CUTTING ROOM: Evan Davis at large

CUTTING ROOM: Evan Davis at large - Lord Lawson's confidence paradox; ECB coins it with the euro-cent; London cabbies pull the Brentford trick; how low can a logo go? ...

by Evan Davis, economics editor of the BBC
Last Updated: 31 Aug 2010

Lord Lawson's confidence paradox; ECB coins it with the euro-cent; London cabbies pull the Brentford trick; how low can a logo go? ...

An enjoyable time had by all at the Council of Mortgage Lenders' recent annual lunch. With 900 people there, it was a less exclusive affair than I'd expected. The turnout, I was told, simply reflects the state of the housing market - the mortgage industry is more inclined to splash out when times are good. On this basis, the market has just peaked and we're due for a crash any day, as London hotel dining rooms will be hard-pressed to squeeze in a bigger crowd. Guest speaker was Lord Lawson, a man with deep experience of housing-market bubbles.

The former Chancellor's speech was characteristically erudite, and he made a good point: that the more faith we have that the days of boom and bust are over, the more recklessly we act, and the more destabilising is our behaviour. So, if we believe the economy isn't going to crash, we feel confident enough to bid house prices up to excessive levels, thus creating the boom-bust cycle that brings about an economic crash. It's a point I've heard referred to as the Greenspan Paradox (because Alan Greenspan's legendary reputation at managing the economy ultimately makes his job harder, not easier.)

It's a fascinating problem. Central banks invest huge effort in creating reputations and credibility for themselves, on the grounds that it's easier to control inflation if people believe that inflation will be controlled.

The Greenspan Paradox implies that credibility can be a handicap as well as an asset.

Perhaps the best solution for competent chancellors or central bankers is to pretend they don't know what they're doing, and that they think the economy is dangerously volatile. That way, we might all act more cautiously.

It's not really Gordon Brown's style, though, is it?

Those people at the European Central Bank are more entrepreneurial than one might think. Among the euro table mats, posters and other paraphernalia at the euro gift shop at the ECB's towering Frankfurt HQ I noticed souvenir one-cent coins in small leather pouches. As you know, one euro cent is not worth much more than a halfpence in sterling - indeed, many of us think the coin should never have been introduced, as it is such a worthless denomination. But the price of this coin in Frankfurt is EUR2.20 - a pretty healthy 21,900% mark-up.

I know it's the ECB's job to maintain the value of the currency, but isn't that going a bit too far?

Ever picked up a taxi at Heathrow? I was there the other day, and was beckoned by a cab driver sitting in a line of cabs waiting for a pick-up. 'Psst,' he whispered to me as I walked past him, 'tell the controller you're only going to Brentford'. A bewildering request, as I was off to Earl's Court. I was told I should reveal my true destination to the driver only when I was in my cab.

The motive for this twisted procedure, I learned, is that if a taxi driver gets a short ride only - like one to Brentford - the controller gives him a ticket to re-enter Heathrow without having to queue behind all the other cabs in the holding area. A driver thus benefits if the actual ride is half an hour but the controller thinks it's five minutes.

A large number of people play this game, I was later told by a cabbie, and taxi drivers often tell the public about the Brentford trick. But two things bother me about this odd piece of cab-driver camaraderie. First, why bother? The system that cabbies are so cleverly cheating is there to help the cabbies themselves, and the only losers when a driver cheats are other drivers, sitting in the queue at Heathrow. Second, it must be especially bewildering for a hapless Japanese tourist arriving at Heathrow, ready to take a ride on what he has been told is the best and most honest cab system in the world, to be given whispered instructions about taking a trip to Brentford.

It's time BAA asked the cab drivers to design a better system.

For the worst logo in the world, try the German World Cup 2006 emblem.

It is truly awful. I would publish it here, but the ludicrous Fifa trademark rules prohibit use of the logo 'in any manner which is considered by Fifa to be derogatory', so I had better not risk getting MT into trouble by reproducing it.

Before you look it up on the web and deplore the lack of style exhibited by German design, be careful - the logo is a shared Anglo-German construction.

It's lucky we never followed up the idea of a shared Anglo-German World Cup. If it had been half as bad as the logo, it would have done our international reputation no good at all.

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