Against this referendum

The EU referendum raises a longstanding question in welfare economics discussed, for example, in this paper (pdf) by Daniel Hausman: why should we pay attention to people’s preferences?

The standard answer is that people know what is best for themselves -or at least that their mistakes cancel out – and so satisfying people’s preferences maximizes aggregate welfare. As Jeremy Bentham wrote, “no man can be so good a judge as the man himself, what it is gives him pleasure or displeasure.”

However, whilst the idea that people are good judges is valid in some contexts, it seems assuredly untrue of the EU debate. There are three problems here*:

 - Voters are wrong about the basic facts. For example, they over-estimate the number of EU migrants in the UK by a factor of three.

 - Some of their views are shaped (pdf) by cognitive biases. A form of halo effect has bred hostility to “elites”: because the Establishment has been wrong about many things, voters don’t trust them even when they correctly warn of the costs of Brexit. The post hoc ergo propter hoc fallacy means voters over-estimate the costs of immigration, and blame immigrants for problems caused by the financial crisis and austerity – a process perhaps exacerbated by the “bad begets bad” heuristic: voters unsettled by the uncertainty caused by immigration also believe immigration is bad for the economy.  And people’s tendency to take risks when they have lost can cause them to become reckless.

 - Many voters are simply angry and spiteful. 61% say they’d accept a weaker economy as the cost of reducing immigration**. As Dan Davies tweeted, we are a nation of 60-year-olds in crap towns complaining about GP appointments.

The problem is that these defective preferences are systematic. It is those who have lost from economic and social change, or who feel discomfited by it, who are most hostile to the EU.

Now, in saying all this I am not necessarily opposing referendums generally. In principle, it should be possible to have institutions which promote deliberative democracy, in which the public have a voice whilst ill-informed or nasty preferences are filtered out.

However, our referendum contains no such filters. Quite the opposite. Much of the media seems to be actively selecting in favour of the worst arguments. The BBC, to its shame, is complicit in this. Not only are its main reports impartial between lies and truth, but it also gives the oxygen of publicity to charlatans and anti-democratic neofascists rather than more thoughtful Brexiters such as Daniel Hannan or Andrew Lilico.

Herein lies a paradox. David Cameron set up the “nudge unit” because he was aware that people are sometimes irrational. And yet in calling a referendum he has unleashed the worst irrationalities of many voters.

As I write, we don’t know the precise circumstances that led to the murder of Jo Cox. But we do know that nasty rhetoric can have nasty consequences. I suspect that heightened anti-immigrant sentiment means that foreigners feel less safe walking our streets. Such insecurity is the direct result of Cameron’s decision to use a referendum in a – perhaps ill-judged – attempt to solve what is primarily a problem of internal Tory party politics. For this, he deserves our contempt.

 

* There might be a fourth: that some people's preferences are more intense than others. I'm leaving this aside.

** Far fewer are willing to pay a personal price, but this might be another example of a cognitive bias: wishful thinking leads folk to think that the costs of a weaker economy won’t be paid by them personally.

Comments

[Peter]

Would the same argument apply to elections and democracy in general?

[Warren Tarbiat]

Well if we look at that same poll that said 60% woudl accept a weaker economy, it says 68% would not want any financial loss to themselves to reduce immigration. Gives a hint that we'll vote to Remain (if a bit narrow) if people think they'll take financial hits of any kind.

But I think the reason why Referendums are not good because they water down the Representative democracy we have & entice a anti-incumbent feeling. Maybe the exception being the Scottish Independence one but even that is causing big divisions and is putting actual Governence in Scotland aside in favour of National Identity politics.

[SpinningHugo]

I doubt very much whether democracy, whetehr direct or indirect, is the best way of reaching optimal decisions. people are not well enough informed, and never will be because it is not in there interests to put in the time and effort.

Something like your objections are as old as Plato. His proposed society run by philosopher kings would probably reach better decisions in more cases than a democracy. Lots of decision making for groups is not best made by democratic process (eg picking a football team).

That however misunderstands the reason for democracy. We have it not because that will necessarily lead to the best decision (in most cases just deferring to expert opinion will do that). Rather we have it to achieve acceptance from the population so that civil society can continue. We all get the same amount of 'say' and so swallow the decision even where we disagree,

It matters that the process is fair, not that it will optimally give rise to the right answer in the largest number of cases.

