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Why cricket is like spam

Posted by on July 23, 2015 in Networks | 0 comments

Why cricket is like spam

The holiday season gets into full swing, but a shadow has been cast by the abysmal failure of our boys to get anywhere near the enormous target of 509 which Australia set them to win in the second Test match.  It may seem preposterous even to have thought they would.  But a revolution seems to be taking place in the ability of teams to make large scores in the fourth innings.

S Rajesh, the stats editor of the website ESPNcricinfo, has a fascinating piece on whether batting in the last innings has become easier.  In the 140 year history of Test cricket, teams have scored 350 or more in the final innings on only 49 occasions.  Of these, no fewer than 21 have been in the past ten years.  The chances of winning when faced with such a challenge still remain low.  Only four sides won in the most recent decade, and only nine in total, but the ability to score heavily seems to have leapt up.

Before the Second World War, teams made 350 or more just five times.  Admittedly, one of these was the monumental 654-6 which England made in South Africa in 1939.  The match was timeless, with England being set 696 to win.  But at the end of the tenth day, the match had to be abandoned as a draw so that the team could catch their ship home.  In the five decades from 1945 to 1995, with many more Tests being played, 350 was exceeded only 14 times.

Rajesh offers some explanations for the dramatic rise in large fourth innings totals.  Higher scoring rates, boosted by the techniques of Twenty20 cricket, mean that teams tend to start their final innings earlier in the match, when the pitch has had less chance to deteriorate.  And in general pitch maintenance is better, so they crumble less.

This all sounds plausible and rational.  But the change may not be a permanent one.  The world of spam filtering illustrates why.  The attacking side, the spammers, constantly change their strategies to try and break through, and the defenders also develop their techniques.  At the moment, they are on top, with the US company Symantec claiming that spam rates are now lower than ever.  But we have been here before.  In 2012, the infamous Russian botnet, Grum, was taken down by spam fighters and spam fell by a half, only to bounce back.  In the same way, there are two sides in a cricket match, and strategies evolve over time. They just take longer to work out and perfect.   In the inter-war period, massive scores were made very rapidly, as improvements in batting techniques dominated.  The fielding side then gained the upper hand.  Fielders became more athletic and defensive placements got better.  Bowling techniques evolved in their ability to contain the batsman.

In any evolutionary system in which two adversaries face each other, fluctuations in outcomes will take place.  Spam and cricket are just two examples.  Maybe even England will be able to learn how to score more than 103.

As published in City AM on Wednesday 22nd July 2015

Scandinavia provides the evidence for Osborne’s war on welfare

Posted by on July 20, 2015 in Economic Theory, Government Spending, Public Policy | 0 comments

Scandinavia provides the evidence for Osborne’s war on welfare

George Osborne’s budget has been met with predictable outrage from the poverty lobby.  The cuts to the welfare budget will allegedly create shocking levels of deprivation.  Young people in particular, it is stated, have been singled out for punitive measures.  On the face of it, the arguments do seem plausible.  Many people on benefits will get less money.  But slashing these payments is a policy which is very popular with the electorate as a whole.  The welfare state, created with the best of intentions, is increasingly seen not as a provider of services to the population as w hole, but as a means of transferring money to those on benefits.

A fascinating new monograph by Nima Sanandaji looks in detail at the welfare systems of the Scandinavian countries over the past century.  Its main title, ‘Scandinavian unexceptionalism’, could mean anything.  But the sub-title rams the message home: ‘Culture, markets and the failure of third-way socialism’.  Greece shows the failure of socialism when other countries are expected to pick up the bill.  Sanandaji writes about the failure of socialism when the tab for a large welfare state is handed to people inside the country itself.  Although they seem harsh, Osborne’s policies will eventually prove to be in everyone’s interests, including those of the poor.

The economic success of the Scandinavian economies long predates their large welfare states.  Between 1870 and the Second World War, for example, Sweden was the fastest growing developed country in the world.  Their success was not a miracle, but was based on standard ingredients such as an open economy, competition in domestic markets, the rule of law, and reasonable levels of taxation.

Even in 1955, the share of taxation in GDP was lower in Sweden, Denmark, Finland and Norway that it was in the UK.  In the case of the former two, the tax take was low by the standards of the rich nations at the time, being in the low 20 per cent range, very similar to the United States.  The Scandinavian experiment of high taxation and a generous welfare state only began in the 1970s.  By 1985, whilst the tax take in the US had remained at 25 per cent, almost the same as in 1955, it was 46 per cent in Sweden and 48 per cent in Denmark.

