A Level Economics Essay 11: Current Account

"Germany runs permanent current account surplus" - Explain why some countries have long-term current account surpluses on their balance of payments.

In simple terms, the balance of payments is a record of all economic transactions between a country and the rest of the world over a specific period. It consists of two main components: the current account and the capital account.

The current account is one of the main components of the balance of payments. It records the flows of goods, services, income, and transfers between a country and the rest of the world.

1. Goods: The current account includes the balance of trade, which represents the exports and imports of goods. For example, Germany's current account includes the value of goods it exports, such as automobiles, machinery, and chemicals, as well as the value of goods it imports, such as raw materials or consumer products.

2. Services: The current account also incorporates the balance of services, which includes income generated from services provided internationally. This includes items such as transportation, tourism, financial services, and consulting. For example, Germany's current account considers the income it earns from providing services like engineering consulting or financial services to other countries.

3. Income: The income component of the current account accounts for the net income earned from investments abroad and investments made by foreigners within the country. It includes items like dividends, interest payments, and profits. For example, if German companies have investments in foreign countries and receive income from those investments, it contributes to Germany's current account surplus.

4. Transfers: The current account also incorporates net transfers, which involve flows of money between countries that are not directly linked to the exchange of goods, services, or income. Transfers can include items like foreign aid, remittances from overseas workers, and grants. These transfers can either contribute to or reduce the current account balance.

The current account balance is determined by the sum of these components. When a country's exports and income from abroad exceed its imports and outward income flows, it results in a current account surplus. This surplus represents a net inflow of funds into the country and indicates that the country is a net lender to the rest of the world.

Germany is known for consistently running a current account surplus, which means its exports and income from abroad exceed its imports and outward income flows. There are several reasons why Germany has been able to maintain this long-term current account surplus:

1. Export-oriented economy: Germany has a strong export sector and is known for its high-quality manufactured goods, such as automobiles, machinery, and chemicals. Its products are in high demand globally, allowing Germany to generate significant export revenue.

2. Competitive advantage: Germany has a competitive advantage in various industries. It has a highly skilled labor force, advanced technology, and a reputation for precision engineering, which makes its products highly sought after. This competitive advantage enables Germany to maintain a strong position in international markets and contribute to its current account surplus.

3. Savings and investment patterns: Germany has a culture of high savings and a focus on investment. Germans tend to have a high savings rate and exhibit a preference for financial security. This leads to lower domestic consumption and a surplus of savings available for investment, both domestically and abroad. The returns on these investments, such as profits and interest payments from foreign assets, contribute to Germany's current account surplus.

4. Strong industrial base: Germany has a well-developed industrial base that supports its export-oriented economy. It has a diverse range of industries, including automotive, machinery, chemicals, and pharmaceuticals, which provide a solid foundation for sustained export performance.

The current account surplus of Germany indicates its success in exporting goods and services, generating income from abroad, and maintaining a competitive position in the global market. However, it is important to note that persistent surpluses can have implications, such as currency appreciation, which can make German exports relatively more expensive and affect the competitiveness of other countries' exports.

John Mearsheimer Ukraine-Russia 2022 Analysis

 

'There is no such thing as past or future': physicist Carlo Rovelli on changing how we think about time

Charlotte Higgins on Carlo Rovelli's book on the elastic concept of time. Source The Guardian


What do we know about time? Language tells us that it “passes”, it moves like a great river, inexorably dragging us with it, and, in the end, washes us up on its shore while it continues, unstoppable. Time flows. It moves ever forwards. Or does it? Poets also tell us that time stumbles or creeps or slows or even, at times, seems to stop. They tell us that the past might be inescapable, immanent in objects or people or landscapes. When Juliet is waiting for Romeo, time passes sluggishly: she longs for Phaethon to take the reins of the Sun’s chariot, since he would whip up the horses and “bring in cloudy night immediately”. When we wake from a vivid dream we are dimly aware that the sense of time we have just experienced is illusory.

