Peak performance
The idea of rational profit- and utility maximisation is prominent in economics, but was challenged by Herbert Simon, a winner of the Nobel Prize in economics who died in February. Instead Simon emphasised the idea of bounded rationality in economics. This article explains why that approach deserves to survive its author.
Oxford University: Facing the Future (Prospect reply)
John Kay responds to some of the criticisms that resulted from his recent article in Prospect Magazine.
Waldfogel’s unwanted gift
Can conventional economic theory be extended to understanding Christmas gifts? Maybe it can, but this would require a more subtle understanding of human behavour than the idea of rational economic man. This article shows that we do not simply value gifts in terms of the cost of the purchase.
Premium mortgage advice
Some aspects of financial advice may not need to be tailored.
Knowing versus guessing
As markets develop, gamblers seem to increase in numbers relative to insurers. We need to emphasise the distinction.
Downfall of an economic experiment
According to conventional wisdom, New Zealand has done everything right in its economic policies: rolling back the slate in industry and welfare, establishing an independent central bank, repaying its public debt. Yet over the fifteen years of reform its economic performance has been dismal. New Zealand is the new Argentina, a once-rich state.
Water companies not built to float
Water companies are unloved by their customers and by the market. The privatisation settlement was essentially flawed. Kelda's initial proposals have now been abandoned, but a version of them deserves to succeed.
Buyers must master art of the particular
If stock-picking fails to beat the index, why should picking companies? It won’t, unless mergers carefully match the firms involved.
Stretching the figures
“Do the math” has become the mantra of a generation of consultants and investment bankers. The new economy, they claim, requires new principles of valuation. But the rules of logic hold even in cyberspace, and so do the principles of economics. Profits are hard to earn in competitive businesses, and markets that are not competitive are usually regulated.
Young surfers catch a wave
The Parable of Dot, Com and Uncle Sam. Where exactly is Uncle Sam’s money going?