From the 1970s, the previously dynamic Swedish economy virtually stalled.  Between 1970 and 2000, net job creation in the private sector was zero.  Sweden fell from 4th position in the OECD table on living standards to 11th.  Taking into account sick leave, which grew enormously, and early retirement, the Nobel Prize winner Thomas Sargent calculates that the true rate of unemployment in Sweden since the mid-1990s has varied between 14 and 18 per cent.

The Scandinavian countries, with the partial exception of oil-rich Norway, began to scale back both taxation and welfare provisions in the 21st century and their economic performance have improved.  Correlation does not prove causation, but the Scandinavian experiences suggest that apparently generous welfare states eventually damage everyone’s prosperity.

As published in City AM on Wednesday 15th July 2015

Guaranteed bank deposits and the market for lemons

Posted by on July 9, 2015 in Debt, Economic Policy, Economic Theory, Euro-zone, Financial Crisis, Markets | 0 comments

Guaranteed bank deposits and the market for lemons

One aspect of the Greek crisis which will affect many readers is the reduction in the amount of cash in a bank deposit which is protected.  The Bank of England announced that the current guaranteed amount of £85,000 will be cut to £75,000 on 1 January.  This has led to predictable outrage, with Andrew Tyrie MP, who chairs the Treasury Select Committee with distinction, being one of the leaders of the attacks.

The provision of any sort of bailout involving banks raises tricky questions.  At the height of the financial crisis during 2008, the then Governor of the Bank of England, Mervyn King, agonised over the so-called moral hazard problem.  Once you rescue a bank with state funding, the incentives to banks to ensure their own liquidity and solvency in the future might be weakened.  King eventually decided that bailouts were essential.  A strong consensus of economists agrees with this view, although there are prominent names who dissent.

Without the deposit guarantee scheme, bank customers would certainly have much stronger incentives to discover for themselves the creditworthiness of any particular bank.  In general, the principle that the onus is on the consumer to find out about the risks of a purchase is widely accepted.  Sellers cannot misrepresent their offer, but otherwise it is up to the buyer.  This applies even to really big ticket items like houses.

The whole idea of protecting bank deposits, on this view of the world, is just another manifestation of the nanny state culture.  People are grown ups and should take responsibility for their own actions.  There is a lot to be said for this view in most cases.  But the bank guarantees are different.

Way back in 1969, George Akerlof of Berkley published a paper for which he eventually received the Nobel Prize.  It is called “The market for lemons”.  He didn’t mean the actual fruit, but ‘lemon’ in the sense of a dud purchase.  Akerlof illustrated his remarkably deep theoretical model with the example of the used car market.   If you see a classified ad for a second hand car and go to look at it, you can kid yourself that you know what you are doing by kicking the tyres like Del Boy.  But the plain fact is that the seller knows a lot more about the actual quality of the car than you do.  Economists love jargon, and this simple concept became known as ‘asymmetric information’.

Markets themselves are often used to try to correct such imbalance.  When you buy a house, you also buy the services of professionals like lawyers and solicitors. They supply you with the information needed to make you almost as knowledgeable as the buyer.  Even they can’t tell you the dog next door barks at night.  But with banks, dogs might bark all day and they are still very difficult for experts to hear.  Regulators, central banks, finance ministries all missed the fact that in 2008 many banks were essentially bust.  They all suffered from asymmetric information.  Deposit guarantees are a Good Thing and should not be reduced.

As published in City AM on Wednesday 1st July 2015

Child poverty is thankfully not rising – but the archaic definition needs to go

Posted by on July 2, 2015 in Economic Policy, Economic Theory, Employment, Politics, Socialism | 0 comments

Child poverty is thankfully not rising – but the archaic definition needs to go

David Cameron is feeling the heat. This is not just a consequence of the sudden dramatic rise in London temperatures. The need to extract something meaningful from our EU partners and the increased threat of terrorist attacks are sleep-depriving problems. But the Prime Minister did have one good result during the past week. Despite widespread predictions to the contrary in the liberal media, the newly-released child poverty figures showed that there had been no increase in the number of children in poverty over the 2011-12 to 2013-14 period.

