John Kay

Visiting Professor
London School of Economics and Political Science

John Kay is one of Britain’s leading economists. He is a distinguished academic, a successful businessman, an adviser to companies and governments around the world, and an acclaimed columnist. His work has been mostly concerned with the application of economics to the analysis of changes in industrial structure and the competitive advantage of individual firms. His interests encompass both business strategy and public policy.

He was born and educated in Scotland, at the Royal High School, Edinburgh, and at Edinburgh University before going to Nuffield College, Oxford, as a graduate student. He is a Fellow of the British Academy, the Royal Society of Edinburgh and a member of the Scottish Government’s Council of Economic Advisers. He was awarded by honorary D.Litt by Heriot-Watt University, Edinburgh.

He began his academic career when he was elected a fellow of St John’s College, Oxford at the age of 21, a position which he still holds. As research director and director of the Institute for Fiscal Studies he established it as one of Britain’s most respected think tanks. Since then he has been a professor at the London Business School and the University of Oxford, and is currently a visiting Professor at the London School of Economics. He was the first director of Oxford University’s Said Business School.

In 1986 he founded London Economics, a consulting business, of which he was executive chairman until 1996. During this period it grew into Britain’s largest independent economic consultancy with a turnover of £10m and offices in London, Boston and Melbourne. He has been a director of Halifax plc and remains a director of several investment companies. In 1999 he resigned his position at Oxford and sold his interest in London Economics. Now his time is principally devoted to writing.

He believes that economics holds the most powerful tools available in the social sciences today, but that an exaggerated and sometimes exclusive emphasis on rational choice models and individual and corporate selfishness undermines both our understanding of economic and social life and the functioning of our economic systems. This theme is today common to much of his work, which uses economic concepts to illuminate a variety of disparate issues.

A frequent writer, lecturer and broadcaster, he contributes a weekly column to the Financial Times. Two collections of his recent writings have been published, Everlasting Light Bulbs in 2004, and The Hare & the Tortoise in 2006. He is the author of Foundations of Corporate Success (1993), and The Business of Economics (1996). His book, The Truth about Markets, was published in 2003 to wide critical acclaim. (A US version, Culture and Prosperity, appeared in 2004). This balanced assessment of the strengths and weaknesses of market organisation, and the flaws in the financially oriented version of market fundamentalism which he described as the American business model, has stood up well in the recent turmoil.

His latest book, The Long and the Short of It, was published in January 2009. This book is an explanation of how the financial system operates, a critique of its provision for personal investors, a guide to the elements of financial economics, and a survival manual for individuals bereft of advice they can, or should, trust. This book is the product of a wider project on how mistaken concepts of rationality distort decisions in finance, business and politics.

The next publication from that project, his new book Obliquity, will be published in March 2010. Obliquity is the idea that complex goals are rarely best achieved when pursued directly: the happiest people are not those who pursue happiness, the wealthiest people are not the most materialistic, the most profitable companies are not the most profit-oriented. The book explores the way in which bogus notions of rationality are used in modern politics, business and finance to justify decisions which are made (and necessarily made in different ways.

He commutes between London, Oxfordshire and the south of France, and his favourite recreation is walking in the mountains behind the French Riviera, an opportunity for reflection which provides many of his best ideas.

My Content

Today, INET presents you a paper that deals with the relationship between economics and the world we live in. John Kay spells out methodological critiques of economic theory in general, and of DSGE models and rational expectations in particular. The paper builds on two articles that Kay, Fellow at St. John’s College of Oxford University and Visiting Professor at the London School of Economics, recently published in the Financial Times (scroll down to find the links). It is concerned with the relation of quantitative models to the world in which we live, and with evergreens such as the implications of unrealistic assumptions in economic theory. Highly recommended reading.
Obliquity is the principle that complex goals are best achieved indirectly. This book explains why the happiest people aren’t necessarily those who focus on happiness, and how the most successful cities aren’t planned (look at Paris versus Brasilia).
This book presents a novel approach to the reform of the world’s financial system, starting with the basic question, what is a financial system for? It shows that the existing system has become far more complicated than it needs to be to discharge its functions – and dangerously unstable into the bargain. It proposes some drastic remedies.

My Video Content

See video

John Kay speaks about the "Capitalism and the Rule of Law" panel at the Institute for New Economic Thinking's "Changing of the Guard?" conference in Hong Kong and how it applies to China.

See video

Discussion and Q&A at the breakout panel entitled "How Can We Create a Financial System That Is Socially Useful?" at the Institute for New Economic Thinking's (INET) Paradigm Lost Conference in Berlin. April 14, 2012. #inetberlin

See video

John Kay, Visiting Professor, London School of Economics and Political Science, speaking at the breakout panel entitled "How Can We Create a Financial System That Is Socially Useful?" at the Institute for New Economic Thinking's (INET) Paradigm Lost Conference in Berlin. April 14, 2012. #inetberlin

See video

How "Obliquity" -- Pursuing Goals in a Roundabout Way -- is Better for Business and for an Innovative Economy

See video

In part 5 of INET's interview with John Kay, he discusses the idea of how the story of the British Post War pharmaceutical industry shows that most profitable companies are not the most profit-oriented