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The other multiplier effect, or Keynes’s view of probability

The only reasonable response to the question “what will interest rates be in 20 years’ time?” is “we simply do not know”.

When storytelling leads to unhappy endings

We deal with that world by constructing simplifying narratives. We do this not because we are stupid, or irrational, or have forgotten probability 101, but because storytelling is the best means of making sense of complexity.

The parable of the ox

Since the ox was no longer being weighed, the key to success lay not in correctly assessing its weight, but rather in correctly assessing what other people would guess. Or what others would guess others would guess. And so on.

Rent-seeking lessons from Mubarak to Louis XIV

If business is endlessly frustrating and politics endlessly rewarding, the career choice for able and enterprising people is obvious.

Only market evangelists reconcile Jekyll with Hyde

No one should starve: that does not mean people should eat as much as possible. A country without a financial system would be – is – an impoverished place. It does not follow that the larger the financial system, the more prosperous the country.

The dogma of ‘credibility’ endangers stability

The elevation of credibility into a central economic doctrine has turned a sensible point – that policy stability is good for both business and households – into a dogma that endangers stability.

Basketball shows high banker pay not a slam dunk

The highwayman who offers “your money or your life” leaves you free to choose – in a sense. There is a spectrum, not a sharp distinction, between free exchange and coercion.

A real market economy ensures that greed is good

Our intuition is that a centrally planned allocation of resources will be more efficient than an uncoordinated one. In a market economy, that error constantly leads us to overestimate the economic advantages, and longevity, of large companies.

In love as in equities, we are fooled by randomness

This year I wrote that if men think about sex on average every seven seconds, the average man last thought about sex three and a half seconds ago. But neither love nor equity markets are so predictable.

Horses for courses: picking market models

What would an economist do if he wanted to study horses? He would go to his study and think “what would I do if I were a horse?”

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