The IRA couldn't destroy the Mancunian spirit - and neither will the latest attack

Terrorism has carved out the modern city of Manchester. Twenty-one years ago, an IRA truck packed with 1,500kg of fertiliser turned a sizeable area of the city centre into a smoking wreck. It was 15 June 1996, my first day at work as a shop assistant in the grand old Kendals department store, just down the road from the bomb. We were gathered in a scruffy upstairs meeting room for a routine briefing by the head of security when it went off. 

We could hear the blast before it impacted, barrelling down Deansgate like an invisible tsunami. When we emerged (thankfully unscathed) onto the street for evacuation, the first thing we saw was that the shop's ground-floor display windows had all been shattered and the fashion mannequins were lying half in and half out.

Monday night's atrocity in the Manchester Arena is simultaneously less destructive and more so. Unlike in the IRA's outrage, which caused upwards of £700m of damage, the direct destruction of physical property this time seems likely to be minimal. But the human cost this time is on a different scale of grief. 

There were some 220 injuries from the 1996 blast, some of them serious, but no fatalities, mainly because the IRA gave an hour's warning. Suicide bombers, however, don't give warnings. At the time of writing, 22 people are already dead and 59 injured. And the horror of the target this time - young people attending a pop concert - makes this feel like it belongs in a different category: a separate species of depravity.

Manchester's modern economic renaissance arguably began with the 1996 bombing. The city responded to the devastation with an imaginative programme of urban regeneration. It has delivered new transport infrastructure, buildings, renovations, clean-ups and the fashioning of some wonderful public places. An extensive overhaul of the previously unlovely Victoria station, adjoined to the very Manchester Arena complex where Monday's mass murder took place, was completed only two years ago.

Public investment has helped to uncork the animal spirits of the private sector. Thousands of new firms have come. International firms, from Adidas to Kellogg's to Gazprom, have located their UK headquarters in the city. Chinese investment is flowing in. The BBC has a major presence in neighbouring Salford, with possibly more media companies to follow. My old employer Kendals must now contest the luxury retail market with southern titans such a Selfridges and Harvey Nichols.

Manchester shows that "post-industrial" can be a springboard, rather than a curse. Its industrial heritage is still all around in the shape of magnificent classical warehouses, built by Victorian cotton barons. But Manchester isn't stuck in the past. It's a services-based economy now: outward-looking and confident. The warehouses have been converted into flats. In the decade to 2011, the city centre's population grew by almost a fifth, the biggest expansion of any UK city outside London. Manchester has cemented its position as the second most economically vibrant city in the UK. Northern Powerhouse indeed.

How will community relations in multicultural Manchester be affected by this atrocity now that Isis has claimed responsibility for the attack? How will Manchester's services economy cope? What will befall its thronging retail and entertainment sectors? What will happen to investment? One suspects the city will manage in the same impressively resilient way that London has coped since the 7/7 suicide bombings on the capital's transport system in 2005.

There's no going back on the Mancunian diversity front. Manchester's two huge universities mean that the city is stuffed with proud citizens of the world of all ethnicities and religions who come to study. And the students often stay after graduation. Manchester has long been a tolerant place - and that is most unlikely to change. Businesses will push on too. This economic snowball has too much momentum to be stopped by a maniac with a rucksack full of explosives and a head full of medieval bigotry.

Manchester's capacity, its symbolism, its openness, its sheer importance, all made my home city a target for the merchants of hatred and violence back in 1996 and, it seems, in 2017. That openness, of course, is the city's vulnerability. But, as with all great cities, its vulnerability is also the source of its strength. And that strength will, once again, show itself.

Theresa May is right not to offer subsidised social care to well-off pensioners

It's a strange world we live in where the Tory Prime Minister scraps a subsidy for wealthy families and Labour complains that it's terribly unfair.

But that's what has happened last week with the Tory manifesto's unexpected move on social care, where Theresa May ditched the idea of capping the amounts an individual has to contribute before the state picks up the remaining tab.

