Stumbling and Mumbling

Author: chris dillow   |   Latest post: Sun, 9 Sep 2018, 12:48 PM


Brexit: an unending dream

Author:   |    Publish date:   |  >> Read article in Blog website

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. Jimbowen

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.

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