innate or genetic, like having red hair or a good sense of humour. on this view, teaching creativity is like teaching someone to grow a funny bone. it is not. it is perfectly possible to teach someone to be funny – there are courses aplenty on it. and it is possible too to teach them to be creative. philip bond teaches a course on creativity at the university of manchester. creativity is not the result of random lightning strikes of inspiration. it is about creating the right environment for lightening to strike in the first place. the shapes and colours of our offices are important. eating and sleeping patterns matter. walking helps. meeting new people matters. new experiences work wonders ( and wonder ). 43 creativity does not require an apple to land coincidentally on the head of a genius, any more than it requires the coincidence of a watt, a hargreaves and an arkwright in the late 18th century in latitudes north of stockport. creativity is a core skill in us all – indeed, the one skill we know is uniquely human. but nurturing it requires the right environment, as ken robinson ’ s reflections on our educational systems make clear. apples are less likely to fall on our heads if we are deskbound. this point is not confined to creativity. today ’ s educational system is heavily skewed towards developing cognitive skills in the young. this made sense during the first three industrial revolutions as humans sought to keep ahead of machines that were long brawn and short brain. as machines ’ cognitive capacity grew, so too did the demand for institutions offering higher - level cognitive skills, such as colleges and universities. available at https : / / www. ted. com / talks / ken _ robinson _ says _ schools _ kill _ creativity? language = en available, as if you were bothered, at https : / / www. youtube. com / watch? v = l8ukyrwxii0 available at https : / / thebestyoumagazine. co / power - of - creativity - by - prof - philip - bond / all speeches are available online at www. bankofengland. co. uk / speeches these institutions were the right response to the challenges of first three industrial revolutions. they are unlikely to be the right response to the fourth. the rise of the thinking machine means the future world of work will no longer require narrowly cognitive skills. and in a world of 100 - year lives and 70 - year careers, educational institutions will need

the growth of house prices in recent years might have been far too high for other industries. secondly central bankers have been cautious to put much weight on their own assessments of when an increase in asset prices is becoming unsustainable. if they get the judgement wrong, they risk slowing growth needlessly and bring inflation persistently below target. even if central bankers put more weight in future on their judgements of excesses in financial markets, it seems highly desirable also to make the regulatory system more counter - cyclical. a number of proposals have recently been put forward, which would have the effect of directly increasing a bank's capital requirements during an economic upturn and allow room for capital requirements to fall in a downturn. for instance professors goodhart and persaud have put forward a scheme linking a bank's capital to the growth in its assets. another possibility is to learn from the spanish system of requiring banks to set aside general provisions against their loan book in good times which can be a cushion against losses in the downturn. there are some drawbacks to each of these particular proposals but we are discussing the best approach both with the fsa and with our international colleagues in the fsf. current challenges for the mpc making sure we do set in place capital and liquidity regimes which dampen the next cyclical upswing in financial markets is important. more immediately, we also have to deal with the present conjuncture and i want to finish this talk with some reflections on that. if the sharp credit squeeze was the only challenge we faced, the monetary policy committee would be expected to continue reducing rates to mitigate the risks of an excessive fall in demand and in inflation in the medium term. but of course we do face another simultaneous shock, the sharp rise in commodity prices, which is driving up inflation across the world. and that raises the question whether we should be raising rates rather than reducing them. moreover recently each month seems to have brought more worrying news on both fronts. the cost shock in the may inflation report, the committee forecast a pickup in inflation to well over 3 per cent, above target and driven in large part by the huge rises we have seen in energy and food prices ( chart 3 ). since those projections were put together, oil prices have risen a further 20 % and food prices by a further 5 %. and the consumer price index has risen faster than we were expecting, reaching 3. 8 % in june. we are a little behind the us