It wasn't just Labour that didn't like it. Some Tory candidates are beginning to grumble, perhaps unsurprisingly given their natural support base. But the heavyweight intellectual opposition came from Sir Andrew Dilnot, the distinguished economist who chaired a major review of social care for the Coalition, who told the BBC that the removal of the cap means the system "is not providing insurance" and will "leave people helpless".

Yet "insurance" here requires some definition. What Dilnot meant is that without a cap on out-of-pocket care costs it will prove impossible for private insurance firms to design a product which will enable individuals to insure themselves against the possibility they will require expensive care in old age.

However, another element of the Conservative proposals guarantees that at least £100,000 of an individual's wealth will be ring-fenced from being used up in care charges. That seems a rather generous state insurance of assets, certainly relative to the existing effective protection of around £23,000.

The Conservative proposal may not be facilitating the type of insurance on individual care expenditure that Dilnot thinks is appropriate. But that's a case to be made, not a conclusion to be simply asserted.

It helps to look at the numbers. Around one in 10 elderly people will need to spend more than £100,000 on their care costs, with some facing costs as high as £300,000. But the median wealth of people in their seventies, the age when they are most likely to need social care, is only around £150,000. Under the Conservative reforms, the majority of elderly people who need extensive care towards the end of their life would not face any significant out-of-pocket payments. The state would end up providing for them.

What Dilnot is lamenting is the dent to hopes of seeing the creation of a private insurance market that would primarily be of benefit to those with significant assets, mainly high-value houses in the South of England. One might wonder whether providing state-sponsored risk pooling for Home Counties pensioners ought to be a Government priority. But let's imagine it was. Providing that support certainly wouldn't be free.

Dilnot proposed a £35,000 cap on out-of-pocket costs that would have required around £2bn a year of additional taxpayer funding. The Dilnot Commission's own estimates show that the biggest beneficiaries of the cap would be the wealthiest fifth of pensioners by income. 

But who would pay? Perhaps it might be funded by an increase in inheritance tax, as various think tanks have proposed. This would be socially equitable since the ones footing the bill - rich families in the South - would also be the beneficiaries of the social care reform. Remember, people cannot take their wealth with them when they die. The "insurance" we are talking about is, in the main, insurance of their children's inheritances.

Yet political reality intrudes here. There's nothing in the Conservative Party manifesto about inheritance tax. And new rules introduced by David Cameron and George Osborne mean that people will relatively soon be able to pass homes worth up to £1m to their children entirely tax-free. 

For all their redistributive fervour, there's actually nothing in the Labour manifesto about inheritance tax either. It's not on the political agenda. This is not an irrelevant detail. It has a direct bearing on the distributional impact of any government policy that subsidises social care for the better off.

Policies should not be evaluated in isolation. The bottom line is that socialisation of the risk of large care bills, as Dilnot is urging, in the absence of any increase in inheritance tax will mean larger inheritances: an increase in the flow of expensive homes passed down tax-free from parents to children.

A taxpayer-funded subsidy to the rich is objectionable enough. A subsidy that will have the effect of increasing already high levels of wealth inequality and which feeds our damaging national obsession with inherited property would be even more so. Unless she is going to reform inheritance tax, we should be relieved that May has chosen the less regressive option on social care.

Labour’s costings, like the fiscal costings found in all party manifestos, are flaky. But there’s a solution

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

General elections tends to turn journalists and broadcasters into Dickens's Mr Micawber, albeit without the charm. Do the promises of the parties add up? Is there a gap? Is there to be happiness or misery? The questions ring in our ears.

In many ways it's a silly and unedifying spectacle. As the economist Chris Dillow has pointed out, it's a sham to imply that such "costings" exercises can tell us anything about the how the public finances will evolve under any particular government.

That depends far more on the state of the economy. And to the extent that the costings obsession of journalists at election time distract attention from bigger questions of macroeconomic management, it's harmful.