Carlo Rovelli is an Italian theoretical physicist who wants to make the uninitiated grasp the excitement of his field. His book Seven Brief Lessons on Physics, with its concise, sparkling essays on subjects such as black holes and quanta, has sold 1.3m copies worldwide. Now comes The Order of Time, a dizzying, poetic work in which I found myself abandoning everything I thought I knew about time – certainly the idea that it “flows”, and even that it exists at all, in any profound sense.

We meet outside the church of San Petronio in Bologna, where Rovelli studied. (“I like to say that, just like Copernicus, I was an undergraduate at Bologna and a graduate at Padua,” he jokes.) A cheery, compact fellow in his early 60s, Rovelli is in nostalgic mood. He lives in Marseille, where, since 2010, he has run the quantum gravity group at the Centre de physique théorique. Before that, he was in the US, at the University of Pittsburgh, for a decade.

Carlo Rovelli in Bologna. Photograph: Roberto Serra / Iguana Press / G/Iguana Press / Getty Images

He rarely visits Bologna, and he has been catching up with old friends. We wander towards the university area. Piazza Verdi is flocked with a lively crowd of students. There are flags and graffiti and banners, too – anti-fascist slogans, something in support of the Kurds, a sign enjoining passers-by not to forget Giulio Regeni, the Cambridge PhD student killed in Egypt in 2016.

“In my day it was barricades and police,” he says. He was a passionate student activist, back then. What did he and his pals want? “Small things! We wanted a world without boundaries, without state, without war, without religion, without family, without school, without private property.”

He was, he says now, too radical, and it was hard, trying to share possessions, trying to live without jealousy. And then there was the LSD. He took it a few times. And it turned out to be the seed of his interest in physics generally, and in the question of time specifically. “It was an extraordinarily strong experience that touched me also intellectually,” he remembers. “Among the strange phenomena was the sense of time stopping. Things were happening in my mind but the clock was not going ahead; the flow of time was not passing any more. It was a total subversion of the structure of reality. He had hallucinations of misshapen objects, of bright and dazzling colours – but also recalls thinking during the experience, actually asking himself what was going on.

“And I thought: ‘Well, it’s a chemical that is changing things in my brain. But how do I know that the usual perception is right, and this is wrong? If these two ways of perceiving are so different, what does it mean that one is the correct one?’” The way he talks about LSD is, in fact, quite similar to his description of reading Einstein as a student, on a sun-baked Calabrian beach, and looking up from his book imagining the world not as it appeared to him every day, but as the wild and undulating spacetime that the great physicist described. Reality, to quote the title of one of his books, is not what it seems.

He gave his conservative, Veronese parents a bit of a fright, he says. His father, now in his 90s, was surprised when young Carlo’s lecturers said he was actually doing all right, despite the long hair and radical politics and the occasional brush with the police. It was after the optimistic sense of student revolution in Italy came to an abrupt end with the kidnapping and murder of the former prime minister, Aldo Moro, in 1978 that Rovelli began to take physics seriously. But his route to his big academic career was circuitous and unconventional. “Nowadays everyone is worried because there is no work. When I was young, the problem was how to avoid work. I did not want to become part of the ‘productive system’,” he says.

Academia, then, seemed like a way of avoiding the world of a conventional job, and for some years he followed his curiosity without a sense of careerist ambition. He went to Trento in northern Italy to join a research group he was interested in, sleeping in his car for a few months (“I’d get a shower in the department to be decent”). He went to London, because he was interested in the work of Chris Isham, and then to the US, to be near physicists such as Abhay Ashtekar and Lee Smolin. “My first paper was horrendously late compared to what a young person would have to do now. And this was a privilege – I knew more things, there was more time.”

Albert Einstein worked at the Swiss patent office for seven years: ‘That worldly cloister where I hatched my most beautiful ideas.’ Photograph: Keystone/Getty Images

The popular books, too, have come relatively late, after his academic study of quantum gravity, published in 2004. If Seven Brief Lessons was a lucid primer, The Order of Timetakes things further; it deals with “what I really do in science, what I really think in depth, what is important for me”.