Which is why we are having a referendum, and why I think it is justified. In terms of outcome, i am quite sure that staying in the EU would be better, and so from that perspective the referendum is at best a waste of time, at worst highly dangerous. But the outcome is not the only thing that matters.

Thanks for the link to the blog BTW.

[Matt Moore]

All these reasons equally apply to any issue of collective choice.

The solution is to minimise the set of decisions taken collectively.

[Steve]

Most of the probles you point out with Democracy and Referendums would be much diminished if our countries were smaller and less multicultural: if people can actually see how their country works directly, rather than through filters, they can judge policies more accurately. Brexit is a good first step, and hopefully the country would splinter further thereafter.

[Toby Mathews]

I agree with Warren Tarbiat, and would go so far as to say this referendum seems to represent a failure in our democracy. Cameron brought this about seemingly to deal with internal problems within his own party, and perhaps to address the perceived threat from UKIP. Neither of these seem like good reasons.

The comedian Richard Herring today posted* that this, "is a referendum that most of us didn’t want, that any sensible person feels unqualified to vote upon and which has divided our country in a way that I don’t think we can easily recover from", which sums up how I currently feel.

* http://www.richardherring.com/warmingup/10676/thursday_16th_june_2016.html

[BCFG]

In the general election people tend to push their anti immigrant belief down the agenda because during a general election they think the economy is the prime consideration.

However in this single issue election, in or out, immigration goes higher up the list because people link the EU with immigration so immigration becomes the key factor. Whether this is enough to overcome the economic considerations we will find out.

I for the life of me cannot fathom how the Jo Cox murder is being linked to this issue. What we do know for sure is that this guy was born and brought up in a liberal democracy and ended up brutally killing someone. The fact he was born and brought up in a liberal democracy is probably as pertinent as what way he would have voted in the EU debate!

[Dave Timoney]

@SpinningHugo,

The reason why we should prefer democracy is not that it secures popular acceptance, let alone that it is efficient or effective, but that is legitimate, assuming you accept that "the people" are ultimately sovereign. The one thing we can say with confidence about next week's result is that it will not "achieve acceptance from the population so that civil society can continue". Whoever loses will be bereft and unlikley to concede gracefully.

With regard to football, most teams (being amateurs involved in kickabouts) do make decisions democratically. Of course, they might make better decisions if they had a dictator/manager, but if the purpose is to enjoy yourself, rather than winning at all costs, then democracy fits the bill. Democracy is about collective utility maximisation, while dictatorship is about sacrificing personal interests to a "higher good" (the team, the nation etc).

Referendums are usually a bad idea (unless there is a binary choice, with agreed consequences, that cannot be resolved otherwise) because they hold out the illusion of popular dictatorship. In fact, all they do is undermine popular sovereignty. It's worth noting the number of times a plebiscite has preceded the institution of an executive dictatorship.

[chris]

@SpinningHugo - you make a good point when you say that the right outcome isn't everything, and that legitimacy matters too. (I'd add Tocqueville's argument for democracy too - that it encourages a generally active citizenry). However, in this particular case, I fear your argument doesn't work: the shoddiness of most arguments (on both sides, if we consider the partisans who've had the most publicity) might actully undermine the legitimacy of whatever result we get, relative to (say) one that might have resulted from a good parliamentary process.
I'm in favour of more democracy, but it needs the institutions that facilitate good decision-making - among them a decent media. We don't have these.

[Endrew]

Of course SpinningHugo makes a good point. Your post Christ seems to entirely miss the point of democracy, which certainly isn't to make well-informed considered judgments!

And which country has "decent media" or ever has, as read by the majority population. The facts are all available on the internet to anyone who really want them. It's a golden age of information and analysis availability.

[Endrew]

@ From Arse To Elbow :

"In fact, all they do is undermine popular sovereignty. It's worth noting the number of times a plebiscite has preceded the institution of an executive dictatorship."

Must be why Switzerland is doing so badly.

[Endrew]

What makes you think that expert economists are going to make a better decision?