If growth is crushed because the government imposes excessive austerity while interest rates are still at rock bottom - something close to what we saw in 2010 under the Coalition - even the most honest of manifestos and most accurate of costings are not going to help the deficit.

In 2010 the Conservative manifesto pledged to eliminate "the bulk"of the current structural budget deficit by 2015. In fact it was still £45bn in that year, mainly because the economy performed so badly.

Yet at the same time, political parties should not be allowed to promise higher public spending or redistribution without acknowledging the costs and trade-offs. If that sounds like an anti-progressive conspiracy, consider how right-wingers are prone to making assertions about how cutting taxes will magically pay for themselves by turbo-charging growth. The fiscal credibility question cuts both ways. Or at least it ought to.

Labour's tax costings today are a mixed bag. The income tax (£6.4bn) and corporation tax (£19.4bn) raising figures by 2021-22 look broadly reasonable because they are based on a HMRC "ready reckoner" document, which allows anyone to estimate what changing headline tax rates would mean for revenues.

But the assertion that Labour would bring in £6.4bn by clamping down on tax avoidance is simply a madeup number, in the sense that it's an aspiration, rather than being based on any kind of programme that can be evaluated. We saw precisely the same made-up numbers in the 2015 manifestos from both Labour and the Conservatives.

Falling between those two extremes are Labour's estimates that an "excessive pay levy" would raise £1.3bn or that introducing a new financial transactions tax would bring in £5.6bn, to take just two examples. This is speculative because we cannot say with any confidence how the public's behaviour would change in response to the introduction of such new taxes because we have no history to go on.

Would firms simply soak up the new pay levy in the form of lower profits and carry on rewarding top staff in the same way? Or would they curb salaries, meaning the levy raised negligible amounts for the taxpayer? The same applies to the proposed transaction tax. Perhaps asset managers and financiers would trade less in response to the levy, meaning it doesn't produce much money. Incidentally, given Labour regards both excessive pay and excessive financially trading as undesirable, it logically ought to welcome a strong behavioural response - although that would create a problem for its costings.

It's true, of course, that new taxes are introduced by governments all the time. And governments, when they do this, always make an estimate of how much money it will end up raising, taking into account behavioural change. Yet there's a check on over-optimism now in the shape of the Office for Budget Responsibility. The OBR tells the Treasury and HMRC to think again if it isn't convinced by their estimates. And it highlights the uncertainty of particular costings.

The obvious and sensible solution to the issue of election manifesto costings is to allow the OBR to perform the exercise - applying the same uncertainty scale on individual tax proposals as it does at Budgets.

This isn't a particularly radical suggestion. The OBR's equivalent in the Netherlands already costs the manifestos of parties that submit their proposals to it in good time. And the head of the OBR, Robert Chote, has said his organisation is willing to do the job, provided its resources are significantly expanded.

The former Chancellor George Osborne deserves credit for establishing the OBR in 2010. The watchdog has helped restore credibility and transparency to Budgets. But Osborne turned down a proposal from Labour in 2014 to allow the OBR to cost all the party manifestos.

Whoever forms the next government would be wise to revisit this. The results for the voting public might not be Micawberite ecstasy, but we would certainly be better informed about the choices available to us than we are now.'

Higher state investment is one thing Labour’s manifesto gets absolutely right

There are some rules of thumb in politics. If you want to keep something secret, say it on the floor of the House of Commons. If you want to publicise something, mark it "secret" and leave it lying around near a photocopier. And if you want people to be misled about what you are proposing, let the right-wing press explain it.

The shadow Chancellor, John McDonnell, first announced plans to spend an additional £250bn over a decade on state investment if Labour wins power in a speech almost a year ago. The surprise would have been if this long-standing pledge had been dropped from the party's manifesto, not that it made the cut.

But what makes the hyperventilating of the pro-Tory press pack in response to this particular line in the leaked manifesto even more risible is that they appear to have little grasp of how moderate this supposedly ruinous investment promise is.

