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The Corporation in the Twenty First Century(US Edition) - John Kay
The US edition of John Kay’s newest book, The Corporation in the Twenty First Century, was recently released and is available to purchase via Amazon at the following link: https://us.amazon.com/Corporation-21st-Century-Everything-Business/dp/B0DR4NWF3B.
Pop goes everything - John Kay
The years since the 2008 financial crisis have been among the strangest in the history of monetary policy. Interest rates have been lower than at any time since the Industrial Revolution. Governments have been issuing debt in unprecedented quantities, and central banks have been buying the debt back. But this era seems to be coming to an end. Interest rates around the world are rising. Markets talk not of quantitative easing but of quantitative tightening. What has been going on? Edward Chancellor’s new book offers a very long-term perspective, beginning in Babylon and ending with Covid. The book combines historical scholarship with a deep understanding of modern financial markets. The first known legal code—that of the Babylonian king Hammurabi—was, Chancellor explains, mainly concerned with financial regulation. Still, he observes, “drawing up financial regulations is one thing but getting people to follow the spirit of the law is another matter”. Almost 5,000 years after Hammurabi, some things have not changed. You can read more at Prospect here.
Introduction: Business in Society - John Kay
And no one puts new wine into old wineskins; or else the new wine bursts the wineskins, the wine is spilled, and the wineskins are ruined. But new wine must be put into new wineskins. Mark 2:22, New King James Version1 In 1901 financier J. P. Morgan orchestrated the creation of US Steel, then by almost any measure the largest company in the world. Two years earlier, John D. Rockefeller had consolidated his activities into Standard Oil of New Jersey, which controlled around 90 per cent of refined oil products in the United States. Steel and oil were essential elements in the rise of the automobile industry, which would transform both everyday life and the ways in which people thought about business. Business historian Alfred Chandler documented the rise of the modern managerial corporation in his magisterial Strategy and Structure (1962).2 The book showcased General Motors, along with chemical giant DuPont, retailer Sears Roebuck and Standard Oil of New Jersey. These companies dominated their industries in the United States and increasingly operated internationally. They exerted political influence, and their turnover exceeded the national product of many states. Their combination of economic and political power seemed to secure their dominance in perpetuity. It didn’t. In 2009 General Motors (GM) entered Chapter 11 bankruptcy. GM is still – just – the top-selling US automobile supplier, but its global production lags far behind that of Toyota and Volkswagen. DuPont has broken itself up, and Sears Roebuck is more or less defunct. These failures are not because people have ceased to drive cars and shop or because business no longer requires chemical products. Incumbents lost out because other businesses met customer needs more effectively. Among Chandler’s examples only Standard Oil of New Jersey – now ExxonMobil – continues to enjoy its former leadership status. Somewhat quixotically, in view of the widespread demand for a transition from fossil fuels. In the 1970s you might presciently have anticipated that information technology would be key to the development of twenty-first-century business. And many savvy investors did; their enthusiasm made IBM the world’s most valuable corporation. The leading computer company of the age would surely lead the race to the new frontier. That wasn’t how it worked out. On Wall Street they called the upstarts ‘the FAANGs’ – Facebook (Meta), Apple, Amazon, Netflix and Google (Alphabet). Then the fickle fashion of finance favoured the ‘Magnificent Seven’, with Netflix replaced by Nvidia, and Tesla and Microsoft added to the list – the latter restored to fortune after missing out on the Apple-led shift to mobile computing in the first decade of the new century. Microsoft is actually the longest established of these titans of the modern economy, famously founded in 1975 by Harvard dropouts Paul Allen and Bill Gates. Four of these businesses companies began trading only in the twenty-first