Rovelli’s work as a physicist, in crude terms, occupies the large space left by Einstein on the one hand, and the development of quantum theory on the other. If the theory of general relativity describes a world of curved spacetime where everything is continuous, quantum theory describes a world in which discrete quantities of energy interact. In Rovelli’s words, “quantum mechanics cannot deal with the curvature of spacetime, and general relativity cannot account for quanta”.

Both theories are successful; but their apparent incompatibility is an open problem, and one of the current tasks of theoretical physics is to attempt to construct a conceptual framework in which they both work. Rovelli’s field of loop theory, or loop quantum gravity, offers a possible answer to the problem, in which spacetime itself is understood to be granular, a fine structure woven from loops.

String theory offers another, different route towards solving the problem. When I ask him what he thinks about the possibility that his loop quantum gravity work may be wrong, he gently explains that being wrong isn’t the point; being part of the conversation is the point. And anyway, “If you ask who had the longest and most striking list of results it’s Einstein without any doubt. But if you ask who is the scientist who made most mistakes, it’s still Einstein.”

How does time fit in to his work? Time, Einstein long ago showed, is relative – time passes more slowly for an object moving faster than another object, for example. In this relative world, an absolute “now” is more or less meaningless. Time, then, is not some separate quality that impassively flows around us. Time is, in Rovelli’s words, “part of a complicated geometry woven together with the geometry of space”.

For Rovelli, there is more: according to his theorising, time itself disappears at the most fundamental level. His theories ask us to accept the notion that time is merely a function of our “blurred” human perception. We see the world only through a glass, darkly; we are watching Plato’s shadow-play in the cave. According to Rovelli, our undeniable experience of time is inextricably linked to the way heat behaves. In The Order of Time, he asks why can we know only the past, and not the future? The key, he suggests, is the one-directional flow of heat from warmer objects to colder ones. An ice cube dropped into a hot cup of coffee cools the coffee. But the process is not reversible: it is a one-way street, as demonstrated by the second law of thermodynamics.

String theory offers an alternative to Rovelli’s work in loop quantum gravity.

Time is also, as we experience it, a one-way street. He explains it in relation to the concept of entropy – the measure of the disordering of things. Entropy was lower in the past. Entropy is higher in the future – there is more disorder, there are more possibilities. The pack of cards of the future is shuffled and uncertain, unlike the ordered and neatly arranged pack of cards of the past. But entropy, heat, past and future are qualities that belong not to the fundamental grammar of the world but to our superficial observation of it. “If I observe the microscopic state of things,” writes Rovelli, “then the difference between past and future vanishes … in the elementary grammar of things, there is no distinction between ‘cause’ and ‘effect’.”

To understand this properly, I can suggest only that you read Rovelli’s books, and pass swiftly over this approximation by someone who gave up school physics lessons joyfully at the first possible opportunity. However, it turns out that I am precisely Rovelli’s perfect reader, or one of them, and he looks quite delighted when I check my newly acquired understanding of the concept of entropy with him. (“You passed the exam,” he says.)

“I try to write at several levels,” he explains. “I think about the person who not only doesn’t know anything about physics but is also not interested. So I think I am talking to my grandmother, who was a housekeeper. I also think some young students of physics are reading it, and I also think some of my colleagues are reading it. So I try to talk at different levels, but I keep the person who knows nothing in my mind.”

His biggest fans are the blank slates, like me, and his colleagues at universities – he gets most criticism from people in the middle, “those who know a bit of physics”. He is also pretty down on school physics. (“Calculating the speed at which a ball drops – who cares? In another life, I’d like to write a school physics book,” he says.) And he thinks the division of the world into the “two cultures” of natural sciences and human sciences is “stupid. It’s like taking England and dividing the kids into groups, and you tell one group about music, and one group about literature, and the one who gets music is not allowed to read novels and the one who does literature is not allowed to listen to music.”