You admit yourself they shouldn't be in the business of making predictions and their expert (and politically expedient) guidance producing the reckless fiat credit bubble of the last 25 years has largely brought the world to its current state of hyperleveraged, non-productive zombie fragility.

[Endrew]

A cabal of "deliberative" democratic "experts" also produced the Euro. Exactly what track record are you appealing to here Chris?

[Endrew]

It is absolutely hilarious how the establishment (including you Chris) are completely baffled at what is happening in the world.

What is happening is that various populations are waking up to the fact that their institutions have screwed them. The solution is to screw the establishment.

And here you are saying a technocracy would be much better! Whoosh!

[ad]

A form of halo effect has bred hostility to “elites”: because the Establishment has been wrong about many things, voters don’t trust them even when they correctly warn of the costs of Brexit.

How do you know they are correctly warning of the costs of Brexit, when they have been so often wrong before?

[Endrew]

As if it matters whether the public estimate immigation numbers by a factor of three!

How is that relevant to the question of whether you want more or less?

If you can't tell me the temperature in Kelvin of your bath, does that mean you can't decide if it should be hotter or colder?

If you can't tell me exactly the proportion of your tax spent on the NHS, does that mean you can have no valid opinion on whether it is enough?

Even your vaunted research "showing" immigration is good for the working class is much more complex than you like to think. Over the years you have advanced several papers which "show" one thing or another, which are in fact deeply flawed in design. Sometimes I wonder if you actually read the method section.

It should be obvious when prediction is difficult, and it always is, particularly when concerning the future, that you have to fall back on arguments of principle.

And yet all we get are these crappy predictions from people who can't predict breakfast, and studies of incredibly complex systems that "show" things that they really don't.

The question is what is the best system of government for this country. I'm not entirely sure, but one big appeal would be to keep it as simple as possible.

[Socialism In one Bedroom]

If we look at the history of human development we see more and more extension of democracy (universal suffrage etc). This development has gone hand in hand with better governance and greater economic development.

I would say that more people do make better decisions than few people because bias is taken out, a bit like when the highest and lowest marks are removed from judges scores in sports.

If we compare lots of people involved in decision making (democracy) as opposed to a privileged elite (dictatorship) then it is clear that democracy works better than dictatorship. This is not surprising, the whims of individuals do not eradicate bias, spreading the decision making does.

I put to you all, 100 people make better decisions than 1 person

[Dave Timoney]

@Endrew,

The Swiss fondness for referendums is a product of their history, specifically the evolution of the federal system of 1848 following the short civil war between the Protestant and Catholic cantons. Even in its modern incarnation (1999), the Swiss constitution does not locate sovereignty with the people but with the cantons (article 3).

To put this into US terms, which are probably easier to understand, it's as if the South won the Civil War (i.e. the primacy of states' rights was affirmed). The reliance on referendums (many of which address trivial issues due to the bar for citizen initiatives being 100k signatures) is, to use a later coinage, a form of Mexican Standoff - i.e. a way of preventing progress, not a principled commitment to direct democracy.

While we in the rest of the world get to hear about votes on banning minarets or introducing a basic income, the important votes (and typically the ones that stand a chance of being approved) concern federal government initiatives, e.g. the reconstruction of the Gotthard Road Tunnel.

[Endrew]

@ fAtE - Was there a point in there somewhere?

[Brian]

The reason why I think Dan Davies is a cock is that he fails to acknowledge that the 60 year old 'gimmer' (of his description) is on the losing side of both globalisation and UK participation in the EU. Dan, as a banker and metro, took the upside and didn't think about who bore the costs - unsurprising for a banker - where they have form. Now it's coming back to bite him on his croissant-filled arse.

I wouldn't be so rude about Dan, I'm on his Bremain side, but it's precisely his cosmopolitan arrogance that sees the chickens coming home to roost.

[Endrew]

Exactly Brian - it's absolutely hilarious to watch.

This post of Chris's is one of his worse. Absolutely chock full of bollocks.

" - Many voters are simply angry and spiteful. 61% say they’d accept a weaker economy as the cost of reducing immigration**."

"Some of their views are shaped (pdf) by cognitive biases. "

No shit Sherlock! This from the man who is always telling us how experts aren't exempt from cognitive biases! (except Chris of course, who is so proud he can list all the known cognitive biases he is always looking out for them!)