century. None of the FAANGs is a manufacturer (I will explain Apple later.) The employees of these companies are not the labouring poor, victims of class oppression; many hold degrees from prestigious universities. (I will come back to Amazon later.) The workers are the means of production. In 2023 investors believed that the ‘Magnificent Seven’ represented the future of business. They clamoured to buy their stock, as they had once clamoured to buy US Steel, General Motors and IBM. And these investors are likely to be right – for a time. But experience suggests the dominance of the seven is likely to be as transitory as that of the large businesses of earlier generations. As I write this, negotiations are proceeding for the rump of US Steel to be bought by Nippon Steel of Japan, and Andrew Carnegie and the Gilded Age have become a footnote to history. Thus the mighty fall – or just slowly fade away. A central thesis of this book is that business has evolved but that the language that is widely used to describe business has not. The world economy is not controlled by a few multinational corporations; such corporations have mostly failed even to control their own industries for long. In the nineteenth and twentieth centuries capital was required to build, first, textile mills and iron works, then railways and steel mills and subsequently automobile assembly lines and petrochemical plants. These ‘means of production’ were industry-specific – there is not much you can do with a railway except run trains along it, and if you want to be an engine driver you need to seek employment with a business that operates (but, as I will explain, does not necessarily own) a track and a train. The leading companies of the twenty-first century have little need of such equipment. The relatively modest amounts of capital they raise are used to cover the operating losses of a start-up business. The physical assets required by twenty-first-century corporations are mostly fungible: they are offices, shops, vehicles and data centres which can be used in many alternative activities. These ‘means of production’ need not be owned by the business that uses them and now mostly they are not. Thus the owners of tangible capital, such as real estate companies and vehicle lessors, no longer derive control of business from that ownership. Labour is no longer subjected to the whims of capitalist owners of the means of production. Often workers do not know who the owners of the physical means of production are, or who the shareholders of the business they work for are, and they don’t know because it doesn’t matter. They work for an organisation that has a formal management structure but whose hierarchy is relatively flat and participative. Necessarily so. In modern businesses the ‘boss’ can’t issue peremptory instructions to subordinates, as Andrew Carnegie and Henry Ford did, because modern bosses don’t know what these instructions should be: they need the information, the commitment and, above all, the capabilities which are widely distributed across the organisation. The modern business environment is characterised by radical uncertainty. It can be navigated only by assembling the collective knowledge of many individuals and by
The Corporation in the Twenty-First Century - John Kay
My new book will be released 29th August, and is now available for pre-order. For generations, we have defined a corporation as a business run by a capitalist elite, that uses its accumulated wealth to own the means of production and exercise economic power. That is no longer the reality. In the twenty-first century, our most desired goods and services aren’t stacked in warehouses or on container ships: they appear on your screen, fit in your pocket or occupy your head. But even as we consume more than ever before, big business faces a crisis of legitimacy. The pharmaceutical industry creates life-saving vaccines but has lost the trust of the public. The widening pay gap between executives and employees is destabilising our societies. Facebook and Google have more customers than any companies in history but are widely reviled. In this book, I examine how business has changed — and how academic models of business have not kept up with those changes. My hope is that this book will provide a better way of understanding the purpose of business, how business actually works, and why a career in business can be both intellectually stimulating and socially valuable.
