Monday, 6 August 2018

Why So Many People Are Bodging Up The Brexit Debate

A couple of weeks ago on Facebook, I said that I have some highly intelligent Remain friends, who I love dearly, but that I think they are missing a key thing: most Remainers fail to realise why the EU has to go, because they misunderstand why its most well-informed critics dislike it. Here's a simple way to explain it.

The EU shares a common property with Islam. All the bad things attributable to Islam are the reason it's perhaps the worst of all human inventions. And all the good things attributable to Islam are nothing to do with Islam - they are good human qualities that exist in spite of Islam, not because of it. They are the qualities associated with being human that Islam has appropriated, and for which it has tried to take credit, fooling millions in doing so.

Similarly, the bad things attributable to the EU are what make it an obviously failed economic model, with all the concomitant problems that come with diseconomies of scale. And all the good things about the EU are the good human cooperatives that are nothing to do with the EU - they are beneficial things that would exist in spite of the EU, not because of it. They are the qualities associated with being human that the EU has appropriated, and for which it has tried to take credit, fooling millions in doing so.

Although I stated that quite succinctly, what I am describing is a very complex phenomenon that makes the Brexit battleground oversimplified, and talk of deals and no deals somewhat inadequate to the task. The reality is, a monstrosity of an organisation like the EU, and its concomitant interconnectedness with all the domestic politics of its members states, is going to be a very knotty institution from which to disentangle ourselves. This means that countess social commentators from both sides will continually be able to bleat on about the benefits and costs of Leaving, and the benefits and costs of Remaining, and act as though they the only ones talking sense.

The debates would be of a higher standard if more people adopted a Bastiat-esque Seen & Unseen approach to the situation. That is, everyone who wants to talk about Brexit should constantly be mindful of the reality that there are huge costs if we Leave, huge benefits if we Leave, huge costs if we Remain, and huge benefits if we Remain. Unless you are attuned to thinking this way, you are providing only sub-standard analyses of the Brexit debate.

Moreover, you also need to add in another element - the element of timescales, which adds a further level of permutational complexity to the debate. For example, with timescales factored in, there are huge costs if we Leave soon, huge benefits and opportunities if we Leave soon; huge costs if we Remain now and Leave later, and huge benefits if we Remain now and Leave later. The number of possible outcomes is nigh-on uncountable, because there are so many subset events that could feed into any potential transpiration, and there are so many good and bad things that might happen, based on so many good and bad decisions that could be made, that it is virtually impossible to predict the short-term net benefits and costs of the culmination of all this.

But all that said, I think there is a way to be confident that, unapprised of all the permutations and possible costs and benefits, voting Brexit was still, on balance, the best decision you could have made. I'm a great believer in the integrity of challenges to failed models, even if that failed model has numerous benefits. Failed models are inevitably going to provide a net loss when all costs and benefits are counted up - and that is why it is right that Britain should leave the EU. It may be a long percentage game to reap the rewards and gradually undermine the failing institution, but many long term gains require bold decisions in the short term.

One of the reasons it's hard to measure the net costs of failed models is because both benefits and costs to society almost always happen very slowly, and are hard to perceive with the naked eye. It is hard to tell if a swimming pool is gaining water or losing water if there is a small leak during a rainfall.

The prosperity pool
That analogy reminds me of a term the economist Don Boudreaux has for human material progress - he calls it 'The prosperity pool', where the higher the water level in this pool, the greater our prosperity. Boudreaux rightly points out that the “prosperity level” in the prosperity pool is only gradually filled up with drops. Even tiny saucerfuls of additional prosperity are exceedingly rare - there are mostly only small drop-by-drop progressions, no more. This is also why if something is going to be good and large, it is going to emerge bottom up, not be imposed top down.

Very few single drops have any noticeable effect on the prosperity level, but each drop - bicycle stabilisers for children, cat's eyes on the road, padded cushions for bike seats, new shades of varnish, comfier shirts, more efficient sewing machines, sunglasses, clothes pegs, and so on - make our lives a little better through their entrance into a highly competitive market. Even the things you may perceive as quite large drops - Google, Microsoft, Facebook, Ford, General Motors, Samsung, Apple, Sinopec and Walmart (to name but a few) are still small relative to the entirety of the prosperity pool and the complex nexus of the human interactions required for these developments.

There are numerous ways the EU causes harm to human prosperity (see my sidebar tab), but as well as the harm it causes, it also doesn't create enough additional value to justify its existence. The rest of the time it primarily moves resources sidewards - and as anyone who has ever taken a swim knows, moving water around in the pool does not raise its overall level.  

In the prosperity pool analogy, new drops are added to the pool every time value is created in society: either through a new good or service, an improvement to an existing good or service, an increase in efficiency, an improvement in technology and decreasing costs of doing something (there are a few more, but those are the big five).

Furthering the analogy; taxes, subsidies, tariffs, price fixing, protectionism, bureaucracy, overregulation and making itself rich off the fruits of other people's labour is the EU's raison d'ĂȘtre. To the typical Remainer, the EU seems to resemble a consignment of rocks thrown into the pool over time as the EU has grown in size (consistent with Wagner's law), which appears to them to have raised the prosperity level. Propagandist memes like this one below are a good case in point:
But alas, the above meme is a rather pathetic medley of exaggerations, attempts to take undue credit, misunderstandings about opportunity costs, and outright falsehoods - all intended to create a fabricated picture of the benefits of the EU. But here's the reality check: as anyone who has ever taken a bath or read Archimedes would know, even if the measured level of the prosperity in the pool appears to be higher, the appearance of a consignment of rocks can make it seem like the water levels are increased when, in fact, they are not.
Continuing with the pool analogy, what the taxes, subsidies, tariffs, price fixing, bureaucracy and overregulation are really equivalent to is closing some of the valves in order to restrict the plumbing line to the pool. They are the costs that society bears in the shape of all the unnecessary expenses, the misallocations of resources, the interferences is information-carrying price signals, and in the new businesses that never get started up, the buildings that never get built, the innovations that never materialise, and the countless mutually beneficial transactions that never occur.
And if we do have genuine aspirations to create a world where the bureaucrats get properly exposed for what they are doing, and a world in which the above activities are no longer an impediment to a fuller and even faster global development for all human beings, then the only way to vote was to vote for Brexit, and hope that by starting to pull out the weeds we will be beginning to irrigate the soil too.