According to official statistics, the number is still high, at 2.3m. This represents 17 per cent of all children. But apart from a small blip at the height of the 2008-09 recession, the trend has been slowly but steadily downwards since 2000, when 26 per cent were classed as being poor. A child is classed as being in poverty if the household has an income of less than 60 per cent of the UK median. The median is the level at which half of all households have an income above that level, and half are below. It is currently around £25,000 a year in the UK, so a poor household is one which has an income below £15,000.

Life isn’t much fun on that sort of income, and no amount of intellectual juggling can get away from this point. But the official definition of child poverty is a pretty odd one. The idea that an income below 60 per cent of the median made you poor was dreamt up in the 1960s by leftist academics like Peter Townsend, then at the LSE. It meant, quite literally, that the poor would always be with us. If, by the stroke of a magic wand, everyone’s real income in the UK were doubled overnight, the median level would be £50,000 a year. And those with less than £30,000 would then be deemed poor.

More importantly, the data on household incomes in any year are a snapshot taken at a particular point in time. The information does not tell us how people move over time.

In fact, there is a decent amount of mobility in terms of moving up and down the income ladder, as the work of scholars like Tony Atkinson at Nuffield College, Oxford shows. Being poor today does not necessarily mean you will be poor tomorrow. Sajid Javid  was the son of a bus conductor in Rochdale. He is now a multi-millionaire and in the Cabinet.

There is a large scientific literature on the question of income mobility. But as a broad summary, both here and in the US, 40 per cent of all households in the bottom 20 per cent of the income distribution will still be there in 10 years’ time. But this means that 60 per cent have moved up, around 10 per cent of them into the top 20 per cent of all incomes.

Rather than being stuck with one that is little more than a relic of the ideology of the 1960s, a more realistic definition of child poverty would take account of these dynamics.

As published in City AM on Wednesday 1st July 2015

Who plays better poker? Cameron, Sturgeon or Varoufakis?

Posted by on June 25, 2015 in Economic Theory, Politics, Socialism | 0 comments

Who plays better poker? Cameron, Sturgeon or Varoufakis?

The gracious Palladian architecture of Edinburgh has often led the city to be described as the Athens of the North. If the referendum result had gone the other way, much closer parallels would have rapidly emerged. A high spending left-wing government, faced by a collapse in revenues with the fall in the oil price, would soon have faced the wrath of international capital markets. This could so easily have been the UK as a whole, as the recent politics of Aberdeenshire Council demonstrate. Until last month, the council was narrowly controlled by a motley collection of the unionist parties, embracing the Conservatives, Labour, and Lib Dems. This vignette shows that Labour would happily have worked with the SNP to form a government in Britain. But there are differences between Scotland and Greece. The Scots, for example, have shown themselves to be much more adept practitioners of the esoteric discipline of game theory. Varoufakis, former academic turned Greek finance minister, specialised in the subject. A sound knowledge of game theory can often be very useful. Chris Ferguson, for example, winner of no fewer than five World Series of Poker championships, teaches game theory at UCLA. The deluded Greek Trotskyist seems to have convinced himself that his theoretical knowledge would give him a decisive advantage in the negotiations with the troika of the IMF, the ECB and the European Commission. But he seems to have forgotten that the purpose of playing a game is to win. You win at soccer by simply scoring more goals than your opponent. But the concept of winning in a set of negotiations is often not as clear cut as this. One of the insights of game theory is that it is possible for both sides to win. To achieve this, the players might adopt strategies which signal their willingness to play co-operatively. The pay-off for both can be much higher over time than when they intend to, in the game theory jargon, defect. That is, make a move at some point which is intended to shaft the opponent. Nicola Sturgeon and David Cameron have manoeuvred themselves into a lucrative strategy of co-operation. The game began during the election campaign. The SNP needed to destroy Labour in Scotland. They trumpeted their intention to help Ed Miliband get into Downing Street. The Conservatives seized on this, and used the SNP bogeyman to frighten the voters in the marginals. The game goes on. Cameron needs to make some concessions to Sturgeon so she can boast about them to the Scottish electorate. But the SNP also needs to maintain a set of grievances, which is their raison d’etre. Neither side actually wants to redress them, so that both sides continue to gain and keep Labour out. Practical politicians are often much better practical game players than so-called expert theorists.