Public sector net investment in 2017-18 is already set to be £40bn. Labour's planned increase of around £25bn a year would take that to around £65bn. As a share of GDP that would represent an increase from 2 per cent of GDP to 3 per cent, taking us roughly back to where public investment as a share of national income was when George Osborne took an axe to it in his 2010 austerity drive.

We're also told, in horrified tones by papers such as the Daily Mail and The Sun, that this investment spending would be financed not by extra taxes but by borrowing. The Times points out that Michael Foot's 1983 manifesto also promised to pay for industrial investment spending by borrowing.

Yet what they fail to note is that George Osborne, in his original fiscal mandate, did exactly this too. The former Chancellor's 2010 deficit target, which was naturally hailed by the right-wing press for its fiscal rectitude, was to achieve balance on the "current budget" over five years. And the current budget, of course, excludes public sector net investment.

In fact, it's been the norm for governments to permit borrowing for investment for the very sound economic reason that investment in infrastructure - whether road repairs, rail electrification projects or new broadband networks - increases the future productive capacity of the economy. This should increase GDP growth rates and hence future tax receipts. In the medium term well-targeted infrastructure spending should pay for itself.

Labour's state investment pledge also needs to be understood in the wider economic context. Private business investment as a share of national income has been falling since 2000 and in 2016 stood at just 9 per cent of GDP. This decline, in combination with the cuts to public investment since 2010, has dragged total economy-wide investment down to about 17 per cent of GDP. This is below the share of national income spent on investment in other peer countries such as the US (20 per cent), France (22 per cent) and Germany (19 per cent). All of this may well explain, in part, our major national productivity shortfall relative to those countries.

Labour's proposal to bump up direct state investment, along with its plan to establish a National Investment Bank to lend an additional £250bn over a decade, is a serious response to what the OECD has called the UK's "historic underspending" on infrastructure. The fact that private investment spending is also under pressure due to Brexit-related uncertainty about the UK's future trade arrangements is another strong argument for the Government picking up some of the slack.

From abolishing tuition fees, to jacking up corporation tax to 28 per cent, to abolishing zero hours contracts outright there are plenty of economic policies in Labour's manifesto that can reasonably be criticised. But higher state investment spending is not one of them. Its critics largely discredit themselves.'

Europe shows that nationalised industries don’t have to be 1970s-style disasters

If you want to go "back to the Seventies" you don't need to hope Jeremy Corbyn enters Downing Street on 9 June and hoists the red flag over the black door of No 10.

If you want to experience public ownership of industries you might try sending a letter in Norway, where Posten Norge (Norway Post) is a state-owned company. You might ride on a train in Switzerland, where the Schweizerische Bundesbahnen (Swiss Federal Railways) is a corporation whose shares are wholly in the hands of the Swiss cantons.

You might try boiling a kettle in Paris, with energy supplied by the state-owned Électricité de France. Or maybe do the same in Hamburg, where the energy grid is in the process of being reacquired by the city government. While you're in Germany, you might like to open an account at one of the country's hundreds of local government-owned Sparkassen, or savings banks.

It may surprise you to learn, given the hysterical reception being given to the leaked Labour manifesto and its proposals for a partial renationalisation of various British industries, that none of those above experiences in continental Europe will be a Soviet-style nightmare.

Indeed, one will find that many of those industries provide a superior service in countries with a strong element of public ownership, compared to their counterparts do here in Britain where such things are "left to the market". There are probably few Southern Rail commuters who wouldn't trade their experience with those Germans who enjoy services operated by the state-owned Deutsche Bahn.

But of course, we don't leave everything to the market here in Britain either. When you board a train here in Britain, you will step on to a privately-owned piece of rolling stock operated by a private franchise. But the tracks over which you travel are owned by the publicly-owned Network Rail, founded after the collapse of the privately-owned Railtrack. And that private rail franchise may well be part of a larger European state-owned group. Arriva is an outpost of Deutsche Bahn. The Essex-operator C2c is part of Trenitalia, the Italian state rail company.

