Post-referendum thoughts

Just as I wrote down my thoughts pre-vote, and advised against leaving, I'll write down my thoughts a day or so after, for posterity. Doubtless it will be grateful. First off I like my son am already bored with the Diana-esque levels of news clogging that the vote has caused, so I apologise for adding to it. Feel free to comment at ATTP or Sou if you like. Or here.


But before all that, a picture of a rose, otherwise everything would be somewhat depressing. Fittingly, it is slightly downcast and perhaps past its finest bloom. But it's a brand-new forward looking Perse rose.

Anyway, just as the pre-vote news was full of drivel, so is the post-vote ([Update: an example courtesy of Timmy). Despite the dire warnings of financial disaster, and the apparently-huge falls on the day, that's mostly froth. The rate fell steeply on the Friday from 1.31 to 1.23, but over a 5-year period that's unexciting. Only a rather longer time will tell. With a bit of luck house prices might fall but I'm not counting on that either. On the Moody's downgrade, I'm with Timmy. [Update: I should have thought more carefully before I graphed. Pound-vs-Euro is interesting, but of course the vote affected the Euro too. So pound-vs-dollar would have been better. For that, meh. We dropped from ~1.45 to 1.35, which isn't chicken feed, but its unlarge in comparison to longer term trends.]

More interestingly, I was proved a better seer than NB, in that I correctly predicted that if he lost, Cameron would resign and leave his successor to sort out the mess steer the ship of state to the exit. I think cameron was correct to do that. There's a slight downside, in that it adds some uncertainty at a time we could do without same (or not. We do at least have certainty he will resign, and that he'll stay till October, which tides us over for the next few months. Had he not resigned there would certainly have been months of speculation about whether he would or not or be forced out or not). Having argued strongly for Remain, he could hardly lead the negotiations of Leave. On a personal level I'm sure he's heartily sick of the whole thing. There's also the upside that this plausibly delays our formal invocation of article 50 until the next PM is chosen, probably in October, and who knows we may have seen sense by then. For my foreign readers - and, it seems, for the benefit of some EU leaders - I should point out that the next PM will be chosen by Tory MPs, not by the country [Update: sigh, would you believe it, I got that half wrong. What actually happens is that Tory MPs select two candidates, which are then voted on by the party membership.]. And that the referendum was advisory, and doesn't of itself invoke article 50; indeed the exact mechanism by which we do that is unclear: most likely, a vote in the House of Commons, probably after the new PM is chosen (I [Cameron] think it's right that this new prime minister takes the decision about when to trigger Article 50 and start the formal and legal process of leaving the EU). The upside of that delay is that just possibly we might see sense and change our minds; though I'm doubtful about that. For example, a majority of MPs could choose to vote against the article 50 bill; but it's unlikely. There's a petition with (at present) 1.5 M signatures to retrospectively change the rules and require a 60% threshold on a 75% turnout - very unlikely to be enacted - but the Beeb article on that does contain the intriguing However, there is talk around Westminster - in the wake of a plunging currency and falling share prices - of whether any deal on Brexit negotiated with the EU should then put to a referendum further down the line. That could just be a way out, but only if a large number of people end up agreeing that Brexit is a clear mistake.

While we're on "timing" I'll notice that several EU leaders have said oh get on with it then, leave quickly if you're going" (h/t Timmy) but as Timmy points out, that's not something they are in charge of, at least not formally; we get to decide when to put our notice in. Perhaps that gives us some leverage in the negotiations? But perhaps not much.

inout The In vs Out map is striking (I've cropped Scotland since it was all In). Apart from London, the Home Counties, Cambridge and Shire, Oxford, Norwich, the Welsh Foreshore and some misc other places, its a sea of Out. Which reflects I think the division between Us and Them. The most common theme of "them" I've seen on the news is that it's those who've done badly over the last few decades who voted Out, apparently under the impression that Out, being a change, would be better. It might be; but I'm dubious it will be, for them. If there's an economic downturn they're the most likely to get shafted. The other theme was "them" sticking one to the "metropolitan elite" but the same comment applies.