In the elementary grammar of things, there is no distinction between ‘cause’ and ‘effect’

The joy of his writing is its broad cultural compass. Historicism gives an initial hand-hold on the material. (He teaches a course on history of science, where he likes to bring science and humanities students together.) And then there’s the fact that alongside Einstein, Ludwig Boltzmann and Roger Penrose appear figures such as Proust, Dante, Beethoven, and, especially, Horace – each chapter begins with an epigraph from the Roman poet – as if to ground us in human sentiment and emotion before departing for the vertiginous world of black holes and spinfoam and clouds of probabilities.

“He has a side that is intimate, lyrical and extremely intense; and he is the great singer of the passing of time,” Rovelli says. “There’s a feeling of nostalgia – it’s not anguish, it’s not sorrow – it’s a feeling of ‘Let’s live life intensely’. A good friend of mine, Ernesto, who died quite young, gave me a little book of Horace, and I have carried it around with me all my life.”

Rovelli’s view is that there is no contradiction between a vision of the universe that makes human life seem small and irrelevant, and our everyday sorrows and joys. Or indeed between “cold science” and our inner, spiritual lives. “We are part of nature, and so joy and sorrow are aspects of nature itself – nature is much richer than just sets of atoms,” he tells me. There’s a moment in Seven Lessons when he compares physics and poetry: both try to describe the unseen. It might be added that physics, when departing from its native language of mathematical equations, relies strongly on metaphor and analogy. Rovelli has a gift for memorable comparisons. He tells us, for example, when explaining that the smooth “flow” of time is an illusion, that “The events of the world do not form an orderly queue like the English, they crowd around chaotically like the Italians.” The concept of time, he says, “has lost layers one after another, piece by piece”. We are left with “an empty windswept landscape almost devoid of all trace of temporality … a world stripped to its essence, glittering with an arid and troubling beauty”.

More than anything else I’ve ever read, Rovelli reminds me of Lucretius, the first-century BCE Roman author of the epic-length poem, On the Nature of Things. Perhaps not so odd, since Rovelli is a fan. Lucretius correctly hypothesised the existence of atoms, a theory that would remain unproven until Einstein demonstrated it in 1905, and even as late as the 1890s was being written off as absurd.

What Rovelli shares with Lucretius is not only a brilliance of language, but also a sense of humankind’s place in nature – at once a part of the fabric of the universe, and in a particular position to marvel at its great beauty. It’s a rationalist view: one that holds that by better understanding the universe, by discarding false beliefs and superstition, one might be able to enjoy a kind of serenity. Though Rovelli the man also acknowledges that the stuff of humanity is love, and fear, and desire, and passion: all made meaningful by our brief lives; our tiny span of allotted time.

London School of Economics - Shame on you

Owen Jones in The Guardian

It is a university that prides itself on being a forum for debate about social injustice and inequality. The London School of Economics was founded by Fabian socialists at the end of the 19th century: they believed education was key to liberating society from social ills.

Last week I was due to attend a debate at the LSE on the expansion of secondary moderns (which is what selection in education really means). At the request of cleaners on strike over their terms and conditions, I withdrew at the last minute. And here is the perverse truth: well-paid speakers will turn up at this prestigious institution to debate the great injustices of modern Britain. Then in come the cleaners – all from migrant or minority backgrounds – to clear up, victims of some of the very injustices that have just been debated.

Like most universities, LSE outsourced its cleaners years ago. It’s cheaper, you see, because the cleaners can then be employed with worse terms and conditions than in-house staff. In this way a university with a multimillion-pound budget can deviously save money on those who clean the libraries, the lecture halls, the offices.

