I will be introducing a discussion of behavioural economics at the Institute of Ideas Economy Forum in London this coming Thursday evening. Do come along if you can. The discussion will range far wider than what is normally conceived of as economics. Details can be found HERE.

My latest book review for the Financial Times was published on 2 December.

For anyone who sees environmentalism as a radical outlook, its adoption by business must be bewildering. The examples are legion. From the World Wildlife Fund credit card from Bank of America to Conservation International’s partnership with McDonald’s to promote Happy Meals; and from Greenpeace endorsing companies, including Mars and Procter & Gamble, that support its sustainable palm oil campaign to Nature Conservancy’s partnership with 3M and Dow Chemical.

For some activists this is simply a matter of greenwash — companies pretending to be environmentally friendly. But it is hard to believe that corporate executives do not, to some degree, support the causes they endorse.

Paul Dauvergne, a professor of international relations at the University of British Columbia, sees it instead as an example of what he calls the “environmentalism of the rich”. He is careful to emphasise this does not refer to support for environmental causes by people who happen to be born wealthy. Instead he argues environmentalism has lost its spirit of outrage. It is only if this is recovered then, he claims, it can take on extreme inequality, destructive growth and excessive consumption.

So Dauvergne is careful to stress he is not opposed in principle to corporate social responsibility, eco-consumerism or partnerships between companies and campaign groups. The thrust of his argument is that such initiatives are positive but insufficient to tackle what he sees as a global ecological crisis.

Essentially this amounts to a narrow tactical critique of mainstream environmentalism which he thinks should be infused with a more passionate form of grassroots activism.

Dauvergne’s main failure is his lack of appreciation that the defining premise of green thinking — that human activity is subject to natural limits — has become pervasive in both business and political circles. Contrary to Dauvergne’s contention, there is little opposition to this outlook. Governments worldwide endorse sustainability as do a large number of business leaders. They might not go as far as the activists would like but they are nevertheless thoroughly imbued in green thinking.

This shift, which has taken place over several decades, reflects the emergence of a profound lack of confidence within the business and political elites. Businesses all too often feel uncomfortable with their traditional role of helping to make society more prosperous. So they play down the importance of their core activities while emphasising their eagerness to change the world. Politicians too tend to question their ability to help create a framework to generate more prosperity. The spread of green thinking in such circles is an outward expression of this crisis of faith.

Dauvergne also fails to explain the paradox he points to so often. Global consumption levels keep rising despite all the talk of sustainability. For him it seems to be simply a matter of too many people behaving irrationally or being duped by advertising. He cannot accept the reality that huge numbers of people quite reasonably want more.

The bulk of the world’s population demands higher material living standards. This is most evident among the world’s poorest. According to the World Bank, there were 767m living on less than $1.90 in 2013. But this is an incredibly low threshold. There are billions more people in the developing world living on low incomes and even in the advanced economies many have suffered stagnant incomes for years.

The fashionable heart-rending by world leaders about extreme inequality is not about achieving affluence for all. On the contrary, the implication is that the bulk of humanity should be prepared to make sacrifices for the sake of mitigating the most extreme forms of poverty.

It would be far better if businesses focused more on their traditional role of raising prosperity while politicians supported them. More resources and better technology help create the conditions to raise living standards but also to overcome environmental challenges. Achieving a richer world means transcending apparent environmental limits rather than embracing them.


I will be talking on the “great inequality debate” at 7pm at Cafe Mainstein in Berlin this coming Saturday. The discussion is in English and entrance is free.

The debate on the super-rich at the recent Battle of Ideas festival in London is now available to watch on video. Clink on the link here.

FT book review

29 Oct 2016

This is the text of my review of  The Market as God for the Financial Times. It was published on Friday 21 October.

 Just across the piazza from Milan’s magnificent Gothic cathedral, the Duomo di Milano, stands one of the first shopping malls in the world. The Galleria Vittorio Emanuele II, a temple of modern consumerism, was clearly built as a commercial replica of its venerable Catholic neighbour.

This uneasy contrast symbolises what Harvey Cox, an emeritus professor of divinity at Harvard, wants to explore in The Market as God. His goal is essentially to compare and contrast classical faith with what he refers to as “ersatz” religion. In his view, the market perspective bears all the characteristics of a traditional religion except it is constructed by human beings. He seeks to uncover the market theology, which he sees as comparable in scope, if not profundity, to traditional religion.

His interest in the subject was piqued when, on a friend’s advice, he started reading the business pages to help him understand the real world. To his surprise he found that the Financial Times’s lexicon (among others) “turned out to bear a striking resemblance to Genesis, the Epistle to the Romans and Saint Augustine’s City of God”.