Hilarious!

As if it follows that a preference for one over the other can only be explained by spite!

[Endrew]

Despite greatly enjoying all this bollocks, I would none the less like to thank Chris for many years of posts, often stimulating, even if the research is not subject to the same analytical rigor de rigueur in the proper sciences.

There aren't many thoughtful Marxists one can find to expose oneself to these days.

[Brian]

I see no coverage whatsoever that the Referendum is the result of a collossal falling out between old money and new money in the Conservative party. New money and power, which is metropolitan, global and rich as Croesus, has totally up-ended the rump end of Britain's old feudal lot, sometimes known as the county set, which dominate the shire Tory associations where some deference to old power still remains. This set of Old Posh have been totally up-ended in recent years as power has become increasingly London-centric, European and global. Their country pads and Country Life lifestyle won't get them a flat in Battersea or photo in Tatler's Bystander anymore, and they're spitting blood. I know because I occasionally interact with them.

[Ano]

The frustration here is that the intent of a referendum is to determine the "will of the people" on a particular issue, free of party politics and other factors that might influence people one way or another. But it's not clear exactly what a Remain or a Leave vote will mean. Does Remain mean a vote for "ever greater union"? Does it mean adopting the Euro? Does it mean "remain until we can come up with a good exit strategy that doesn't wreck the economy"? Leave is if anything, even more muddied. Obviously we will leave the EU, but what of the EEA, what of the ECHR? What if the vote is 51% either way? And naturally, politicians will choose to interpret the vote in a way that favors what they planned to do anyway.

[Vreni]

I'm not sure that doubting the competence of the plebs is going to make them hate the elite any less :)

But I agree with your comments on the media coverage: the level of discourse, reasoning, and plain good manners has been far higher across the 'blogosphere' than on MSM.

[TB]

There's many faults about Nigel Farage, but what he says in that clip is just

' people’s tendency to take risks when they have lost can cause them to become reckless.'

in a format to do with migration rather than poverty. An inverse of left wing people saying poverty causes crime.

[Keith]

ff course the only way to fairly conduct this decision by plebiscite would be to have many options clearly stated by the Parliament and by citizen initiative. So the public could vote by multiple choice among a range of options using the best method of voting according to voting theory... And pigs might fly.

Refrenda are not Democratic but a way for the elite to resolve differences that divide them. So it is a form of manipulation by the ruling class. Brian is right I think that the right is split as result of class dynamics with added romantic nationalistic nostalgia. The dominant class all over the west is divided between neoliberals and pure social reactionaries. The result of the vote will resolve nothing as the underlying conflict will remain.

The EU ties together economic, political, social and cultural questions. There is probably no way to resolve all of these to the satisfaction of all, and certainly not in a single question which fails to give any detailed answer to them. The campaign merely has unleashed the possibility of all the people with problems projecting them onto the referendum. Producing heated debate, anger, and a violent murder of an MP. With exaggerated apocalyptic claims and constant accusations of lying by each side. Totally dismal. When the vote is over nothing useful will result and we will be no better off.

Cameron if the vote goes his way will have won his gamble to appeal to the right with a referendum to win a tory majority. The SNP will also have done well from the Independence referendum as it has helped to crush Labour in Scotland as "red tories" so the elite will be ahead of the game in each case. Mission accomplished.

[Michael L]

The trouble with referenda is that one never knows how long their mandate lasts. Given that a young, glamorous and evidently very good and moral MP who actively supported the Remain cause has just been murdered by someone expressing pro-Leave slogans, I think there is a sporting chance that Remain will win. But if Leave were to win, Parliament would be required to pass the necessary legislation. Given that a majority of MPs in the house think that leaving the EU would do their constituents harm, they might vote against that legislation. The only solution to the political crisis that would arise would be to dissolve Parliament and hold a General Election. But if the great British public did not elect large numbers of UKIP members, the new Parliament might also refuse to pass the necessary legislation. At which point it could be considered that its mandate was fresher than that of the referendum.

In which case, why not just ask Parliament to decide in the first place?

[Dave Timoney]

@Endrew,

"Was there a point in there somewhere?"

