A new year's message

For those of you entering 2017 with dread at the prospect of Brexit and a Trump presidency, here’s some comfort: things rarely turn out as bad as they seem. This is not just a sentimental cliché. It’s supported by social science.

Back in 2008, Christoph Merkle asked stock market investors how they’d feel if they lost money. After the crisis he asked them how they felt about the losses they had actually suffered. He found that their actual pain was significantly less than they’d feared. “Investors are able to cope with their losses much better than they expected” he concluded. Experienced utility was higher than anticipated utility.

This is consistent with a finding by Andrew Clark and Yannis Georgellis – that people adapt to most adverse events such as divorce or bereavement. We are psychologically more resilient than we think.

I suspect the same is true in politics. This is partly because the language of politics is hyperbole: each side overstates the extent to which victory for the other would be a catastrophe. Also, developed economies tend to be resilient to shocks; neither good policies nor bad have dramatic effects. There is, as Adam Smith said, “a great deal of ruin in a nation.”

Modest adverse effects, allied to our tendencies to over-estimate the harm of losses and under-estimate our ability to adapt to them, suggest a cheerful possibility: that Brexit and a Trump presidency might not be as bad as feared.

In truth, though, I suspect a lot of the pain we felt about last year’s political developments was not so much a fear about their likely effects as disappointment about what they symbolized. Victory for Trump and Brexit represented a victory for liars, racists and the closed-minded.

But perhaps there’s a solution to this, which we’ve known since the Stoics – to simply pay less attention to the corrupt and fallen world, to cultivate our own garden. Or as the greatest of those who left us in 2016 put it: “Forget your mind and you'll be free.”

Again, social science vindicates this. Participation in politics – unusually amongst voluntary (pdf) work – tends to make people less happy.

Of course, there are massive objections to this advice. One is that it’s horribly complacent. It’s easy for us older, richer white people to ignore politics because we won’t bear its costs. The victims of Trump and Brexit will be the poor and ethnic minorities, not people like me. And in retreating from politics, we are in effect tolerating lies, injustice and economic inefficiency. If the best people become idiots in the original sense of the word politics will be dominated by the worst.   

But this would be no change at all. Politics today is largely feudal: it is what rich people do to the poor. The challenge for we leftists is how to resist this without falling into despair. This is, psychologically, a tricky balancing act. But not an impossible one.

Happy new year.

Comments

[gastro george]

"Politics today is largely feudal: it is what rich people do to the poor ..."

Can't be repeated enough.

[Nicholas Gruen]

Hmm,

Well this is the first post of yours that I've read Chris that I've ever strongly disagreed with.

Of course things could turn out OK. In fact I'm probably OK with your suggestion that Brexit could turn out not too bad - after all at least the economic models say it's a modest hit. But the idea that I can relax about the harm Donald Trump could do? I'm sorry but while - again - nothing much could happen, in which case if Trump doesn't court disaster perhaps it won't happen to us - fairly dramatic things tend to happen in the space of four years giving Trump plenty of time to do terrible things.

When the twin towers fell in 2001 the Bush jnr presidency was turned from a likely non-event into a cascading set of disasters we're still not over. In such cases actual harm can easily massively outweigh expected harm.

I'm not sure that monetary losses should be compared with starting wars.

[Dipper]

Trump and Brexit are only the same in that what was perceived as an establishment view was rejected by the electorate. Other than that there isn't much similarity.

I there is a lesson in them it is that the hubris and moral grandstanding evident in both campaigns lead to losses that could have been avoided. If you want to win in western democratic politics, work out who you need to convince, and then listen to what their concerns are so you can present a vision and policies that will win them over.

[Bob]

Disagree.

Check the weak econ news. Pers income, 0.0%, Personal spending, 0.2%. Leading indicators, 0.0%. Donald Trump may inherit a recession, and congress are demanding any tax cuts etc come with matching spending cuts.

You check econ news all the time even on unemployment and put up on twitter Chris come on you know better than this.

I think it won't be as bad in UK as US.

[Blissex]

«Victory for Trump and Brexit represented a victory for liars, racists and the closed-minded.»