As published in City AM on Wednesday 24th June 2015

Supply side success is a cure for the drug of deficit finance

Posted by on June 22, 2015 in Austerity, Economic Policy, Economic Theory, Employment, GDP, Government Borrowing, Government Spending, Inflation, INVESTMENT, Markets, Politics, Public Policy | 0 comments

Supply side success is a cure for the drug of deficit finance

George Osborne’s plan to run financial surpluses and use them to pay off government debt has been met with the usual set of whinges and whines, mainly from academic economists funded by the taxpayer. Of course, their arguments are based purely on what they believe to be the intellectual merits of their case.  One of the more prominent names is David Blanchflower, once a Gordon Brown favourite on the Monetary Policy Committee, who at least is based in a private university in America. Blanchflower predicted that coalition policy after the 2010 election would lead to 4 million, and possibly even 5 million, unemployed. The actual figure now is 1.8 million. Still, economic forecasting is a notoriously difficult exercise.

It is clearly very difficult for a certain kind of economist to grasp the fact that an economy can prosper whilst at the same time the government balances the books. The two decades after the Second World War were probably the most successful in the entire history of the UK as an industrial economy, stretching back to the late 18th century. From the late 1940s to 1964, real GDP grew at an annual average rate of 3.5 per cent. Today, relatively few economists believe that we can sustain an annual growth of more than 2.5 per cent. And each additional one percentage point extra on GDP represents the best part of £2 billion worth of extra output.

Over this period, successive governments added virtually nothing to the size of government debt. In some years the government ran a surplus, and in others a deficit. But cumulatively, these more or less cancelled out. At the same time, low but persistent inflation eroded the value of the outstanding stock of debt, so that as a percentage of GDP, government debt declined sharply over these 20 years. Of course, fiscal prudence did not by itself cause the strong economic performance. Indeed, rapid growth leads to a growing flow of receipts from taxation, which makes it easier for a government to behave responsibly.

The key point is that the 1950s and early 1960s were very favourable to sustained growth driven by the supply side of the economy, by companies incentivised by the prospect of profit. The controls and restrictions imposed of necessity during the war had largely been lifted by the time the post-war socialist government under Attlee lost office in 1951.  Living standards has been ruthlessly squeezed during the war in order to divert resources into the armed forces. So there was a massive pent up demand for new consumer goods. Companies had been unable to invest during the war, so they wanted to build up their stocks of capital equipment rapidly. The net result was a prolonged boom, driven by the supply side, and enhanced by the renewed opening up of world trade.

Economic theory suggests strongly that longer term growth is driven by the supply side, by investment and innovation. If Osborne can create a climate in which these flourish, he will simply not need the drug of deficit finance.

As published in City AM on Wednesday 17th June 2015

Banks, cancer and Stephen Hawking

Posted by on June 15, 2015 in Economic Theory, Failure, Markets, Networks | 0 comments

Banks, cancer and Stephen Hawking

Massive fines for banks, gross misbehaviour, huge bonuses for failure, bailouts at vast expense to the taxpayer: it’s little wonder that politicians and pundits can almost invariably win cheap applause by describing the financial system as being a cancer on society.

But in a deep way, cancer and the financial system do have much in common. They both exhibit qualities which in the scientific jargon are known as “robust yet fragile”. It is a key concept in the new but rapidly expanding field of complexity science, described by Stephen Hawking as the science of the twenty-first century. Complexity provides the tools which connect many apparently unrelated phenomena. Bright young people in particular need to listen to Hawking’s opinion to equip themselves with the skills which will make them really marketable.

The concept of “robust yet fragile” is relevant to almost any system which evolves over time. Successful systems develop features which enhance their ability to survive. In particular, they need to be able to withstand the continuous shocks and surprises which happen all the time in real life. The subject of last week’s column, Fifa, has just experienced a major shock which may prove terminal for the organisation. But for the most part, unanticipated events are on a smaller scale. Robust systems develop the capacity to absorb these kinds of shocks. It’s pretty obvious, one might think.

The important insight is that it is exactly the ways in which systems evolve to become robust which also makes them fragile. The global financial system during the decades prior to the crisis became increasingly interconnected. A massively complicated network of assets and liabilities developed.

