Brexit: an unending dream

Simon says Brexit is a fantasy:

There is nothing about the case for Brexit that is based in reality. This is why everything Brexiters say is either nonsense or untrue.

This poses the question: will they ever acknowledge reality? I’m not sure they will.

Let’s say, for the sake of argument, that Brexit proceeds without massive glitches such as hold-ups at ports but otherwise much as Remainers expect (pdf)– that is, we get slower growth in trade and productivity than we otherwise would. This implies weaker trend growth than otherwise. If we are to be five per cent worse of in the mid-30s than we would had we remained, we’d get average growth of (say) 1.6 per cent rather than (say) two per cent per year.

But the thing about counterfactuals is that nobody sees them. In 2035 there’ll be no Jim Bowen saying “here’s what you could have won”. There’ll be no “a-ha” moment of proof that Brexiters were wrong, even if (arguendo) they are.

And this will bring a host of cognitive biases into play. Once we have bought something, we invent reasons to justify our choice. This is especially true for things we’ve strived hard for. As Dan Ariely put it in Predictably Irrational, “the more work you put into something, the more ownership you begin to feel for it.” This is the Ikea effect (pdf). And it’s amplified further by the fact that if a belief is part of our identity, we are especially loath to ditch it.

Brexiters, then, are likely to play up the benefits of being an “independent people”. And they can easily attribute slowish growth to other causes: inadequate infrastructure or training, a lack of entrepreneurship and so on. Such blame will not be wholly wrong.

As Leon Festinger and colleagues showed, even the clear failure of a prophecy does not necessarily cause its believers to recant. This is likely to be especially true of Brexit, as the failure might not be glaringly, irrefutably obvious.

Asymmetric Bayesianism, choice-supportive bias, the endowment effect, ego involvement and dissonance reduction might combine powerfully to stop Brexiters recanting.

There’s more: adaptive preferences. We’ll get used to mediocre growth and resign ourselves to it. As John Band tweeted:

In 30 years time British people will just plain have forgotten that the country used to be about as rich as France, rather than benchmarking itself against Poland and Portugal.

Facts rarely settle political debates. This might be especially the case with Brexit.

Comments

[Dipper]

@ Blissex

«the shortfall is 0.05% (half of one percent) of EU GDP»

Oops, 1/20th of one percent... As half of one percent would be half the EU budget, and the UK contribution is roughly 1/10th of it.

If its a small amount for us, Then its a small amount for them and they can easily let us off it.

The amount we are having to cough up to leave is suggested to be about £50 billion, which is about 5 months budget for the NHS. Doesn't seem like a small amount to me.

[Noah Carl]

I really can't understand how anybody could be critical of the EU.

Take the Eurozone. It's been a roaring success. Yes, yes, Greek unemployment reached 25%. And I suppose Italy hasn't grown in GDP per capita terms since the late 1990s. But the German economy is humming along nicely! (Don't you bring up that pesky quote from Milton Friedman predicting that all this would happen advance.)

Likewise, the EU handled the Catalonian crisis with graceful finesse. Basically, some seditious old ladies had the nerve to vote in a referendum, so the Spanish government responded appropriately by sending in baton-wielding riot police. A few people were dragged out of poling stations, and there was the odd face covered in blood, but those details aren't important. What matters is that the EU gave the right response, namely a very muted one. (We wouldn't want the project to fail, so if the occasional old lady gets a bloody nose, it's not a big deal.)

The EU has of course had many other successes: a strong sense of legitimacy, as reflected in very high turnout rates in European elections; a progressive common external tariff, which is doing wonders for development in places like Africa and Latin America; a record of listening to people's concerns and never asking countries to vote again because they gave the wrong result; and a truly beautiful giant egg building in the centre of Brussels (I'm not exactly sure what it's for, but it was very expensive, so it must be money well spent).