Simon wonders why simple theories of inflation are so attractive. For me, this raises a paradox.

There's a long tendency for people to be attracted to simple ideas. Many believe that there are easy solutions to tricky problems - be they independence, a smaller state, getting companies to pay fair taxes, whatever. (Yes, Marxism used to be among such ideas.) There's a name for this - the Casaubon delusion, the notion that there's a key to all mythologies.But, as several millions corpses in the 20th century warn us, such keys often don't exist. Foxes (pdf), who know many small things, do better than hedgehogs who know one big thing.

However, the opposite of a great truth is another great truth. In other contexts there are indeed simple solutions or near-solutions.Gerd Gigerenzer has shown (pdf) that simple rules of thumb are surprisingly effective, and evidence from many different contexts supports the claims of Robyn Dawes (pdf) and Paul Meehl (pdf), that simple models often out-perform expert judgment.

Take two examples of this.

One comes from stock-picking. There's good evidence that some strategies do beat the market on average over the long-run: momentum, defensives and quality. Such stocks can be identified not by judgment, but by simple stock screens.

Another comes from management. As Nick Bloom has shown, good management (pdf) often consists not so much in the exercise of judgment and discretion, but in the implementation of control and feedback rules; the work of Shann Turnbull is interesting in this context too. (This is not to say that implementation is necessarily a simple task).

However, there is popular resistance to the use of such simple methods. Very few stock-pickers rely solely upon simple screens* and our attitudes to management - especially among the political-media class - haven't progressed beyond "ju-ju man do magic."

So here's the paradox. We often believe in simplicity when we shouldn't, and don't believe in it when we should. John Stuart Mill said that liberty is often granted when it should be withheld and withheld when it should be granted. The same, perhaps, applies to simplicity.

* This might be reasonable for professional fund managers as such strategies carry benchmark risks, but retail investors have no such excuse.