The Emperor's New Clothes - John Kay
Once upon a time, there was a wise and kindly Emperor, with a faithful retainer called Sid. One day, the Emperor took him aside. ‘You are serving me well, and as a mark of my esteem you will receive a pension which will enable you to maintain your standard of living even when you are no longer fit to work.’ ‘Thank you,’ said the faithful retainer, ‘but what happens, O wise Emperor, if you die before I do?’ ‘Have no fear,’ said the Emperor, ‘My descendants will recognise the prosperity I have bestowed on them. They will honour my commitment, and in fairness to them I have set aside an earmarked sum which recognises the obligation I have undertaken to you and which they will in time assume.’ But then Pooh Bah, the Regulator of Everything, appeared. ‘How can Sid be certain that he will receive the pension which you have promised?’ he asked ‘He can’t,’ said the Emperor. ‘The world is full of radical uncertainty. The empire might become a republic. Or be invaded by Putinia or Trumpland. Or its population might fall victim to the Black Death, or covid 29. My faithful servant might live to be a hundred, or fall under the wheels of a coach tomorrow. And none of us know what investment returns will prove to be over the next 50 years. Or what will happen to inflation.’ The High Chancellor then made what he thought was a helpful suggestion. ‘I am selling,’ he said, ‘long dated bonds, which will mature during Sid’s retirement. There are two varieties. One pays you a very small amount every year, and repays you decades from now in the greatly devalued money of the time. The other will pay back the value of what you paid in, but you have to pay me an annual fee for the privilege of not losing value.’ ‘These sound like terrible propositions to me,’ said the Emperor. ‘I would much rather invest in houses, and schools and hospitals, and roads and bridges, and new businesses, which will yield a positive return and provide benefits and employment for my people. That way all my subjects will be able to enjoy a prosperous retirement. Who buys these unattractive securities you are selling, High Chancellor?’ ‘I do,’ said the Imperial Banker. ‘So the High Chancellor sells them on my behalf,’ said the Emperor, ‘and then the Imperial Bank buys them on my behalf.’ ‘That’s right,’ said the Imperial Banker. The Emperor had never really understood monetary policy, and now he realised it must be even more complicated than he had thought. ‘Does anyone else buy these long dated bonds?’, the Emperor enquired. ‘Yes indeed’, said Pooh Bah. ‘There is a tribe called the Regulatees who must do whatever I tell them. And I have instructed many of them to set aside money to buy the High Chancellor’s bonds.’ ‘Almost all the bonds the High Chancellor issues are now owned either by the Imperial Bank or the Regulatees’, the Emperor’s advisers explained. By now the Emperor was torn between regretting that he had not undertaken the advanced course in finance which had been offered to him, and relief that he had retained his sanity by focussing instead on the ordinary business of the Court. Especially after the Imperial Banker’s aide, who was a whizz with finance, reported that Pooh Bah’s instructions would be disastrous for retirees. If pension provision was based on bonds with negative real returns, then either the pensions would be inadequate or the cost of providing them would be prohibitive. ‘That is none of my business’, replied Pooh Bah. ‘My job is to ensure that everyone is certain to get the pension they have been promised, even fifty years from now.’ That seems to confuse security with certainty, mused the Emperor. The criminal I condemned this morning to life imprisonment without parole has achieved certainty about his future, but such certainty is a punishment, not a privilege. Pooh Bah seems to be offering future pensioners a similar deal – although they will experience a miserable retirement, at least they can be sure that their retirement will be miserable. And, the Emperor continued, ‘I don‘t see how you can offer certainty about the outcome in fifty years anyway. Even if we invested in the High Chancellor’s paper, he might not meet his obligations. And we know he is constantly tinkering with the tax treatment of pensions. And also with indices. At the moment his securities are linked to the retail price index, not the consumer price index, and there is no strips market which enables Regulatees to match assets to liabilities exactly, especially since we are not completely sure what these liabilities are or when they will arise. And we don’t know what returns the High Chancellor will be offering in the future. That is in addition to the ‘black swans’ and long tail events I mentioned earlier which are not incorporated in the forecasts. There are no certainties in business, finance or politics.’ The Imperial Wizard thought he could help. ‘The High Chancellor’s bonds are readily accepted as collateral at the Court Casino’, he observed. ‘There is a new strategy, called Luck and Divine Intervention (LDI), which is almost guaranteed to win. Those gains will secure Sid’s pension and relieve the pressure on the Imperial finances.’ To the Emperor’s surprise, Pooh Bah was nodding in enthusiastic support. But the Emperor had to decline. After some mishaps early in their reign, the Empress had banned further visits to the Court Casino. Then the Court Jester offered a solution. ‘You say you do not know the economic future’, he said. ‘I don’t either. But I can make up all the numbers you and I don’t know.’ ‘Investment returns, inflation rates, mortality distributions – the lot.’ ‘But how does that deal with the uncertainty which surrounds all these things?’, asked the Emperor, whose patience was now wearing thin. ‘Easy’, said the Jester. ‘I will make these numbers up over and over again, so that you have a complete probability distribution of the numbers you don’t know. This