At one level, this was good news. If a particular connection went under and a bank was left with a bad debt, the fact that it now had so many other connections, other contracts, meant it was more able to take the hit. But when confidence started to collapse in 2008, the very fact that financial institutions had become so closely entwined with each other meant that the adverse consequences spread like wildfire. The system was robust to most shocks, but had become fragile. The effects of a single piece of bad news could be transmitted across the dense network very efficiently.

Last week a major breakthrough in the treatment for many cancers was announced, and it illustrates the robust yet fragile nature of cancer. Cancer evolves continuously, thereby defending itself against standard attacks such as targeted therapies. It stays one step ahead and makes itself robust to the shocks designed to kill it. But its evolution has made it vulnerable to a new approach, which harnesses the body’s immune system to attack cancerous cells. The ways in which cancer has changed has made it easier for the immune system to recognise the difference between normal and cancer cells. True, it has required some very smart science to take advantage of this. But the robustness which cancer developed to cope with previous shocks has made it fragile to the latest one.

As Published in City AM on Wednesday 10th June 2015

FIFA, corruption and economic growth

Posted by on June 10, 2015 in Corruption, Economic Theory, Executive Pay, GDP, Inequality | 0 comments

FIFA, corruption and economic growth

The FIFA arrests have dominated both front and sports pages. We must await the outcomes of the trials before pronouncing on individuals.  But amongst soccer fans, the organisation is a byword for sleaze and corruption. England spent £21 million on the campaign to secure the 2018 World Cup. The height of our attempts to influence the delegates seems to have been the offer of a free breakfast with Prince William in Zurich. Little wonder that we only obtained one vote in addition to our own.

Economics has a great deal to say about corruption. Does it, for example, tend to increase or reduce the level of GDP per head in a country? The answer might seem obvious, but economic theorists are nothing if not imaginative. For example, in almost a caricature of rational choice theory, it has been argued that allowing government employees to solicit bribes provides them with an incentive to work harder. To be fair, however, the overwhelming consensus is that corruption is bad for the economy.

A key figure in the debate is Paolo Mauro, for over 20 years a senior economist at the IMF, and now a fellow of the Petersen Institute in Washington DC. His 1995 article in the Quarterly Journal of Economics has become the classic empirical investigation of the impacts of both bureaucracy and corruption on growth. He constructed a detailed data base across 67 countries, summarised in a bureaucratic efficiency index. This combined data on red tape, the independence of the judiciary, and corruption.

Mauro divided his sample into six different groups, depending upon the level of his index. There is a very strong correlation between membership of these groups, and whether or not a country has actively supported Sepp Blatter in FIFA. The African countries, for example, are almost all in the bottom two groups in terms of efficiency, and the top two are made up of Western Europe, America, Canada, Singapore and Japan.

The negative impact of corruption on growth is strong. The results of Mauro’s sophisticated statistical analysis are not straightforward to present. But, as an example, if Nigeria could somehow move from the most corrupt of his six groups to the third most corrupt, its economic growth rate would improve by as much as 1 per cent a year. If the country had done this over the whole period of its independence from the 1960s, income per head would be 65 per cent higher than it is now.

The problem of course is that a culture of bribery and corruption is self-reinforcing. In a corrupt society, it is in the collective interest to move to a much lower level of corruption. But it is not really in any individual’s interest to try and do so. If you take bribes, you will lose them. And if you expose bribes you will be ostracised, maybe even killed. This clash between the collective and the individual interest means that markets cannot solve the problem. I rarely praise the bureaucrats of the OECD in Paris, but their anti-bribery campaigns deserve support.

As published in City AM on Wednesday 3rd June 2015

Markets are good, but we need clear signals

Posted by on May 28, 2015 in Economic Policy, Economic Theory, Markets, Networks, Politics, Public Policy | 0 comments

Markets are good, but we need clear signals

Perhaps the most enjoyable aspect of the general election result is the abuse which is now being heaped on the metropolitan liberal elite from many quarters.  Theirs is truly a difficult mind set to comprehend, based as it is on an unshakeable belief in their own omniscience. Yet this is confounded on an almost daily basis by the response of ordinary people to incentives. The central planning mentality is simply not able to imagine all the ways in which markets operate.

