Awards for Excellence (or maybe not)

In 2006 Euromoney magazine published it’s annual list of best banks.

In the North American category, the awards for both Best Investment Bank and Best at Risk Management went to … Bear Stearns.


When the awards were issued, Bear Stearns was already dangerously exposed to toxic debt, and shortly afterwards collapsed, nearly bringing the global financial system down with it.

When it comes to finance and economics, it’s hard to trust that even the experts know what they are talking about.


Connections makes carefully research recommendations for your charity dollars.  If you’re wondering what the most effective use of your charity dollars are, I strongly recommend reading their recommendations.  On of the charities they recommend is the Schistosomiasis Control Initiative (SCI).

Interestingly, schistosmiasis is increasingly prevalent partly due to the decline of stocks of the fish that eat the snails that carry the disease-bearing parasite.

Overfishing is a classic example of a tragedy of the commons.  It is rational for each individual fisherman to do everything he can to maximise his haul, but eventually a tipping point can be reached.  In 1992 the stock of North Atlantic cod collapsed completely.  The Canadian government issued a moratorium on any further cod fishing.  A 500-year old industry destroyed itself,tens of thousands of people lost their jobs,  and twenty years later the fish stock has only recovered to ten percent of its original size.

It seems to be a tenet of all economic discussions that ‘growth’ is an unqualified good thing.  We need, however, to understand that growth in production is the same as growth in consumption.  As the chart above shows, the cod fishing industry experienced growth for nearly two hundred years.  But in this case, ‘growth’, meant ‘extracting more and more fish from a limited supply every year’.  Eventually the extraction rate surpassed the ability of the fish population to replenish itself, and the industry and ecosystem collapsed.

Unlimited, unbound growth is neither possible nor desirable.  Our global economy must, eventually, transition to a model of sustainability rather than growth.  I’ve discussed earlier the logical endpoints of a relentless focus on growth.

It’s time to figure out what a genuine ‘circular’ economy would look like.  I’m thrilled that people like Ellen MacArthur are taking on this challenge.


Economics in One Lesson

I just read the excellent ‘Economics in One Lesson’, by Henry Hazlitt.  Written more than fifty years ago, it is just as readable and relevant as if it had been published last week.

He starts out by arguing that the reason Economics is haunted by more fallacies than other areas of study is because the world is full of groups who have a direct interest in arguing plausibly and persistently for policies that will benefit them at the cost of others.  Unlike an objective field such as physics or mathematics, there are no end of individuals and groups who are intentionally trying to confuse the general public on the subject of economics.

Hazlitt’s primary lesson is this: “The art of economics consists in looking at merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

What amazed me reading the book is how up-to-date it sounded.  The policies and politics he discusses – strikes, tariffs, industry bailouts, interest rates, taxation, minimum wage laws and protectionism are precisely the same policies that are discussed today.  And the positions he argues against are just as prevalent today as they were in 1946.

The book is freely available at, and I heartily recommend it.

For a lighter presentation, though surprisingly comprehensive, I also recommend this Hayek vs Keynes Rap Anthem, and Keynes vs Hayek Round Two.

The Circular Economy

What do you do once you’ve sailed single-handedly around the world and been made a Dame Commander of the British Empire?  Why, you re-design the world economy, of course, and talk some of the biggest companies in the world into getting on board your vision.

Pathological consumption has become so normalised that we scarcely notice it.

“Bake them a cake, write them a poem, give them a kiss, tell them a joke, but for god’s sake stop trashing the planet to tell someone you care. All it shows is that you don’t.”

George Monbiot points out the absurdity and the cost of our obsession with consuming plastic junk to mark the season.


In better news, Princeton researchers design a significantly more efficient solar panel


And a gravity-powered lamp for developed nations that’s cheaper than burning kerosene.



Future Economics

The word economics has its root in the Greek word oikonomos – one who manages a household.  So economics is the study of how we manage our resources – individually, communally, locally and globally.

Our dominant paradigm is that of a market economy.  This is one of the staggering intellectual achievement of the last few thousand years.  I believe that a market acts as a distributed system for deciding how labour is allocated.  Unlike a centrally governed economy, in a market-driven economy the decisions about what to grow, what to mine, what to build and what to sell are decided by overall market sentiment – fundamentally, what people are willing to buy.

This has some major strengths.  No one individual or computer needs to calculate all the needs and requirements for the population of an entire country or an entire world.

It has its flaws too, which I intend to explore further in future articles.  Most critically, I feel that the market economy under prices the long term costs of resource extraction.  Consider an example.

I decide that I want to eat shrimp, so I go to a seafood restaurant and order some.  So do lots of other people.  As a result of the increased demand for shrimp, more restaurants are built.  The price of shrimp goes up.  Sensing an opportunity, a shipyard builds more trawlers, and more shrimp are caught, meeting the market demand.

So far so good.  But as a result of the extra trawling, the sea-beds are stripped bare, ecosystems are destroyed, other fish are caught up and killed by the nets.  The market system has worked perfectly, but we have failed to take into account the long term costs of our actions.  My grandchildren may never get to eat shrimp, if all of them are harvested now.


So what do we do?  What does a stable, sustainable, global economic system look like?  I have a feeling that it would have many of the characteristics of the existing market system, with a few key changes made.  Perhaps we come up with a way to accurately price in the costs of our actions.  Perhaps we change our concept of ‘value’ to take on a broader meaning.

Perhaps we start by asking – what are we trying to achieve in the first place?