Only One Man Can Save Venice: Mickey Mouse - John Kay
In 2008, the Instituto Veneto awarded me a prize for this essay on the future of Venice, which advocated charging tourists €50 to enter the city. 16 years later, a similar (but cheaper) scheme has been implemented. Venice is the first urban theme park. Like any other theme park, it is full of attractions, but impractical for everyday living. Since it has about 70,000 residents and 19 million visitors a year, most of the people you find in Venice at any time are tourists. The ratio of tourists to residents will rise inexorably. Economic growth will add millions to the numbers of potential visitors, while the fall in numbers of permanent residents, who face high prices for accommodation and low availability of groceries and hairdressers, will continue. The economic logic that leads people to visit Venice for their honeymoon but not to discuss their pension plan will forever dictate the structure of Venice’s economy. With its tourist majority, Venice should be managed as a tourist city, not a municipality, rather as a national park is managed as a tourist area rather than a rural parish. Aesthetes might be appalled by the comparison between Venice and Disneyland, but Venice is as artificial as Disneyland. The city ceased to be a significant commercial and political centre more than 200 years ago. The successors of the Doges of Venice are the politicians of modern Italy, and Venice today lacks the competent management that the Walt Disney Company could provide. Without competent management, the race is on to see whether the city sinks first under a sea of tourists or beneath the waves of the Adriatic. If tourists paid 50 euros (about £38), which is similar to the price of entry to Disneyland, as an admission fee to Venice, the proceeds would fund the barrier needed to protect it from the sea, finance urgently needed conservation, and build better facilities to meet the needs of tourists while preserving the character of the city. The Walt Disney Company would ensure that Venice is preserved because it cares about the value of its assets. Venice’s politicians, who care about re-election, oppose the barrier in favour of something better and less costly, without being specific about what that is. Disney wants its guests to have a good time because it cares whether they come back. Most residents of Venice would rather that visitors didn’t come back. Disney is fiercely protective of its brand but nobody owns the brand that is Venice. If the first thing visitors to Venice remember is the magnificence of the setting, the second is the frequency with which they were ripped off. The point of a €50 charge is not to make tourists pay through the nose: they already do. It is €6.50 to board a vaporetto, overpriced tat flanks the Rialto and the Accademia and the most expensive coffee in the world is served to bad music on St Mark’s Square. An admission charge would divert the money that visitors already pay from the black hole of Italian politics and the greedy merchants of Venice to the preservation and enhancement of the — tourist — amenities of the city. Bewildered Asian visitors wander around St Mark’s Square, taking photographs of each other and feeding the innumerable pigeons. As a tourist city, Venice needs to serve its visitors better. Imagine a visitor centre that explains the role Venice played in the development of Western civilisation and (though not everyone will like it) in the development of Western capitalism — a pioneer of globalisation. Imagine also a Venice off-season, closed to day tourists, allowing those who most love the city to experience it as Ruskin must have experienced it. The problems of Venice are not problems of technology or finance, but problems of politics, organisation and management. Historical accident has placed the jewels of Western Europe’s culture and civilisation in the hands of Western Europe’s most dysfunctional political system. When Ulysses S. Grant created the first national park, he emphasised that America’s natural wonders belonged not just to the people who lived near by but to the nation as a whole. The implication was that the nation had both rights of access and responsibilities of management. Europe’s manmade wonders belong, not just to the people who live near them, but to the inheritors of European civilisation, who have both rights of access and responsibilities of management. Disney is not the best answer: but anything would be better than the squabbles, corruption and delays of Italian politics.