Similarly, if you're getting domestic energy supplied by EDF, it's that same group that powers the Parisian kettle. As many have noted, we do have public ownership in UK rail and energy markets. It's just that the government ownership is by foreign governments.

The question of national versus private ownership is less important than many people imagine. What really matters is the structure of the wider industry, the incentives for managers, the quality of regulation and the political and social context in which firms operate.

The privatisations of British Airways, British Telecom and British Steel were a success not because high quality private managers were brought in to replace low-grade state bureaucrats. The management teams were often the same before and after privatisation. What changed was the introduction of competitive pressures and the imposition of credible budget constraints, forcing these same managements to compete, cut costs, work more productively, invest and innovate.

But it's harder, if not impossible, to inject competitive pressure into natural monopolies such as rail and energy generation, and utilities such as water, through privatisation. And because they are natural monopolies (with unsurmountable barriers to market entry by potential competitors) they are always going to be tightly regulated, even when they are in private ownership. It would be a brave politician who proposed to let a private water company charge households in its area whatever the market would bear.

The issue of the cost of renationalisation is also something of a red herring. When the state privatises an industry, presuming it sells the business to private investors for what it is actually worth, the state does not register a profit in a comprehensive accounting sense. What it gains in sale receipts it loses in future profits. The same is true in reverse. Assuming it doesn't overpay, the cost to the state of buying back, for instance, the Royal Mail or the National Grid will be balanced by the flow of future net revenues from those businesses.

The key question, from a public policy perspective, is whether the business assets are likely to be run more efficiently in the interests of the public in one form of ownership than the other. Will the absence of the risk of bankruptcy result in budget indiscipline from public managements? Will public managers be more attuned to the whims of ministers and employees rather than the needs of customers? Or, on the other hand, will private managers under invest to increase dividends to shareholders? How likely are civil servants to draw up franchising contracts that will provide good value for taxpayers?

These ought to be empirical questions, informed by analysis, evidence (including from abroad) and judgement. Yet for much of the British media and political classes it is, alas, a matter of ideology.

The energy market is broken but customers stubbornly refuse to be liberated from their tariffs

In a new book James Kwak describes the curse of "economism". This is the tendency for people to engage in public debates about economic policy brandishing nothing more than a supply and demand curve and a conviction that all government interventions in markets are inevitably destructive. 

Purveyors of economism treat all markets as simple and identical. They disregard context and assume perfect information from participants. They reason as if they have read only the early chapters of an introductory economics textbook and that they never grasped that the models described in those chapters are useful abstractions, not descriptions of the real world.

There's been a lot of economism in the debate about the Conservative proposal for price caps on certain residential energy tariffs (just as there was when Labour under Ed Miliband promised an overall price freeze two years ago). Fearful outcomes apparently range from a collapse of investment in new supply to a Venezuelan-style social collapse.

The first challenge to the simplicities of economism is detail: an analysis of the characteristics of the market in question. Around 70 per cent of UK households, despite much prompting from ministers and advertising from switching websites, are not getting the message that they could save money by changing suppliers when their fixed-term contracts come to an end. 

Now this could be because they enjoy paying over the odds for their energy, which seems unlikely. It could be because they love their existing supplier too much to ever think about changing, which again seems somewhat implausible. Or, more likely, it could be because they are baffled by the artificial complexity of the tariff contracts offered and feel too intimidated and confused by the concept of a market in domestic energy to switch.

Of course, a third of people do switch supplier, leading to complaints that capping the standard variable tariffs of the non-switchers will undermine this functioning element of the market. Yet this brings to mind the polite curate who told his host that his boiled egg was "good in parts". It's difficult to argue that a market is functioning only in parts.

If a majority of customers don't switch, that undermines the pressure on providers to provide a good service to anyone. It's no coincidence that the heart sinks at the thought of having to ring one of the major providers to question a bill - and that the "big six" come out notably badly on customer satisfaction surveys.

