6 thoughts on “Of experts and ‘experts’: economists and Brexit”

  1. Posted 05/07/2016 at 13:48 | Permalink

    “Economists asserted that leaving the EU would lead to a less open economy, that the UK would do no extra trade deals with the non-EU world, that if we remained in the EU there would be no price to pay in terms of inappropriate regulation harming the UK economy or our being drawn into future Eurozone bailouts, that there were no economic gains in terms of getting rid of the CAP or CFP or better regulation.”

    That’s exactly it.

    Ceteris paribus, i.e. given all other trade arrangements between Britain and the rest of the world and given the current regulatory framework in the UK, Brexit – by making it more difficult to trade with countries in the EU – will have a negative effect on the long-run supply side of the economy.

    But why would everything else stay equal?

    By leaving the EU, Britain will be free to adopt a unilateral free trade policy.

    Furthermore, Brexit makes it possible for Britain to embark on a new approach to, say, financial regulation. In the UK, there was virtually no government regulation of banking until 1979. Instead, the behavior of banks was subject to tight private regulation. The private regulatory framework for banking was then substituted by government regulation in the 1980s. This approach has not been a success. Brexit gives Britain the opportunity to return to the principles that served financial markets so well before the 1980s.

    Will Britain use the opportunities presented by Brexit – or will Britain’s approach to trade and regulations be more restrictive and intrusive than before?

    Nobody knows for sure.

    But on the whole one can be rather optimistic: In general, smaller political entities are governed better than larger ones. (For this reason it would also be good news, if, following the Brexit, Scotland would achieve independence.)

  2. Posted 05/07/2016 at 17:12 | Permalink

    The two main specific issues in the referendum campaigns were the economy and immigration. On immigration both main parties had shown themselves to be extremely unreliable — their estimates of future annual immigration being wrong by hundreds of thousands. As for the economy, even laymen were able to detect an element of exaggeration in the shrillness of the forecasts — and the OBR, which was set up in 2010 precisely because British governments had been unable to resist the temptation to tell lies about the economy, was conspicuous by its absence from involvement with any the scary forecasts. It is worth remembering, too, why in our system of parliamentary representation it was eventually necessary to have a referendum at all. The reason is that nearly all the senior establishment parliamentary figures (including, both in 1975 and 2016, the Leader of the Opposition!) were ‘in favour’ of continued UK membership of the European Union, even though opinion polls made it clear over many years that a very substantial minority of the British population were not. In other words, our ‘representatives’ in parliament didn’t manage to do an adequate job of ‘representing’ the views of their constituents. I believe there was also a widespread impression that the government was rather too eager not to play fair, dragging in Uncle Tom Cobleigh and all from abroad to give us advice which was obviously not disinterested, as well as spending £9 million of taxpayers’ money to side with the Remain part of the argument.

  3. Posted 05/07/2016 at 20:59 | Permalink

    “Voters remembered that most economists recommended we should join the euro.”

    Completely untrue. I remember studying the euro at university in 1996 – the striking thing was how many economists were saying Europe was not an optimal currency area and that the euro was a bad idea. This was the consensus view from Krugman to Milton Friedmann.

  4. Posted 06/07/2016 at 00:29 | Permalink

    “In general, smaller political entities are governed better than larger ones.”

    This will be comforting news for Zimbabwe and Namibia as they prepare to lead the global renaissance. Nor is it clear that e.g. Hungary is better governed than the US. The size of the entity is not what matters. What counts is the efficacy of its institutions plus the ability of the people to maintain and upgrade them as necessary.

  5. Posted 06/07/2016 at 13:10 | Permalink

    Anonymous – you are completely wrong on that re: economists in the UK. In fact, the same Royal Economics Society group survey as suggested economists opposed Brexit found a two-thirds majority in favour of the euro in the late 1990s: http://www.economist.com/node/199382

  6. Posted 06/07/2016 at 22:50 | Permalink

    Put differently, you are saying the Leave result was in effect the ‘wisdom of crowds’ and the resulting market mayhem down to the herd instinct. And we have to wait up to 20 years to see if leaving was a good idea. So far so good-ish but two things bother me: (i) the quality of political leadership that should get us to the promised land; and (ii) the close result means the in/out arguments will rage for a long time to come.

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