Scotland looks entirely likely to have a second referendum on independence. Without thinking it out too carefully I think - assuming we don't reconsider our exit - that they're likely to have it, and to vote to Leave the UK and Remain in the EU, and the EU will be happy to keep them. Oh what a tangle that will create. Leave itself will create a considerable legal tangle. That has a benefit - it will tie up a lot of idiots who might otherwise go around creating new laws - but a cost: we'll have to pay all their salaries, and they will inevitably get many things wrong, and the courts will be snarled up with cases of whose law applies to what. I'm not sure how big all these frictional costs are. [Update: Timmy points out that Scotland would have problems meeting the entry criteria without sever austerity; not sure how they'd get round that, but people can be creative.]

One thing curiously unremarked, to me, is the way misc EU folk have said "well, if you're going to leave, we're certainly going to give you bad terms to try to discourage everyone else" (e.g. Wolfgang Schäuble1; with Angela Merkel a notable exception). That very strongly puts forward the view that the only reason countries would stay, is because they'll stomp on your faces if you leave. In other words, its close to an admission that they too think the EU is a bad thing. I would far rather see them confident; have them say "of course we'll do our best to negotiate fair terms for all that will make both sides as prosperous as possible"; making the point that people stay in the EU because they want to be in. There's no sane economic reason for the EU to put up trade barriers with the UK (errm, or with anyone else in fact; as various but to me most obviously Timmy have pointed out, the correct action is to reduce all import tariffs to zero immeadiately without negotiation. But Merchantilists Rool, no matter how stupid that is).

Update: via CIP I realise I've forgotten to note how disappointing it is that the EU appear to have learnt nothing from this. Almost everyone I know that wanted Remain - which is to say, nearly everyone I know - says "Remain, even though the EU has many unattractive features". And yet our Leave seems to stir nothing in them but to make the exit as painful as possible - see previous paragraph. That's their only solution.

I leave you with more roses.



* Researchers reeling as UK votes to leave EU - Future of science uncertain after referendum result. Nature. But then again, “This is going to be very damaging,” says Jonathan Butterworth, a physicist at University College London who works on the ATLAS experiment at the Large Hadron Collider near Geneva, Switzerland is a hint at how it might get solved.
* Brexit: Emotions Trumped Facts During UK’s Referendum - Real Skeptic.
* Oh my! Looks like Scotland and Northern Ireland may have a veto on #Brexit process - Twitter
* Boris explained
* wittily, we're due the presidency in 2017
* Brian largely agrees with me which is nice, because he is sensible.
* JA sounds genuinely angry, and he's normally so detatched.
* Churchill on Europe
* James on the already-visible impacts on science collaboration.


1. See VV's comment. I am no longer sure I can find a good source for anyone actually saying this, as opposed to one of their opponents saying that they've said it.

More like this

You should conduct a poll of readers/commenters here on whether Brexit was good idea for Britain.

I’m guessing that most of the readers/commenters here, perhaps the super-duper majority, would answer NO
(i.e. Brexit was a NOT good idea for Britain.).

I’ll start off the poll results by answering YES
(i.e. Brexit was a GOOD idea for Britain.).

By See Noevo (not verified) on 25 Jun 2016 #permalink

Young people voted remain, but it's always their lot to pay for the folly of the old.

Of more consequence for the world is the fact that the EU seems teetering on collapse. It ought to be reformed, of course, but that seems unlikely. Its only hope of survival may depend on extracting a pound of flesh from whatever remains of the UK.

"Despite the dire warnings of financial disaster, and the apparently-huge falls on the day, that’s mostly froth."

Does rather depend on how much the BoE put in to support it though, doesn't it ?