Yes, but you presumably missed it. The Swiss employ referenda as a constraint on the federal government. There is an irony here if you consider the history of the EU since 1992 and its attitude towards referenda on treaty acceptance.

The Swiss model of locating sovereignty with the cantons (i.e. states) rather than the people is precisely what we have in the EU (this is otherwise known as "the democratic deficit"). In other words, Switzerland is an appropriate parallel for the EU, but not for the UK.

[Kaleberg]

Since the recession that started in the 1980s is still hammering a lot of people in the UK, it is not surprising that many are not all that enamored of the prevailing economic ideology that has kept them mired in a sluggish, slow growth economy. The GDP may have grown, but they have seen stagnant wages, rising expenses and collapsing public services e.g. the schools and the NHS.

Brexit is about London remaining Europe's international financial center, something that greatly benefits a small but powerful minority and somewhat benefits a much larger minority in the London area. Financial centers are easy to move. They require no special skills or assets. They are political artifacts, and they impose costs on everyone while only benefiting a relative few.

One important trend to consider is that the share of the GDP commanded by an hour of work has been falling since the 1970s. Even if the GDP fell 20% as a result of Frankfort taking over London's role as a financial center, most people would barely notice it. Perhaps the ongoing squeeze might squeeze a touch harder for a year or two, but that might have happened anyway.

Many working people have already figured this out as it has been driven home for decades now. Most economists have not since they only consider the impact on the London elite who sign their paychecks. Arguing that the London bankers and their hired help know best and that this should override the basic tenets of democratic rule seems rather arrogant. Either that or ignorant.

[Ralph Musgrave]

Chris accuses Farage of fascism. Well UKIP can’t hold a candle to the political left and centre ground when it comes to fascism and racism: Labour and Tories took part in the slaughter of a million Muslims in Iraq, while UKIP opposed the war from day one.

And Chris (like most lefties) is curiously silent about the fascists who go in for murdering cartoonists, beheadings, homophobia, misogyny, etc etc etc etc etc. But as anyone with half a brain realized long ago, most lefties aren’t too bothered about fasicsm and racism as long as relevant perpetrators have brown skins rather than white skins.

Ooops: now I do believe the latter is a form of racism. Hilarious, init?

[Guy]

@Arse To Elbow

1) Nobody is old enough in Switzerland to care about what happened around 1848. Swiss people like direct democracy because they practice it regularly. The consensus in Switzerland is that it is the best system to settle decisions, without fights or illegitimate strikes, as in France today.

2) Direct democracy applies at all levels in Switzerland: federal, canton and municipality.

3) The Swiss people exists precisely because the Swiss people take decisions together. The EU is the exact opposite. The EU people does not exist because people are consulted, at best, at the national level.

4) Swiss politicians don't get to decide whether to use a referendum or not. Swiss people do. This is essential to the system, as is the experience of using it regularly.

5) Whatever the British people decide, the EU and its market will not go away. The immigration problem will not be solved, or it will be at a high cost to the UK.

For that reason, the Brexit referendum is the wrong question at the wrong level. Instead, the EU people should decide whether they do want unlimited/uncontrolled freedom of movement in Europe...

Unfortunately, this question is taboo in the EU, which is strongly lacking in democracy.

[Antoni Jaume]

"Instead, the EU people should decide whether they do want unlimited/uncontrolled freedom of movement in Europe...

Unfortunately, this question is taboo in the EU, which is strongly lacking in democracy. "

Why do you not say it explicitly:

the EU people should decide whether they do want slavery reinstated in Europe...

Unfortunately, this question is taboo in the EU, which is strongly lacking in democracy.

[Dave Timoney]

@Guy,

Nobody is old enough to care about what happened in 1688/9, but we in Britain still make a fetish of Parliamentary sovereignty.

I agree that "the Brexit referendum is the wrong question at the wrong level", both in the sense that it won't change immigration policy (or existing numbers of immigrants) in the way that many Brexiteers believe, and in the sense that amendments to the free movement of labour (or capital) would be better decided by the EU people as a whole.