The Biggest Avoidable Policy Disaster in British Politics - John Kay
I prefer true but imperfect knowledge, even if it leaves much indetermined and unpredictable, to a pretence of exact knowledge that is likely to be false. The credit which the apparent conformity with recognized scientific standards can gain for seemingly simple but false theories may, as the present instance shows, have grave consequences. Friedrich von Hayek, Prize lecture in Stockholm on receiving the 1974 Nobel Prize in Economics. 1974 was also the year I thought about pensions for the first time, although, like most people in their twenties, not for long. The long-standing provision of defined contribution pensions for university staff was replaced by a defined benefit scheme, USS. This was an era in which most large employers and many small ones were making similar moves. After a long political debate, Barbara Castle presided over the bipartisan introduction of an earnings-related tier to the state pension scheme, with provision for good occupational schemes to “contract out”. Following the establishment of the ‘cradle to grave’ welfare state in the decades immediately after the Second World War, this extension of defined benefit occupational pension schemes was perhaps the greatest success of British social welfare policy. The system was not without problems. I recall in the 1980s helping Sir David Walker organise a seminar at the Bank of England to discuss issues in the governance of occupational pensions and their relationship to corporate balance sheets. But as schemes matured, the beneficial results of the growth of occupational pensions became apparent. In 1995, more than 60% of pensioners had below median incomes. By 2010 the distribution of pensioner incomes was in line with that of the working population, as the architects of defined benefit schemes had envisaged. Old age was no longer a major cause of poverty. But then the foundations of defined benefit provision began to crumble. Famously, the scale of Robert Maxwell’s theft from Mirror Group Newspapers pension funds was revealed when he was found dead in the sea near Madeira in 1991. It became evident, as we had recognised at that Bank of England seminar, that more needed to be done to promote the security of pension promises and this led to the Goode Report in 1993. Less dramatically, in 1997 Exley, Mehta and Smith delivered a seminal address which introduced a generation of actuaries to modern financial economics. I had once been startled to find that actuaries knew little of finance theory – soon I would come to think they knew too much or at least took it too seriously. Accounting practice was shifting from historic cost to ‘fair value’ assessment of balance sheet values, with possible implications for the treatment of pension liabilities, which became a reality with the adoption of new accounting standards – in particular, FRS 17 in 2000 and IAS 19 in 2001. The outcome of these events was a stream – then a torrent, then a flood – of fresh complexity and regulatory intervention. There were several components to the economic contribution to actuarial analysis. It had long been recognised that money in the future is worth less than money today. This idea was systematised in the calculation of discounted cash flow (DCF) valuations, which enabled a present value to be attached to a stream of prospective cash flows. Subjective expected utility (SEU) valued uncertain returns by reference to their variance and the ‘risk aversion’ of an agent, with such ‘risk aversion’ deduced from the second derivative of the function relating utility to income or wealth. Modern portfolio theory (MPT) and the capital asset pricing model (CAPM) emphasise that the uncertainty attaching to an investment portfolio depends not just on the uncertainties (variances) associated with returns on individual assets but on the covariances between them. Finally, the efficient market hypothesis (EMH) expressed the idea that market prices reflected all publicly available information. (Importantly, the empirical observation that historical equity returns substantially exceeded levels readily explicable by these models, described in 1985 by Rajnish Mehra and Edward Prescott as ‘the equity premium puzzle’, still lacks good explanation within this theoretical framework.) This analytic framework was extensively developed in the 1950s and 1960s and contributed to the transformation of the world of finance from one in which well-bred gentlemen exchanged inside information with each other over long alcoholic lunches, to the professional activities of today that sweep many of the most able students of mathematics into the City of London and Wall Street (or Greenwich, Connecticut). And Nobel Prizes were awarded to Harry Markowitz (MPT), William Sharpe (CAPM) and Eugene Fama (EMH) for their contributions; LJ Savage (SEU) had died in 1971 aged only 53. These models have been indispensable tools in developing our understanding of financial markets. But Hayek’s 1974 lecture gave prescient warning of the dangers of their misapplication. He observed “I regard it in fact as the great advantage of the mathematical technique that it allows us to describe, by means of algebraic