As to Brexit today I realized that it is based not on small-mindedness on a rational, patriotic premise: that is it is not worth giving up ownership of the British Empire for mere membership of the European Union. :-)

[Dipper]

Comparing Trump with Reagan is illuminating. Reagan had been a governor, so was familiar with US politics and knew how to get things done. Trump has no experience and does not know how to get things done. Reagan had his party's backing. Trump has many enemies in the Republican party. Reagan seems to have had a strong sense of his own role as leader, Trump behaves like a petulant spoilt child being used to getting whatever he wants.

The possible outcomes of the Trump presidency range from stagnation whilst he gets caught in the mire of Federal politics and lacks the tools to resolve issues, and nations such as China and Russia use the gap in foreign policy vision emanating from the US to build their own spheres of influence, through complete log jam as he gets impeached due to conflicts of interest, to really very bad - military engagements that the US cannot win or lead to global disaster. I see no possibility of good outcomes miraculously springing from this presidency.

[Dipper]

look folks, this Brexit thing. At the end of the day, its a deal. We offer up certain things, we get certain things back. The deal is only as good as the terms, and the terms were IMHO just not good enough.

Seriously, what do you think happens when you formally accept terms like those? Do you think that's the end of the story? Once you've signalled that you will accept poor terms, do you think the other side stops? No. they keep going and keep going until you have nothing left.

It isn't about racism, empire, or any of that nonsense, its about a relationship that is going bad and deciding that an amicable divorce with legally agreed terms of separation is better than trying to carrying on living with a control freak.

[Luis Enrique]

I think you're right, but I don't take much comfort from it. Suppose that 75% of the time, things aren't as bad as you fear. That'd fit with the research you cite here. Given what's a stake with Trump, that 25%, when things are as bad or worse, is still scary as hell.

[gastro george]

"Seriously, what do you think happens when you formally accept terms like those? Do you think that's the end of the story? Once you've signalled that you will accept poor terms, do you think the other side stops? No. they keep going and keep going until you have nothing left."

Fog in Channel. Continent cut off.

Because obviously the sole reason of the EU, and the target of every EU country, is to shaft the UK ...

[Dipper]

@gastro george

The EU is a project with a clear end-goal - political unification. Britain has repeatedly made clear it doesn't share that end goal. No other country was quite so explicit in its rejection.

The EU and the EU nations had choices. They could have had a much looser general arrangement. They could have given nations more choice in what they signed up to. Instead they have been explicit and draconian.

Also, did I dream those European politicians saying Britain needed to be worse off on leaving the EU? Did the Guardian make up this report?
https://www.theguardian.com/politics/2016/oct/07/uk-must-pay-price-for-brexit-says-francois-hollande

And finally may I wish you a happy new year and a successful 2017.

[Patrick Kirk]

"The victims of Trump and Brexit will be the poor and ethnic minorities, not people like me." - he poor and ethnic minorities were essential elements of the voting blocks for both Trump and Brexit. You may offer the leftie condescension of saying they didn't know what they were doing but they active agents who make their own decisions - not victims.

[gastro george]

"The EU is a project with a clear end-goal - political unification. Britain has repeatedly made clear it doesn't share that end goal. No other country was quite so explicit in its rejection."

That makes no sense. If it were the case, then why would the UK ever join?

[Dipper]

@gastro george

As I'm sure you are aware, pre and post referendum there was a long debate about whether the EU had always been a political project or whether it had just been a free trade area. Most people thought we were joining a free trade area.

Toby Young discusses this amongst other things in his video "Facts not Fear".

https://www.youtube.com/watch?v=E2oz3hRubE8

[gastro george]

"The EU is a project with a clear end-goal - political unification."

"... there was a long debate about whether the EU had always been a political project or whether it had just been a free trade area."

Can you make your mind up. It's either clear or it's not.

[Dipper]

"Can you make your mind up. It's either clear or it's not."

It was clear to the UK that it was a free trade area. It was clear to much of Europe that it was a political project.

There is a quite well established history to this debate. What is your point gg? what is it you think me or others are not understanding?

[Igor Belanov]

"It was clear to the UK that it was a free trade area. It was clear to much of Europe that it was a political project."

That makes the UK look a bit stupid then, doesn't it? Must be because we're so rubbish at foreign languages and couldn't understand all their talk about subjugating the UK in a European empire.

[Dipper]

"That makes the UK look a bit stupid then, doesn't it?"

Well it might be the EU who is stupid by being so narrow in their definition that they forced a major nation out of the EU. It wasn't black and white on either side.

and happy new year Igor.