An in-house LSE worker has up to 41 days’ paid leave, six months’ fully paid sick pay, and good maternity pay and pension rights. Cleaners, on the other hand, have the statutory minimum. If they fall ill, they are paid nothing for the first three days, then just £17.87 a day. For a cleaner paid £9.75 an hour – living in one of the world’s most expensive cities – that’s simply not an option. “They can’t afford to be sick,” says Petros Elia, general secretary of the United Voices of the World (UVW) union. Cleaners turn up ill to work instead.

No wonder they describe themselves as “second-class”, “third-class”, or “no-class” workers. The response of LSE’s management is a sobering indictment of industrial relations in a society in which the employers have the whip hand. Cleaners and their supporters have been threatened with arrests and injunctions. “LSE’s mottos is ‘to know the causes of things’,” says Michael Etheridge, the Unison branch secretary, “and yet on the issue of outsourcing it has, as an institution, been wholly ignorant.”

That these cleaners have stood up for themselves – in the face of such hostility – is courageous, and an inspiring precedent for other workers in low-paid, insecure Britain. They’ve come from a variety of different countries; some have only worked at LSE for a few months. But they have organised, and thrown themselves into a determined struggle that now has the university authorities on the run.

Rattled, the LSE has been forced to offer concessions: beginning with 10 days’ full sick pay, then 15, then 20. But UVW and Unison – which represents some of the other cleaners – are clear. This is not a strike simply about improved conditions: it is about being treated the same as other workers. Only parity will do. Unison has been offered a package of improvements, including sick pay of up to 65 days and four weeks of additional maternity pay, and a pledge to work “to reach full parity … in the near future”. But continued pressure on LSE to accept the cleaners’ demands is clearly necessary.

It is a saga that tells many stories about modern Britain. It’s about how, disproportionately, some of the lowest paid and most insecure work is done by migrants and minorities. It’s about a race to the bottom in terms and conditions. It’s about how the law is rigged in favour of bosses. But it’s also about how – with determination and organisation – workers can indeed win.

Mildred Simpson was born in Jamaica and moved to Britain in 1989: she’s worked at the LSE for 16 years. A few years ago she was made a supervisor: back then, there were 25 supervisors, but the number has been slashed to 13. For no extra pay, she is expected to do the jobs of two people. This, for her, is a fight for equality. “We’re doing all the dirty work while they’re drinking their champagne and drinking their coffee,” she says. But she has a message to other workers too. “Fight as well as us as much as you can, for your rights, for pensions, for better working conditions, to be recognised.”

Britain’s universities grant their management lavish salaries: the Former LSE director Craig Calhoun was on a salary package of £381,000 a year and spent tens of thousands on overseas trips. It’s not just cleaners who are mistreated. Academia is becoming increasingly casualised and insecure. At Birmingham University, for instance, a shocking 70% of staff are on insecure contracts. Academics are overworked, struggling with bureaucracy, and often lacking the basic security of knowing how many hours they’re working each week.

Unions have been dramatically weakened in Britain. That has fed into a general sense that injustice is permanent, a fact of life like a weather system, rather than the consequence of human decisions. If there is no apparent collective means available to overcome injustice, then inevitably we become resigned. But if some marginalised, hitherto voiceless cleaners can put one of the world’s most prestigious universities on the backfoot, they set an example to others. This is a country that has endured the longest squeeze in wages for generations, while wealth at the top and in the boardroom has boomed; where our workforce is increasingly stripped of security and fundamental rights. That might be the current direction of travel, but it can be changed. And those cleaners at LSE show how.

What matters: leadership, data analysis, culture

Three factors that can play an important role in a team's success

Ed Smith

May 15, 2013

 

	Rajasthan Royals are an example of a cricket team that underspends and overachieves © BCCI  Enlarge
Related Links Ed Smith : It's not about selection or tactics, silly

A writer yearns to have intelligent readers who engage with his ideas. Then you realise that they are examining your logic with an uncomfortably forensic eye.

Two weeks ago I argued that all students of sport need to understand randomness. That the familiar talking points of selection and tactics are lazily thrown around to explain events they often do not influence. That understanding the "causes" of why things happen in sport is very difficult.