equations, the general character of a pattern even where we are ignorant of the numerical values which will determine its particular manifestation. We could scarcely have achieved that comprehensive picture of the mutual interdependencies of the different events in a market without this algebraic technique. It has led to the illusion, however, that we can use this technique for the determination and prediction of the numerical values of those magnitudes; and this has led to a vain search for quantitative or numerical constants…” He continued: “…compared with the precise predictions we have learnt to expect in the physical sciences, this sort of mere pattern predictions is a second best with which one does not like to have to be content. Yet the danger of which I want to warn is precisely the belief that in order to have a claim to be accepted as scientific it is necessary to achieve more. This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely
Scotland's Money? - John Kay
What currency options would be available if Scotland became independent? This pamphlet describes how the globalisation of finance and the digitisation of records have fundamentally changed the nature of money and banking. The author considers the mechanics of a currency transition and concludes that the best option is the continued unilateral use of sterling for the foreseeable future.
To the Lighthouse - John Kay
As fireworks marked the beginning of 2023, Virginia Woolf’s novel To the Lighthouse was finally released from US copyright. To mark the occasion I reprise a lightly edited and amplified version of a column which first appeared in the Financial Times in 2002. The year is 1927, and Virginia Stephen is talking to her husband, Leonard Woolf, over the cornflakes in their elegant Bloomsbury home. VIRGINIA: Darling, I am thinking of writing a novel called To the Lighthouse, based on experiences in my family childhood, and set on the Isle of Skye. It will be a masterpiece of 20th-century fiction. LEONARD: What a good idea, darling. With the Great Depression about to start, the royalties will come in handy. We will not only be able to afford the groceries, but enrich the children and grandchildren of our nephew. The following morning: VIRGINIA: Leonard, my agent tells me that under British law, copyright in my new work will expire 50 years after my tragic suicide in 1941. Wordsworth Editions will then be free to produce copies of To the Lighthouse and will sell them for as little as £1. Students will even be able to buy annotated editions to help them with their exams. (Both aesthetes grimace in horror at the prospect.) LEONARD: What a blow to our finances! But what can we expect in a country governed by men such as Ramsay Macdonald and Stanley Baldwin, with no understanding of the economic needs of creative people? A week later: VIRGINIA: Leonard, my agent has just learned that a European directive which will be approved in 1993 will extend copyright in my work for 20 years. And – what joy – Congress will pass a law in 1998 prolonging my US rights for 75 years after initial publication. I am to be spared the degradation of my books appearing in Walmart until two decades of the next millennium! LEONARD: Wonderful news, Virginia. And how fortunate that our friend Maynard Keynes is coming for dinner. He is a director of the Midland Bank and I am sure that as well as warning us about the impending depression and the collapse of the gold standard, he can arrange a loan on the security of the royalties you will earn between 1991 and 2022. I will pop out to the stationer and buy you pen and ink right away. And so British novelists and composers who died more than 50, but less than 70, years ago were able to leave their footprints in the sands of time. But for the prospect of retrospective copyright extension we could so easily have lost not just To the Lighthouse, but 1984 (published 1949, Orwell died 1950) and The Grapes of Wrath (published 1939, Steinbeck died 1968). How fortunate we are that Jane Austen, Herman Melville and DH Lawrence were not deterred from writing by the short copyright terms prevailing when they wrote! Copyright on The Grapes of Wrath, perhaps the greatest novel of 1930s depression America, will expire in the US in 2034 and in Europe in 2038. The Great Gatsby, the iconic novel of the roaring twenties, entered the public domain only last year. In 2003 the US Supreme Court decision upheld the 1998 extension of copyright (legislation officially called the Sonny Bono Copyright Act after the chart topping singer – I’ve Got You Babe – turned Representative from California, but more widely known as the Mickey Mouse Copyright Act after the Disney Corporation lobbied vigorously for its passage.) Dissenting, the sadly missed Justice Stephen Breyer noted the minimal present value of earnings 95 years in the future and asked “What potential Shakespeare, Wharton, or Hemingway would be moved by such a sum? What monetarily motivated Melville would not realize that he could do better for his grandchildren by putting a few dollars into an interest-bearing bank account?” Has any company’s discounted cash-flow calculation ever incorporated returns more than 75 years from now? The retrospective nature