Another solvent for economism is some history. Electricity was once provided, in the majority of areas, by local authorities as a kind of public good. There followed a national monopoly after the Second World War.

And controls were only last month re-imposed by the regulator on charges on pre-payment metres (which are a common feature of the homes of the poorest). Intervention and tight regulation have been the norm in the residential energy sector for most of its history.

It is now seventeen years since the residential energy supply market was liberalised. But most people stubbornly refuse to be liberated. One can take the view that further effort is required to nudge them into the switching habit.

Or another, reasonable, conclusion is that domestic energy may simply never be the fast-moving and competitive market that was once envisaged and that some form of limited price control is now justified to put a stop to the egregious gouging of vulnerable customers by complacent private incumbents.

In his 1953 poem The Solution Bertolt Brecht satirically lamented that the people had forfeited the confidence of the government and that the time had come to dissolve the people and elect another. We should beware the temptation to blame customers for letting down the residential energy market.

Why do the wealthy and well-connected tend to win so many political battles? Because they are wheels that squeak

The squeaky wheel gets the grease and losers cry louder than winners sing. British politics certainly bears out the truth of those old observations.

Just two months ago we witnessed a backlash against Philip Hammond's hike in national insurance for the self-employed, which was designed to bring the levy closer into line with the tax paid by employees. This resulted in a spectacular and humiliating U-turn for the Chancellor within days.

That fiasco came hot on the heels of a noisy revolt against business rates reevaluations and a partial retreat in the Budget (a retreat which is set to cost taxpayers £435m). That affair was also a reminder that, for a quarter of a century, cowardly governments (of all stripes) have dodged a revaluation of council tax bands in England out of fear of an eruption of opposition from the Home Counties.

Then, just last week, there was a coordinated push back from Tory MPs against a new funding formula unveiled by the Government last year for the distribution of central funding for local schools. One does not have to be Mystic Meg to foresee where this one ends.

All the reforms above have two things in common. First, they would make for a more equitable raising and distribution of resources. Second, they would create more winners than losers around the country. But the losers shout louder than the winners. And the losers, in the main, are satisfied: the squeaky wheel is lubricated.

In all cases, ministerial foolishness or cowardice made reform harder. Severe cuts to real terms per pupil school funding over the coming years accentuates the pain of the transition to the new formula for individual schools. The business rates revaluation was delayed for nakedly political reasons, making the eventual re-rating more painful (for a minority of firms) when it eventually came. The same applies, albeit on a grander scale, in the council tax saga. Hammond's national insurance reform probably ought to have been done in tandem with a wider set of reforms to address the conditions of self-employed workers.

Yet there's a larger dysfunction here. Even without those ministerial missteps there would have been significant, possibly insurmountable, opposition. Why? Why do reforms that would benefit more people than the numbers who lose out get shot down, watered down or never even attempted? 

Media framing is a major part of the problem. Newspapers run lobbying campaigns championing those who stand to lose out from a particular reform. They never run campaigns on behalf of those who stand to benefit. The broadcasters tend to take their lead from the press. And the resulting media cacophony persuades ministers to retreat.

Yet the media is not the only factor. Lazy MPs must be culpable too. In all these cases - school funding, self-employment tax, business rates, council tax - parliamentarians ought to be defending or pushing for reforms that would benefit the vast majority of the own constituents.

Where are the MPs from all those areas that will benefit speaking out on behalf of the more equitable school funding formula? Where are the political representatives from less well-off regions pushing for the original business rates revaluation? Where are the MPs, with their tens of thousands of conventionally employed constituents, defending the national insurance equalisation with the self-employed? Why are parliamentarians not lobbying for council tax revaluations, given the fact that, arithmetically, most of their constituents would benefit? 