Enter Kieran McMaster, a statistician and ESPNcricinfo reader. He asks how I can explain the evolution of the Spain football team and the All Blacks rugby squad, teams that not only win but also drive forward the evolution of their sport. Surely that is evidence of tactical supremacy? Moreover, his question gained added weight thanks to a random external event: the retirement of Sir Alex Ferguson. How can I square my scepticism about the short-term influence of tactics and selection with the consistent and relentless success of Sir Alex, who manipulated the levers of management so shrewdly?

Here goes.

I certainly do believe in leadership. It is obviously true that some captains and coaches make a sustained difference. Warren Gatland has transformed the Welsh rugby team from romantic underachievers to pragmatic winners. Jose Mourinho wins something wherever he goes. The pattern of success is too consistent to be explained by randomness. One out of one might be dumb luck. But it is much more likely to be skill than luck if a coach has a long sequence of different winning teams.

It is equally true that there aren't many coaches and captains in this elite category, certainly fewer than there are teams that need managers. Great coaches are incredibly rare. So clubs that continually chop and change managers, searching for the right "chemistry" (usually a euphemism) are usually taking an ill-judged risk. It is a statistical fact that changing the manager, on average, makes no difference at all to the performance of the team. It is, however, always expensive and usually distracting. Most teams would be better advised to invest in youth coaching and infrastructure rather than another round of sackings at the top.

Consider the following logic. If every club sacked its coach on the basis that they were searching for Sir Alex Ferguson, at the end of the process there would still only be one club with Sir Alex Ferguson, and dozens of disappointed teams, because there can only ever be one manager who is the best in the world. Sometimes it's better to work with what you've got rather than chase fantasies.

Secondly, I acknowledge that teams can gain a competitive advantage through smarter, clearer use of data and statistics. We all know about Moneyball and the Oakland A's. Cricket has a more current example: the Rajasthan Royals. They underspend and overachieve. And, like the A's, they use data to study how games are really won, instead of just recycling clichés. According to Raghu Iyer, the Royals' CEO, their strategy is not to buy famous players but to "out-think the opposition" at the player auction.

Thirdly, I believe in the power of culture. The recurrent success of some national sides cannot be explained by random cycles of dominance. Some sporting cultures achieve success because they get more things right, from grass roots to World Cup final. The All Blacks play a wonderful brand of total rugby. They rely on skills developed throughout New Zealand's rugby culture. In Dunedin this March, during rain delays in the cricket Test match between England and New Zealand, I watched Otago practise on the adjacent rugby ground. Everyone can pass, everyone has awareness, there are no donkeys and no under-skilled thugs.

	The serious analyst of sport runs into difficulties when he argues that "an Australian would never have dropped that catch because they're tougher over there", or "India lost the match because they should have picked X"

Something similar can be said about Spanish football. Only once have I succumbed to a satirical rant on Twitter. It was during the European Cup final of 2012. In the lead- up to the match, we had to endure ill-informed punditry about how Spain's refusal to pick "an outright striker" was a negative move, how they played a cautious game based on control of the ball rather than dynamic sweeping moves, how rival teams ought to do this and ought to do that, as though opponents hadn't already tried everything and simply lost. Basically there was a widespread reluctance to admit that Spain had developed a systemic solution to playing a better, more modern brand of football. This struck me as both insane and ungracious.

In the 14th minute, Cesc Fabregas, an attacking midfielder who was playing instead of the lamentably absent "outright striker", scored a typically classy goal. The goal revealed the interaction of control, technique, movement, intelligence and team work - a microcosm of Spanish footballing philosophy. Spain went on to win 4-0, and this columnist could not resist a series of sarcastic tweets about "boring Spain", "stupid selection", "wrong-headed tactics" and so on.