of the change in the law shows that the object is not to stimulate new creative activities but to enrich owners of the rights to old ones. Breyer observed that the Constitution allowed Congress to pass legislation to “promote the Progress of Science . . . by securing for limited Times to Authors . . . the exclusive Right to their respective Writings. That was not the motive which prompted the Mickey Mouse Act. (However the Majority on the Court took the view that the meaning of ‘limited Times’ was a subject within the proper scope of Congressional judgment.) Now there is something in the argument that a single powerful company is the best means of securing investment in, and development of, products and activities. But the experience of modern market economies is that innovation and consumer interests are almost always better served by competition than monopoly. Creative industries differ only in that diversity and experiment are even more important in art and literature than in oil and water supply. Shakespeare’s legacy might be better protected and developed if his works and characters could only be used under license from the Royal Shakespeare Corporation. Such an agency could prohibit bad productions and ensure that annotated texts properly reflect the consensus of the corporation’s approved scholars. But the history of totalitarian art gives little grounds for optimism that this would stimulate creativity. Rather the opposite.
Introduction: Business in Society - John Kay
And no one puts new wine into old wineskins; or else the new wine bursts the wineskins, the wine is spilled, and the wineskins are ruined. But new wine must be put into new wineskins. Mark 2:22, New King James Version1 In 1901 financier J. P. Morgan orchestrated the creation of US Steel, then by […]
The Corporation in the Twenty-First Century - John Kay
My new book will be released 29th August, and is now available for pre-order. For generations, we have defined a corporation as a business run by a capitalist elite, that uses its accumulated wealth to own the means of production and exercise economic power. That is no longer the reality. In the twenty-first century, our […]
Only One Man Can Save Venice: Mickey Mouse - John Kay
In 2008, the Instituto Veneto awarded me a prize for this essay on the future of Venice, which advocated charging tourists €50 to enter the city. 16 years later, a similar (but cheaper) scheme has been implemented. Venice is the first urban theme park. Like any other theme park, it is full of attractions, but […]
Hiring Research Assistant - John Kay
Professor Sir John Kay is one of Britain’s leading economists with particular interests in business and finance and their interaction with public policy. Fuller information on his work, career and research interests can be found on the rest of this site. He is looking for a research assistant for a period of one to two […]
The Biggest Avoidable Policy Disaster in British Politics - John Kay
I prefer true but imperfect knowledge, even if it leaves much indetermined and unpredictable, to a pretence of exact knowledge that is likely to be false. The credit which the apparent conformity with recognized scientific standards can gain for seemingly simple but false theories may, as the present instance shows, have grave consequences. Friedrich von […]
The Emperor's New Clothes - John Kay
Once upon a time, there was a wise and kindly Emperor, with a faithful retainer called Sid. One day, the Emperor took him aside. ‘You are serving me well, and as a mark of my esteem you will receive a pension which will enable you to maintain your standard of living even when you are no […]
Pop goes everything - John Kay
The years since the 2008 financial crisis have been among the strangest in the history of monetary policy. Interest rates have been lower than at any time since the Industrial Revolution. Governments have been issuing debt in unprecedented quantities, and central banks have been buying the debt back. But this era seems to be coming […]
To the Lighthouse - John Kay
As fireworks marked the beginning of 2023, Virginia Woolf’s novel To the Lighthouse was finally released from US copyright. To mark the occasion I reprise a lightly edited and amplified version of a column which first appeared in the Financial Times in 2002. The year is 1927, and Virginia Stephen is talking to her husband, […]
Job Advert: Assistant to John Kay - John Kay
John Kay is one of Britain’s leading public economists. He writes books and articles and lectures widely to both technical and general audiences. If you are not familiar with his work, go to www.johnkay.com John requires an assistant to provide both research assistance and administrative support. The work will involve research assistance of a conventional kind: collecting and analysing data […]
Scotland's Money? - John Kay
What currency options would be available if Scotland became independent? This pamphlet describes how the globalisation of finance and the digitisation of records have fundamentally changed the nature of money and banking. The author considers the mechanics of a currency transition and concludes that the best option is the continued unilateral use of sterling for the foreseeable future.