Economics is often unhelpfully and inaccurately framed as a zero sum game, where one person's gain is another person's loss. Think of how Donald Trump talks about trade, or the way Ukip and now the Conservatives talk about immigration. But when it comes to reforming an unequal tax or spending system the zero sum logic actually holds. And the person who gains tends not to be the poor but the wealthier, the more powerful and the better connected.

The pessimistic view is that because potential winners are usually dispersed and disorganised, and because people generally bank gains without gratitude, the incentives of politicians will always be to listen to the angry and organised losers. Perhaps that's true. But it would be nice to put it to the test rather more often.

The first step is for the silent wheels to start squeaking too.

An economics lesson that the Borough Market terrorists failed to grasp

It’s unlikely that the pathetic psychopaths who ran amok in Borough Market randomly stabbing Londoners on Saturday night gave any thought to the economic significance of their target. But the city’s foodie hub is a powerful case study in the phenomenon of retail clustering.

From one perspective, it’s odd that so many artisan grocers and luxury delicatessens would want to cram themselves into one relatively small place beneath the railway arches of a busy London train station. Competition is ferocious. Business rates are punitively high.

Why not spread out across the capital? Sadly, there are no artisan delicatessens where I live in the unfashionable suburbs of south London, even though there are plenty of folk with a sufficiently high disposable income to shop in them. If these shops dispersed they would have much less competition, a higher share of a reasonably large local market and lower overheads.

But there are two forces at work on retailers, one centrifugal and centripetal. The centrifugal force is the desire to reduce local competition by striking out alone. The centripetal force is the urge to benefit from higher footfall by clustering.

If a retailer is selling a good or service that is considered a luxury rather than a staple, the clustering force often prevails. Clustering in Borough Market has created a world-class foodie destination and customers are sucked in from far and wide. People won’t travel into London Bridge to buy a pint of milk, but they will to buy a chorizo roll from Brindisa or a Lemon Chiffon cake from Konditor & Cook.

The same applies if a purchase is relatively infrequent, which is why one often finds two rival retailers flogging washing machines, or sporting goods equipment, sitting right next to each other in out-of-town retail parks. More competition, yes, but also more customers.

Whole areas benefit from clustering through positive spill-overs. People shop for their artisan cheese and their cured ham in Borough Market and then enjoy one of the many high-end local restaurants or independent coffee shops. They stroll by the river and drink in one of the pleasant Thames-side pubs. It’s a day out, often turning into a night out too.

Clustering, economies of agglomeration, network effects and positive spill-overs, on a larger scale, explain cities themselves. There are spill-overs galore in any big city.

To expand on the example at hand, wealthy City workers cross London Bridge to have lunch in Borough Market. Doctors come from nearby Guy’s Hospital for a post-shift drink. Tourists saunter over from the South Bank and vice versa. Firms buy floor space in the Shard, despite the high rents, because of the local amenities, not least the famous foodie hub next door.

This clustering is what makes cities a prime target for terrorists. They seek to leverage the murderous rage of their risibly small band of fanatics by assaulting a place where they know there will be lots of innocent victims. They seek an iconic location so they can create a mass psychological impact through their despicable violence.

But clustering is also why cities are so resilient, and why the waters of commerce tend to close over the economic damage they cause surprisingly quickly. There is so much capital invested in cities – the refurbished shop, the new office block, the renovated train station – that people have to keep using it to pay the bills. There’s economic momentum. Londoners are grieving for the victims of the London Bridge massacre but they aren’t “reeling”, mainly because they haven’t got time to reel.

And the way to limit the economic damage that terrorists seek, in part, to create is not to panic, but to carry on spending and enjoying all the wonderful experiences a city has to offer. As Rudolph Giuliani urged New Yorkers immediately after the 9/11 attacks to “buy a pizza, take the kids to the park, see a show”, the advice in London should be: visit Borough Market.

Don’t be alarmed, as the Mayor Sadiq Khan rightly told Londoners and the capital’s hundreds of thousands of visitors at the weekend. And only a malevolent fool – or the President of the United States – would urge otherwise.