[I've not seen any reason to believe they put anything in. Why would they? We have a freely floating exchange rate -W]

You using the same logical falacy as Climate Change Deniers who invoke the "Boy who cried Wolf" argument when they say that AGW must be scam, because "they" warned us about the Y2K bug and then nothing catastrophic happened

[It's certainly not the same logical fallacy. Actually, I don't even know what you mean -W]

A few comments - first on the GBP vs euro: maybe not the best comparison, since also the euro got hit by the Brexit, exactly because of the uncertainty caused by the vote. You may want to plot GBP vs US$...the GBP is now at the lowest value in at least 7 years, when it briefly hovered around the same value in 2008. We're also just one day in, much more can happen.

[Yes, good point, so good I thought of it independently :-) -W]

Second, the harsh talk of some people in the EU is a bit of a catch-22 situation. Sure, the talk about not being kind sends a harsh message to the other countries that they'd better think twice. At the same time, being kind and nice would just strengthen those who are already now calling for referenda to get out of the EU: see, you can leave without being hurt in any way.

Third, regarding trade barriers: in my, and most likely simplistic, view this will in part also depend on what trade barriers the UK will/will not have with other countries, with which the EU does have trade barriers in place. Otherwise the UK is going to be used as a transit country to circumvent the EU trade barriers. In other words, the UK would have to follow EU rules anyway.

Finally, the UK should not wait too long with making decisions, because already now scientists in the EU will be very hesitant to include UK companies and universities in any future Horizon 2020 applications. The vultures are also already picking at the European Medicines Agency (Italy, Sweden and Denmark have been quite explicit: just move it over to our country, we're ready), but of more serious direct concern is that the UK would have to decide pretty soon whether it will just follow the EMA advices, or set up its own system - this could mean significant delay in accepting new drugs on the UK market, which in turn could mean trouble for many local pharmaceutical companies. Somewhat surprisingly, I haven't yet seen a similar discussion about the European Banking Authority, which of course cannot be placed outside the EU. Regardless, both agencies will already now be working on relocating.

"Actually, I don’t even know what you mean"
The Y2K bug is used (by AGW deniers) as example of experts predicting catastrophy and getting it wrong, because nothing bad happened after 2000. One reason (although not the only one) why this argument is wrong, is that a lot of money and effort was spent on the Y2K to ensure nothing catastrophic did happen. Your argument is similar - just because the pound didn't fall to what you consider catastrophic levels doesn't mean that there wasn't a effort to sustain it. Obviously, the BoE would not reveal if it has been supporting the pound - that would just cause a further run.

[I don't think that's true. The BoE can say when it intervenes. However, I don't think it would intervene to support the pound directly - that's the point about a floating currency. What it is more likely to do is provide liquidity to UK banks or companies if for some reason the markets froze. Which they didn't. See "The BoE previously announced special liquidity auctions around the time of the vote to ensure that British banks do not run short of funds. The aim is to offset any possibility of a run on the banks, or the financial system seizing up, and to prevent a repeat of the chaos seen in the financial crisis" -W]

My personal historical favorite has long been Thomas Paine. Paine said, "The World is my country, all mankind are my brethren, and to do good is my religion. "

A couple of millennia before Paine, Socrates had voiced the same sentiments, "'I am not an Athenian or a Greek, but a citizen of the world

I had long thought that the great dystopian novels of the 20th century -- not to mention the actual events -- had put a wooden stake through the heart of nationalism. Oh sure, there would always be small factions that would attempt to revive it on national levels, but no developed nation with an educated populace would ever fall prey to its clutches. Obviously that was wishful thinking.

As Larry Summers writes in the wake of Brexit: "The political challenge in many countries going forward is to develop a “responsible nationalism”. It is clear that there is a hunger on the part of electorates, if not the Davos set within countries, for approaches to policy that privilege local interests and local people over more cosmopolitan concerns. Channeling this hunger constructively rather than destructively is the challenge for the next decade. We now know that neither denying the hunger, or explaining that it is based on fallacy is a viable strategy."