Orlando Figes gives an illustration in his excellent book on the Russian Revolution, A People’s Tragedy.  Shortly after coming to power the Soviets imposed strict price controls, on vegetables. They forgot to include onions in the list. The result was a massive glut of onions, this being the only vegetable on which the growers might conceivably have made a profit. Admittedly, this was a simple bureaucratic mistake. But at the moment, Venezuela is imposing price controls, and the economy is being devastated, with many basic commodities, even lavatory paper, being virtually unobtainable. Many African countries, in the first flush of independence, did the same thing. A friend of mine went to work in Tanzania in the 1970s, full of idealism. Confronted by massive queues for almost everything, it did not take him long to respond to incentives and do what every other ex pat was doing. He sent his servant to queue for him instead.

The incentives created to get people to switch to diesel, such as lower vehicle taxes, proved very effective, and over the past 20 years the number of diesel cars in the UK has risen from just under 2 million to 12 million. Yet the consequences were unforeseen. It has only emerged this year that diesel engines create much more pollution than petrol ones. Environmentalists bullied the government some years ago to cut the speed limit to 20mph in Richmond Park, near where I live. It turns out that this is much worse for the health of the numerous cyclists than when cars are allowed to run at the more efficient speed of 30mph.

Gordon Brown epitomised this view of the world. Under his control of the economy, the tax manual more than doubled in size. Regulators came to see their jobs as devising more and more rules to try and anticipate every eventuality. It was a doomed mission, as the complete failure to anticipate the financial crisis shows.

But there is an important flip side to this. If we are to rely more on markets and incentives than on tomes of regulation to produce reasonable outcomes, it is essential that markets are seen as giving reliable information. The Americans understand this, hence the massive fines just imposed on banks. There are also serious questions to be asked about the increasing dominance of algorithmic trading in financial markets. Not only are the chances of ‘flash crashes’ increased many times, but it becomes less clear what information is being signalled by market prices. This is something useful for the regulators to examine.

As published in City AM on Wednesday 27th May 2015

Opinion Polls, Financial Crashes and Groupthink

Posted by on May 14, 2015 in Economic Theory, Financial Crisis, Networks, Politics | 0 comments

Opinion Polls, Financial Crashes and Groupthink

The election is done and dusted, but many interesting questions remain. Was there a swing to the Conservatives at the very last minute, or was it indeed possible to foresee the victory in advance? Snippets are emerging which suggest that the electorate had made up their minds well before polling day. Rod Liddle, the entertaining columnist, visited his home area of Stockton on Tees a few weeks ago. Liddle, a Labour-inclined man, walked round the highly marginal seat and actually spoke to people. He wrote that it did not feel like Labour would win.

The website Labour Uncut, a place where Blairites huddled to escape persecution under the Miliband terror, carried a fascinating piece on 2 May. Local political parties are entitled to inspect the postal votes as they arrive. It is strictly illegal to count them. But it is hard not to notice the relative sizes of the heaps of votes for the parties. The information fed back to Labour HQ was that the postal votes showed no swing to Labour in the marginals. Miliband’s late night visit to Russell Brand was undertaken as a panic response. And, just in case there are devotees of efficient market theory out there wondering how this information was used, I did make a modest amount by betting on the outcome.

More importantly, a web post by the polling company Survation reveals a more general problem. They conducted a careful telephone poll on the day before the election. Survation not only named the local candidates, but they insisted on only speaking to the named person from the dataset. They called mobile and landline telephone numbers to maximise the ‘reach’ of the poll. The figures showed 37 per cent to the Tories and 31 per cent to Labour, almost exactly matching the real result. Here is Damian Lyons Lowe, CEO of Survation, on what happened next: “the results seemed so out of line with all the polling conducted by ourselves and our peers that I chickened out of publishing the figures”.

Full credit to Mr Lowe for being so open and honest. But the same thing happened in the days before the 1992 election, another so-called ‘surprise’ Conservative victory. The Labour lead appeared solid, so several polling companies adjusted their results in the Labour direction in order not to look too different from the rest.

Both are classic examples of the influence of groupthink. This is exactly the same phenomenon which led to the financial crisis. The influence of the network of peers becomes so strong that individual judgement is overridden. ‘Everyone’ knew that mortgage-backed securities were a licence to print money, ‘everyone’ knew that debt was no longer a problem in the new economic paradigm. Even the strong willed leaders of major institutions capitulated in the face of such pressure, no matter what their private doubts. Opinion polls are neither here nor there. But a major challenge for financial regulators is how to identify the signs of the next build up of groupthink in the markets. This is the most effective way of preventing crises.

As published in City AM on Wednesday 13th May 2015