John Kay

The suggestion that we might partially turn back the clock has been described as a call for “Hovis banking”, referring to an advertisement that plays on nostalgia. The commercial succeeds because we believe the bread our grandparents ate, before innovations in technology and marketing, was nicer and more wholesome. Perhaps that is true in banking as in baking.

We will succeed in managing financial risk better only when we come to recognise the limitations of formal modelling. Control of risk is almost entirely a matter of management competence, well-crafted incentives, robust structures and systems, and simplicity and transparency of design.

When an industry model is broken, the best business strategy may be to manage its decline.

Britain is a small island, dependent on frequent and reliable air travel. From the distribution of its population, its biggest airport would ideally be north-west of London.

The value of Modigliani-Miller – like any good model in physics or economics – lies as much in the questions it raises as in the truths it reveals.

The theory that the right answer to the gap in information and knowledge between the investment bank’s structured products division and the person in the street is to give the person in the street more information is absurd.

The books that Britain exports have long been made from trees grown abroad. Then globalisation meant the paper was also made abroad, and increasingly the printing took place overseas. Soon selling a book will involve no physical objects. The division of labour becomes ever finer and generally increases the wealth of all involved in the production process.

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.

A business secretary should focus on issues that enable business to improve how it serves the public. He should not act as a super lobbyist collating the suggestions of the chief executives and public relations consultants constantly banging on his door.

The housing market is like other financial markets: price expectations create momentum that drives prices arising from normal affordability ratios. But they must eventually return to these norms through “mean reversion”, creating the endemic booms and busts of cycles.