Of course, he was not claiming that the financial press literally focuses on divine matters. Rather that the preoccupations of finance strangely parallel those of theology. Each of them has its own grand narrative about the inner meaning of human history. Theologians have their myths of origin, legends of the fall and doctrines of sin and redemption. Finance has similar concerns but in disguise: chronicles about the creation of wealth, the seductive temptation of over-regulation and salvation through the advent of free markets. Even entrepreneurs can, in his view, be seen as a secular version of saints.

Cox is at pains to emphasise that he is not opposed to the market itself. His objection is what he sees as its aspiration to divinity that has emerged over the past couple of centuries. It has become, in his view, a hubristic outlook that inspires wastefulness, cupidity and avarice.

Such criticisms are in line with two papal encyclicals (letters) that are approvingly cited by Cox at the start of the book. In 2013, inEvangelii Gaudium (the Joy of the Gospel) the newly elected Pope Francis criticised a “deified market” and “ideologies which defend the absolute autonomy of the marketplace”. Two years later, Laudato Si, the Pope addressed the growing planetary crisis brought about by climate change. Indeed, Cox dedicates his book to Pope Francis “with gratitude and hope”.

In principle, Cox’s project of examining the values and symbols of the market is a good one. It could help yield a better understanding of how the capitalist economy works.

Unfortunately, he makes a fundamental error that plagues countless critiques of the market system. He assumes that a confident pro-free market perspective is the dominant outlook. But even on a descriptive level, leaving aside any debate about the desirability of such a worldview, this is simply not true. Free market economics is not prevalent at the level of the workings of the market system or in relation to public discourse.

Despite the occasional flourishes of free market rhetoric the overwhelming reality even in the US is of huge state intervention. Government spending in the US is expected to amount to about 36 per cent of GDP this year, or $6.6tn, according to the International Monetary Fund. It is hard to square this reality with claims to the economy’s free market status.

On the level of ideas, pervasive doubts about the free market most often take the form of concerns about its alleged damaging effects. For example, the widespread idea that climate change represents a huge market failure, one that potentially threatens the future of humanity, is hardly a ringing endorsement of capitalism. Similarly, the often expressed concerns about the damaging effects of extreme inequality suggest a lack of confidence in the market system.

What Cox presents as a humane critique of the mainstream free market outlook is in fact an expression of the contemporary orthodoxy.

The Market as God

21 Oct 2016

The Financial Times has published my review of The Market as God by Harvey Cox. I will upload the text in the next few days but meanwhile here is the link. You may need to register (free) to read it.

Battle to commence

17 Oct 2016

A reminder that I will be debating inequality and the super-rich at the Battle of Ideas this Saturday. Come along to the session and indeed the whole weekend.

I am delighted to be speaking at the Battle of Ideas weekend at the Barbican Centre in London on 22 and 23 October 2016. On the Saturday I will be speaking on a panel on the super-rich and on the Sunday on the debate about social inequality. I will post more details at a later date. Alternatively you can check out the Battle of Ideas website. The whole festival is well worth attending.

Book recommendation

26 Jul 2016

Those who know German would do well to read Zeitgeisterjagd (Hunting the Zeitgeist) by Matthias Heitmann. The German author explores the dire consequences of the spirit of the times we live in. Risk aversion has infused public and private life to such an extent that we think of ourselves as unable to act upon the world. This ultimately renders us incapable of overcoming the challenges that face us. The result? We have become unfree.

The book was reviewed by Maren Thom in English on spiked in October 2015.

Readers in the UK can buy the book on Amazon here.


The following is a blog post I wrote on behavioural economics for the Institute of Economic Affairs website.

Anyone who has what might be called an instinct for freedom is likely to baulk at being dictated to by experts. A fundamental liberal principle is that individuals should have the autonomy to make their own decisions about how to run their own lives.

This insight goes back at least to the eighteenth century. Immanuel Kant, one of the greatest German philosophers, spelt it out in 1784 in an essay entitled Was ist Aufklärung? [What is Enlightenment?]: “If I have a book that thinks for me, a pastor who acts as my conscience, a physician who prescribes my diet, and so on – then I have no need to exert myself. I have no need to think, if only I can pay; others will take care of that disagreeable business for me.”

Overall the passage sounds strikingly contemporary. In the early twenty-first century we are plagued with self-proclaimed experts telling us how to do everything from eating healthily to parenting. The main difference with Kant’s day is that we do not have to pay for guidance from above, or at least not directly. We are bombarded with unsolicited advice.

However, there is a key clause in Kant’s comment that it is easy to miss. His argument hinges on the assumption that individuals are capable of thinking for themselves. But what if that premise is false? What if ordinary people, those who are not experts, are incapable of thinking rationally?