This is what Brexit means far more than the economic impacts on the UK or Europe or the the rest of the world. It's a sign of cultural failure. We must worship these arbitrary lines that by accident of birth by and large determine the paths of our lives. We enshrine selfishness,turning our backs on those less fortunate and only worry about ourselves.

That the UK will likely become Britain and a poorer, less influential nation is an ironic 'reward' for its inability to rise to the challenge.

"They say immigrants steal the hubcaps
Of the respected gentlemen
They say it would be wine an' roses
If England were for Englishmen again"

-- The Clash, Something About England

Note, they never played the song live fearing the audience might actually *agree* with these lyrics and miss the sarcasm. 40 years later the audience still can't be trusted.

By Kevin O'Neill (not verified) on 25 Jun 2016 #permalink

It's not a dead cert anyway and there's plenty of precedent within the EU for second referenda to clarify or even double check. The Lisbon Treaty 2008-9 went through a second referendum in Ireland (and came up with a different result), as did the Nice Treaty of 2001-2. Denmark had a second referendum for the Maastricht Treaty of 1992-3. Plaid Cymru are pointing out that a second referendum's needed anyway on the exit terms. It's forgotten that a referendum is just a measure of public opinion. When they're assumed sacrasanct and constitutionally binding with no questions asked, people like Hitler are made absolute leader (1934). At 2,674,673 signatures so far (around 100,000 an hour), the petition for a second referendum will be discussed in the HoC. I know the cynics amongst us will say "it'll never happen because they think the real world works this way or that way, but examples of this kind of possible situation are above.

"well, if you’re going to leave, we’re certainly going to give you bad terms to try to discourage everyone else” (e.g. Wolfgang Schäuble; with Angela Merkel a notable exception)."

Fine if you want to read that into it, but the document of Schäuble only says you will not get a fabulous deal (at least in the part of the article you linked to that was not pay-walled). You can just as well interpret it as what German Chancellor Angela Merkel said: the European Union has "no need to be particularly nasty in any way".

[You're right, it doesn't say what I wanted it to. Interesting. However I think I've seen other examples, I wait for the next one to pass by -W]

You could see a difference in that she wisely said: "She insisted that deterring other countries from leaving the EU should not be a priority in the talks." While for Schäuble (or one of his civil servants) this was a consideration. Schäuble is a nasty gnome, so it could be him.

By Victor Venema … (not verified) on 25 Jun 2016 #permalink

WC - you really need to get over your Worstall fixation. Here's a clean-up of one of his recent columns done by CATO. You *know* things are bad when even CATO has to set the record straight. Misunderstandings on Brexit and the WTO

Worstall writes: "I would prefer to believe that there’s been some mistake in translation, possibly reporting, than to believe that a major world organisation might be in the hands of someone so confused."

And of course the one confused is Worstall.

[I think Timmy is correct. After exit we could - and indeed should - drop all our import tariffs. Whether we would or not is a different question -W]

By Kevin O'Neill (not verified) on 25 Jun 2016 #permalink

To Kevin O’Neill and J Bowers…

First, to Kevin O’Neill #6:

“My personal historical favorite has long been Thomas Paine. Paine said, “The World is my country, all mankind are my brethren, and to do good is my religion. “
A couple of millennia before Paine, Socrates had voiced the same sentiments, “‘I am not an Athenian or a Greek, but a citizen of the world”

Perhaps, then, Thomas and Soc would today say
‘There really be no immigration, or at least no need for it.
For the “immigrant” is already perfectly where he needs to be – in the world.’

To J Bowers #7:

“It’s not a dead cert anyway and there’s plenty of precedent within the EU for second referenda to clarify or even double check.”

I wonder if the powers-that-be would be calling for a second referendum if the “Stay” vote had instead won?

