market in 2008.

The turmoil following the collapse of Lehman Brothers three years ago was an opportunity to
reform the world’s financial system. It was missed, and the new crisis promises little change.

After mistaken claims made ahead of the global crisis won much academic support, long-held assumptions were called into question – but the real world often remains overlooked or ignored.

Sovereign debt repayment is more about politics than economics.

In the dollar bill auction, one party eventually scores a pyrrhic victory and takes possession of the dollar bill. Both parties lose, but the smaller loser is the person who sticks out longest. That is not usually the rational player.