That is the starting point for the edifice of the burgeoning field of behavioural economics. Many of its proponents, such as Dan Ariely of Duke University, state bluntly that they view humans are irrational. The more sophisticated ones, such as Daniel Kahneman, a Nobel laureate at Princeton, talk more guardedly of ‘bounded rationality’. Either way the assumption is that the human thinking process is fundamentally flawed.

One way this argument is sometimes is expressed is the claim that humans are more like Homer Simpson than Mr Spock. Most people, in this view, are essentially idiotic and ignorant rather than logical calculating machines as epitomised by the Star Trek character. (Although fans of the science fiction franchise will know that Spock is actually torn between human emotion and Vulcan reason).

Whatever metaphor is used it should be clear that if the claim of irrationality is true it undermines one of the foundations of mainstream economics. From a behavioural perspective it is wrong to view consumers as primarily driven by rational considerations. From this premise it is a short step to explain financial crises and economic downturns as essentially bouts of irrationality. The conclusion normally drawn is that experts should play a central role in directing economic activity.

It is important to recognise that such claims should not be rejected simply because they lead to objectionable conclusions. If the assumption of irrationality is true then, whether we like it or not, it should be accepted. The key question is whether it is indeed correct. There are at least three reasons to question it.

First, the claim of irrationality is often based on a caricature of orthodox economics. Even the most ardent mainstream economists do not generally claim that humans always act as perfect robotic calculators. People do not systematically weigh up the costs and benefits of every minute decision they ever make.

In reality, the mainstream claim is that an assumption of a broad rationality should be the starting point for building a model of how the economy works. It does not preclude people from ever feeling emotions, making mistakes or miscalculating on the spur of the moment. Moreover, outside the economic sphere, say in relation to love or family life, people often make decisions on grounds other than economic rationality.

It is also common for behaviouralists to assert irrationality rather than to prove it. For example, in a BBC Horizondocumentary Daniel Kahneman, the Nobel laureate, gave the working habits of New York taxi drivers as an example of irrational behaviour. His claim was that everyone wants taxis on rainy days but on sunny days fares are hard to find. So, he argued, taxi drivers should logically spend lots of time driving on rainy days when it is easy to find passengers. Sunny days, when there are fewer passengers around, are the best time for drivers to take time off. But in reality many drivers do the opposite. They work long hours on slow sunny days while knocking off early when it is rainy and busy. Rather than thinking about how best to maximise their income they simply aim to earn a set amount every day. Once they hit their target they go home.

Anyone who takes the trouble to talk to taxi drivers or even to think about the question will realise things are not so simple. Some drivers say that, contrary to Kahneman’s claim, there can be fewer people around when it is raining. For example, a potential passenger who is thinking of going out for a meal might decide to eat at home instead if the weather is wet. Other drivers claim that passengers tend to want to go on less lucrative shorter journeys, rather than long trips, when it is raining.

It is also likely that many drivers have set expenses to pay, whether it is for food or housing, every week. To be sure of meeting their commitments they may need to drive whatever the weather. On a sunny day they may decide they cannot afford to risk waiting for more lucrative rainy days to come along. The weather itself is uncertain.

In such cases there is probably no perfect solution which is right in all circumstances. It is likely the correct answer will vary according to particular local conditions and individual needs. The key point is that it is wrong to simply assume that taxi drivers who work long hours in sunny weather are behaving irrationally. They may have rational reasons for driving when they do. Indeed they are likely to know a great deal more about how they run their own lives than even the most eminent professor.

Finally, the claim that economic downturns can simply be explained as bouts of irrational behaviour is crass. Such arguments tend to be based on simplistic assumptions. Often financial turmoil is treated as more-or-less synonymous with trouble in the real economy when the relationship between the two is complex.

In addition, it is wrong to see economies as mere collections of individual consumers. Modern economies are complex entities with large numbers of producers as well as consumers. Understanding weaknesses on the productive side of the economy involves examining such factors as low levels of business investment and profitability. The difficulties economies face demand careful examination rather than assertions that they are manifestations of market madness.

Indeed it is a rich irony that it is often experts, who in many cases are sympathetic to behavioural economics, who have exacerbated economic problems. For instance, there is a reasonable case that some central banks contributed to the 2008-9 financial crisis by pursuing an overly loose monetary policy beforehand. Low interest rates contributed to the creation of the financial bubble before the market crash. And, this leads to a fundamental issue. Those who use behaviourial economics often suggest that it implies a greater role for regulators or the state to “nudge” us in the right direction. But, are not regulators subject to behaviourial biases too? Perhaps, for example, they systematically over-estimate their ability to perfect markets.

Behavioural economics should be seen as part of a broader assault on reason that goes back to at least the nineteenth century. It attacks the primary liberal value of individual freedom on the spurious grounds that people are incapable of thinking clearly for themselves. On this basis is opens the way for both illiberal policy conclusions and flawed economics.