Possible Paths Podcast: Decision-making, ‘Radical’ Uncertainty, Biases & Heuristics, how ‘Greed is Dead’, and more… - John Kay
NewsPodcastPossible Paths Podcast: Decision-making, ‘Radical’ Uncertainty, Biases & Heuristics, how ‘Greed is Dead’, and more…September 15, 2021455Share on FacebookTweet on TwitterTAGSbehavioral economicsPodcastRadical UncertaintySHAREFacebookTwittertweet!function(d,s,id){var js,fjs=d.getElementsByT
Job Advert: Assistant to John Kay - John Kay
John Kay is one of Britain’s leading public economists. He writes books and articles and lectures widely to both technical and general audiences. If you are not familiar with his work, go to www.johnkay.com John requires an assistant to provide both research assistance and administrative support. The work will involve research assistance of a conventional kind: collecting and analysing data […]
Planning reform is tearing the Tories apart. But the system is fixable - John Kay
It is a truism that Britain needs more houses. As the population has grown, average household sizes have fallen—from four before the Second World War to 2.4 today, the result of greater longevity, more single parents and more independent lifestyles. Much of our housing stock is in the “wrong” place—too many people want to live […]
Alice in Wonderland College - John Kay
Alice opened the door to the Hall of Wonderland College. In the absence of the Dean, the Mad Hatter was presiding at High Table. The assembled dons were discussing the Universities Superannuation Scheme, as they did so often nowadays. The Dormouse was comatose as always. ‘Have a cup of tea’, the Mad Hatter suggested; but […]
Why competitiveness should not become a goal for the FCA - John Kay
The promotion of competition is an existing aim of financial regulation. But in proposals around the Future Regulatory Framework in the Queen’s Speech last month, an additional objective was suggested: encouraging “competitiveness”. This modification of the regulatory remit sounds like a technical, semantic change. It is indeed technical — the devil of all financial regulation […]
Psychology is Fundamental: The Limitations of Growth-Optimal Approaches to Decision-Making Under Uncertainty - John Kay
We argue that ergodicity economics as currently theorised is actually a restricted case of the theory it criticises, and it does not provide convincing alternative justifications for its usefulness.
Capturing the regulators - John Kay
A new book by Financial Times journalist Dan McCrum tells the story of Wirecard. The German company, which acted as a payment processor (an intermediary between shopper and merchant), appeared to be one of continental Europe’s relatively few successful technology start-ups. Except it wasn’t. In June 2020, Wirecard filed for insolvency. Many of its assets and reported […]
Scotland and Ukraine - John Kay
There is not much humour to be found in the Ukrainian war, but here is a vignette that might give momentary relief from the tragedy – or even a moment of insight into it. Luhansk, capital of the self-declared independent Luhansk republic in Eastern Ukraine, was founded by the British industrialist Charles Gascoigne. He established […]