John Kay

Young people might reasonably ask their parents or grandparents why a much richer society cannot now provide the benefits it provided for an earlier generation. I am not sure I have a good answer.

Keynes famously advocated reducing unemployment by employing people to dig holes and fill them in again: today it would be enough to employ them to fill the potholes that are already there.

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.

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.

Financial markets are an effective discipline on profligate individuals and states because markets cannot easily be bullied or lobbied, and their threat to make the cost of funds prohibitive is effective.

From the start, PFI conflated the desirable aim of exploiting private sector management skills in project supervision with the undesirable aim of obscuring public finances with complex funding structures. It created an industry of advisers with a vested interest in its own expansion.

The interpretation of fairness is culturally specific but rarely does it correspond to measures of income inequality. Fairness is a perception, not a Gini coefficient.

Good quangos have specific technical expertise and their purpose is to take issues out of politics. Bad quangos have no distinctive skills and are designed to put issues into politics.

Government spin is especially debilitating because government is a monopoly supplier of much of the information that an informed democracy requires.

There is no simple answer to the question: “How should capital gains be taxed?” So there are as many different regimes as there are national tax systems and they are often, as in Britain, in a state of seemingly endless flux.