[gastro george]

"Well it might be the EU who is stupid by being so narrow in their definition ..."

Well I think that they get to define what they are or aren't.

[Dipper]

@ gastro george

"Well I think that they get to define what they are or aren't."

and that, in a nutshell, is the problem. We were in it for forty years, the second largest contributor, on our way to being the biggest nation by population, but what it was we were part of was determined by them, not us.

For all the discussions about the referendum no-one ever seems to question whether or not the EU was correct in what it did, or question the EU's aims and intentions. Says a lot about how people in the UK, Remainers in particular, viewed the EU.

[D]

Happy new year Chris, keep up the good work.

I wonder how they tested causality in the study showing poltical activism and trade union engagement makes people less happy? My experience is that the less happy tend towards the political.

(kind of) in the spirit of your new year's message I'm going to have a nice breakfast rather than bothering to find out.

[Igor Belanov]

@ Dipper

Try removing 'UK' and 'EU' from your posts and replace them with 'Scotland' and 'Westminster'. Maybe you'd get a different impression then.

[Dipper]

@ Igor Belanov

It's illuminating but not in the way I think you mean.

rUK sends money to Scotland, not the other way around.
rUK is devolving more power to Scotland, not taking power from it.

Ultimately its up to the people of Scotland whether they remain in UK which means rUK has to put a better proposition to Scotland than the EU does.

Anyway, in the spirit of Chris's post, nothing will happen in 2017 to the UK/Scotland question as SNP will concentrate on extracting advantage from Brexit negotiations before pressing the button on a new referendum.

The process of negotiation with EU and Scotland should be net beneficial, particularly if done well - i.e. played hard. It should end up in a position of maximum benefit to all parties.

[gastro george]

"rUK sends money to Scotland, not the other way around."

I think that you might need to present some figures on this rather than making assertions, because comparing the finances of Scotland/UK to the UK/EU might not be as clear as you think.

[Dipper]

"I think that you might need to present some figures on this rather than making assertions, because comparing the finances of Scotland/UK to the UK/EU might not be as clear as you think."

Indeed. Clear as mud, but a very entertaining debate around October this year between Andrew Neil and lots of Nats. The consensus is a deficit of around 9%ish I think.

https://twitter.com/afneil/status/768387894801203200

[Dain]

"older, richer white people to ignore politics..."

But they don't. This demographic is more active in politics than any other group.

[gastro george]

My word, first Toby Young, then Andrew Neil, as your "experts". I feel out of my depth here.

But I think that you'll find that the "deficit" <> net economic transfers between Scotland and England.

[Keith]

So if like Chris you are rich, white, and straight go on holiday and forget the evil right as they do not affect you...so much for solidarity comrade.

As for poor and ethnic minority Americans voting for trump I think that is misleading as an idea. Most of the people who voted for trump always vote Republican and are not poor or black. A relatively small group switched and the rest abstained as they disliked Clinton. Her loss depended on a small number of rust belt states. Those states are not the poorest or most uniformly reactionary. Clinton and her party are at fault in that the Democrats need to expand their base and get them motivated to vote, trying to appeal to mythical moderate Republicans is pointless as there are none by this point. The elite running the party need to increase the number of loyal supporters and voters in all elections state, local, and federal. Which is a long term job and not one the leaders including Obama have done. This is the main failure of the dominant strategists.

[Dipper]

@ gastro george

Toby Young is a polemicist, so always plenty to disagree with but I thought his video quite effective.

Andrew Neil is, for me, the best political interviewer and interrogator out there because of his obsession with the details. It's a rare political who can be grilled by him and come out unscathed.

As for Scotland's financial situation I feel we will not reach any resolution until independence if it occurs, possibly not even then. One thing that would help significantly is for Scotland to have a central bank. At the moment Scotland sends lots of money to the BoE, and then gets lots of cash from the BoE, so endless arguments about who owes who. Much better to have Scotland pay all its money into a BoS, pay all its expenditure out of the BoS, and then if the BoS finds itself short the BoE can send it some money. Apart from adding clarity to the above question, it would make a route to independence a lot easier as the necessary institution to handle government debt is already in place. That's something the Scottish government could usefully get on with in 2017.

And yes I know that deficit <> transfer as rUK has a deficit too.

[Max Cantor]

I don't think anyone has clear picture of what's coming up next