But I'm not certain, returning to our original question, that the influence of national sporting culture should be filed under the heading "tactics". It is more a case of philosophy culminating in elite expression. Put differently: if Spain had been instructed by their manager to play a violent, low-skill form of football in that final, I doubt they could have done so. So deeply ingrained is their approach that it has become second nature, not really a "tactic" at all.

I thrill to all three of these methods of gaining an edge in sport: through leadership, via analysis, and through culture.

However, and here is the crucial point, not everything that happens on the sports pitch can be explained in terms of leadership and strategy, or even culture (though the influence of culture is so subtle that it's impossible to measure).

This is especially true over the short term. The serious analyst of sport runs into difficulties when he argues that "an Australian would never have dropped that catch because they're tougher over there", or "India lost the match because they should have picked X", or "imagine how good we'd be if we changed the captain". Above all, my scepticism about causes kicks in when a match is lost and a media inquest begins into everything that immediately preceded the defeat, as though the former inevitably led to the latter.

In sport, as in life, I believe in the capacity of innovation, strategy and intelligence to make a difference over the long term. But that faith can coexist with the right to challenge the retrofitting of today's causes to suit yesterday's events.

You can be a short-term sceptic and still a long-term optimist.

Cricket and Causes - It's not about selection or tactics, silly

Understanding causes is incredibly difficult. It is much easier to assume that easily discernible surface issues are the primary explanations for victory and defeat

Ed Smith

May 1, 2013

	Mike Atherton copped criticism during Australia's dominance in the 1990s: "It is not easy to be bold, consistent or whatever else is deemed topical, when you are losing matches" Paul McGregor / © ESPNcricinfo Ltd  Enlarge
Related Links Ed Smith : What can colonoscopies teach us about cricket? Players/Officials: Mike Atherton | Michael Clarke Teams: Australia | England

If you want to understand sport, you have to understand causes. More accurately, you have to understand how difficult it is to be sure about which causes really influence events, and which are merely irrelevant side issues.

Coaching is about understanding causes: what causes players to perform better? Journalism is about causes: which factors led one team to beat the other? Fans, too, reflect obsessively about causes: what might make the difference for us next season? Sport, like history, is about causes.

And yet understanding causes is incredibly difficult. Causal threads must be observed and disentangled, then weighed and judged. It is much easier simply to assume that easily discernible surface issues - such as selection and short-term tactics - are the primary explanations for why teams win and lose.

That is why the books that have most influenced my thinking about sport address the question of causes rather than sport itself. If I had to name one book that anyone with a serious interest in sport should read, it would be Nassim Taleb's Fooled by Randomness. It scarcely mentions sport, and Taleb actively dislikes organised games. But Fooled by Randomness explores the dangers of sloppy assumptions about causality. It attacks lazy guesses about one thing "leading" to another. It makes the reader re-examine his own flawed reasoning.

Taleb recalls watching the financial markets on Bloomberg TV in December 2003. When Saddam Hussein was captured, the price of US treasury bills went up. The caption on TV explained that this price movement was "due to the capture of Saddam Hussein". Half an hour later, the price of US treasury bills went down. The TV caption explained that this was "due to the capture of Saddam Hussein".

The same "cause" had been invoked to "explain" two opposite effects, which is, obviously, logically impossible.

The next time you absorb sports punditry, keep in mind that story about Bloomberg TV and the price of Treasury bills. You will learn that a golfer misses a crucial putt "because he lost concentration", and then misses the next putt because he was "trying too hard". You will learn that a team loses one match "because they didn't stick to the game plan", then loses the next "because they were unable to think on their feet".

A manager messes up one match "because he was too loyal to his favourite players", then fails in the next "because he unnecessarily alienated the core of the team". And, my favourite: there is always the player who "benefits from utter single-mindedness" one week, and then "suffers from a damaging lack of perspective" the next.

The point, of course, is that causes are being manipulated to fit outcomes. They weren't causes at all, merely things that happened before the defeat. The ancient Romans had an ironic phrase for this terrible logic - post hoc, ergo propter hoc, "after this, therefore because of this".