My original point wasn't about Switzerland (that was just responding to endrew), but about how referenda tend to divide society and thereby weaken the very concept of popular sovereignty. When this happens, you either have an authoritarian turn in which one side suppresses the other to restore national unity, or you have to double-down on direct democracy and allow referenda for trivial matters, which devalues the mechanism but thereby avoids compromising sovereignty.

The latter can work in a federal system (such as Switzerland or the US), where the structure of devolution exists, but it becomes problematic in states that are highly centralised and protective of legislative sovereignty. The UK has managed to accommodate devolution in Scotland, Wales and NI, but it has singularly failed to do so in England. This is why the EU referendum on Thursday is proving so socially divisive.

[Blissex]

«Instead, the EU people should decide whether they do want unlimited/uncontrolled freedom of movement in Europe...»

That is something for which in Europe there is an obvious and vast popular majority. For most europeans freedom of trade and capital movement is something for bosses, but freedom of movement and residence in Europe is something they value a lot.

Even the UK citizens do: all they want is freedom to move *to* the rest of Europe, while blocking movement *from* the rest of Europe. That was indeed the main negotiating position of D Cameron in his attempted "deal", and he was told that *reciprocal* freedom of movement was not negotiable as part of the single-market package. And indeed reciprocity should not be negotiable.

The reason why D Cameron was offering one-side only, instead of both-sides restrictions, is that he does not want to tell the large numbers of tory pensioners in the rest of the EU that they have to come back (costing the NHS a lot of money) or pay their healthcare abroad at private rates, instead of scrounging from the spanish, french, italian etc. health systems as they presently doing.

One of the reasons, perhaps the main one, why the greeks after defrauding quite overtly their Eurozone partners haven't defaulted and given them the finger and left the EU is that they value enormously freedom of movement, even if that means that they have hundreds of thousands of bulgarian and romanian immigrants.

«Unfortunately, this question is taboo in the EU, which is strongly lacking in democracy.»

That question is *pointless* because reciprocal freedom of movement is *very popular*.

The more important question that should have been subject to a referendum was the expansion of full EU membership to very poor countries with a very different level of development; but it was not the EU that made that question a taboo, it was the EU governments that collectively decided for it over the head of their citizens.

Most importantly the UK government, that pushed hard to expand full EU membership to the poorest countries, in part to undermine the EU, as usual, in part to make the USA happy for geopolitical (anti-russian) reasons, but also to make available a large number of very cheap unemployed workers for the benefit of UK property and business rentiers.

IIRC UK consulates in the new member countries were told to advertise widely UK jobs to potential emigrants, and to help them immigrate to the the UK, to push down wage costs for ther NHS, for pensioner care homes, for farmers, for construction and retail businesses, all loyal tory (Conservative/New Labour) voters.

They are still good at it, as a commented on another blog says that:

«I once saw a
business spot on the BBC World News in Germany where they showed the British
embassy in Vietnam hosting visits for UK business leaders to see how they
could improve profitability by outsourcing to Vietnam»

[joe]

We got a vote Leave leaflet with all the Referendum "facts" set out. It greatly amused me as my wife calmly went through it point by point. "Total Lie, Lie, Not True, Ridiculous" etc etc. Many will believe every word if it reinforces their existing prejudices fed by ignoble closet English Nationalist politicians preying on their ignorance.

It greatly amused elitist me when R4 interviewed some voters in Sunderland. What is the biggest issue here?" "Immigration is top of the pops. We're voting Out". "Has immigration effected you personally?" "No not really - they don't come here - there's no work, see".

Then there are the magical super-immigrants who are simultaneously all on the dole; all living in non-existent council houses; stealing all our jobs and buying all the houses at the same time as working below the minimum wage and qualifying for a mortgage. Their putting our NHS into crisis - no young singles hardly use any NHS resource and 55% of NHS professionals are migrants.
Are any of the issues things that UK are at fault for not dealing with - no it is all the EU's fault.

Get our democracy back - we love an unelected Houses of Lords and 85% of the Common's members as party elected shoe-ins sitting in safe seats.
We need a points system - we have got one and it does not control immigration.
We need control of our borders - we have control of our borders.
We are full up - no we are practically empty.

With the UN reporting that 25% of UK adults are functionally illiterate I think it is absolutely cruel of Cameron to shift responsibilities for such a complex decision onto those least equipped to make that decision.