It is hard to imagine a stronger contender for adopting false causes than the failure of English cricket teams to win the Ashes between 1987 and 2005. This dismal sequence was, apparently, "caused" by the following factors: structure of county cricket, unshaven stubbles worn by some England captains, sticking with a failing core of senior players for too long, introducing too many new players, being insufficiently hard-working and professional, being insufficiently joyful and amateur, having too many counties, being too English, not being English enough. And so on.

Pretty much anything that existed within English cricket, at some point or other, was used to explain England's lack of success in the Ashes. An English cricketer in the 1990s only had to brush his teeth to be told that they didn't do it like that in Australia.

Above all, English cricket failed because it was not like Australian cricket. If only England teams would copy Australian teams by (in no particular order): swearing/caring/sledging/bonding/singing/ drinking/attacking/being mates/taking risks/backing themselves/fronting up/digging in/manning up/playing for the badge/never saying die… if England teams simply did all that, then, frankly, playing Shane Warne's flipper and Glenn McGrath's metronomic seam-up would be a doddle.

	When your best is not quite good enough, the two levers under your control - selection and tactics - begin to look very inadequate. In other words, they are not really "causes" of defeat at all. They are simply things that happened along the way

Imagine the logical gymnastics required when England started winning Ashes series again. All the previous causes of defeat had now to be converted into explanations for victory. If England's Ashes success continues, it can only be a matter of time until we have the ultimate "Bloomberg moment", when an article is written arguing that Australia routinely loses the Ashes because they have too few state sides and must urgently copy England's first-class structure of 18 counties.

True, some things within English cricket have changed in reality as well as perception: players are now centrally contracted to the England team, for example, rather than to their counties. But not as much has changed as is often claimed. Revolution - "chumps to champs" - is a snappier narrative than gradual evolution.

But the real fun lies elsewhere. It has now become fashionable to scour Australian cricket looking for "causes" of their decline. A few years ago, the personality of Michael Clarke became the focal point for critics of the culture within Australian cricket. When Clarke came good, it was time to look elsewhere for "causes" of muted Australian performances. Ex-players attacked selection as confused, even insulting. Australia, they argued, had to pick more young players, and yet had to pick more players with hard-earned experience; they had to stick with a consistent team while also, inevitably, abandoning obvious mistakes. Sound familiar?

Mike Atherton, the former England captain who received his fair share of criticism during the era of Australian dominance, remarked wryly this week: "It is not quite so easy to be bold, to be consistent or whatever else is deemed topical, when you are losing matches."

The two central variables in sport, the main levers controlled by the management, are selection and tactics. Imagine, for a moment, that you are in charge of the lesser of two teams. You pick what you think is your best XI. And you lose, despite the team playing at or near its potential. If you stick with the same team, are you not merely sleepwalking towards another defeat? And yet if you change it, what has led you to change your mind about the team that you thought was the best XI last week and which, after all, did not really under-perform? Difficult one, isn't it, picking a team that is less good than the opposition?

Now tactics. Imagine you devise what you consider to be your optimal tactical approach. You execute the plan reasonably well. And you lose. Do you change tactics, with the same logic that led you to change the team, or stick with the old tactics that led to defeat?

Very simply, when your best is not quite good enough, the two levers under your control - selection and tactics - begin to look very inadequate. In other words, they are not really "causes" of defeat at all. They are simply things that happened along the way.

It is the same with national economics. Governments and central banks control the familiar levers of interest rates, money supply and taxation. They are endlessly criticised for their handling of all three. But what if the actual economy, the thing itself, is simply not very robust? A rabbit cannot always be conjured magically from a hat.

I would not have explored all this if I wasn't surprised at how often it is forgotten or overlooked in the analysis of sport at every level, from the pub to the board room, and from the commentary box to the armchair. We have long accepted that understanding historical causes is profoundly subtle and intellectually demanding. Exactly the same applies to understanding causes in sport.