[That's an odd question, because the PTB aren't calling for one now we've voted Leave -W]

I don’t think so.
But I guess we’ll never know for sure, huh?

By See Noevo (not verified) on 25 Jun 2016 #permalink

Catching up on my Worstall I have to admit to being more than appalled that anyone pays him for this tripe.

Bliss It Is In This Very Dawn To Be Alive - Britain Votes Brexit
"I think the long term effects are going to be, as long as we follow sensible economic policies post-Brexit, beneficial to the UK economy. Partly on the Patrick Minford grounds, that leaving the EU allows us to take that one sensible trade stance, unilateral free trade, which being in the EU prevents us from taking. But more than that I am absolutely convinced that the generally slow growth of the advanced economies is nothing to do with Larry Summers’ secular stagnation. Nothing to do with inadequate demand, with slow technological growth, not Robert Gordon’s analysis. Rather, it is the accretion of regulation of the economy that is responsible. And leaving the EU means that Britain can free itself from much to all of that – if it so desires of course."

The results are in on the austerity experiments. They suck. Someone clue Timmy in on the results please. Too much of the non-existent regulation on shadow-banking caused the financial collapse. The EMH is still alive! The Onion can't satire these people.

And Minford? Really. As I wrote at ATTP's, the ‘Economists for Brexit’ remind me of one of the standard neo-liberal/libertarian/free-market think tanks that can be counted on to produce ‘papers’ supporting the latest incarnation of Randian fantasy.

And as Martin Wolf wrote:
“… modern approaches, on which other analyses build, start from realities. Prof Minford’s assumptions of homogeneous goods, perfect competition and no geographical effects contradict them. This, argue the LSE authors, “is poor scholarship and bad science”.

In short, the other [Worstall & Minford] involves orcs.

Or as VTG replied, "Well, yes, “Economists for Brexit” is kind of like “Astrophysicists for Geocentricity”

Now why am I not surprised Timmy qualifies as an astrophysicist for geocentricity?

By Kevin O'Neill (not verified) on 25 Jun 2016 #permalink

Its going to be a mess for sure. I don't think they get to change their minds "oh, we didn't really mean it". Although a second referendum even if no one changes their mind might have a different result, see Kevin Drum's blurb of voting preferences and turnout as a function of age. Maybe be young, who feel strongly for Remain, will decide they need to vote. But, I think a second try is highly unlikely.

England had been billing itself as a gateway to the EU for business. This covers both services, and manufacturing. England has a lot of automobile manufacturing, and 57% is exported to the EU. This is all now seriously tarnished if not destroyed. So some of these jobs are going to go away.

I'm with those who say, "get on with it quickly". Uncertainty is bad for business, and bad for people trying to decide to take a job (or employers getting cold feet about offering one). So the sooner the new landscape becomes visible the better for all involved.

By Omega Centauri (not verified) on 25 Jun 2016 #permalink

"Timmy have pointed out, the correct action is to reduce all import tariffs to zero immeadiately without negotiation."

Consider a tax on carbon dioxide releases. How does that work, without a matching import tariff on goods based on how much carbon dioxide release there was when they were made?

[That is an interesting point. When I discussed this with CIP and asked him to name a "good" tariff - since he was reluctant to accept my all-tariffs-are-bad point - this was the one he picked. However, its a hypothetical one, not a present-day one -W]

By Phil Hays (not verified) on 25 Jun 2016 #permalink

People here in the States say the people of Great Britain intentionally voted against their economic interests. Or, do the Leave voters believe they are protecting their interests from the slow drag of the EU?

By Paul Kelly (not verified) on 26 Jun 2016 #permalink

@ See Noevo: "I wonder if the powers-that-be would be calling for a second referendum if the “Stay” vote had instead won?"

We probably need a second referendum on the terms of exit anyway. Meanwhile, our legislators have to trigger Article 50. Another referendum is on the way, regardless, unless the other EU states invoke treaty clauses due to instability and vote us out. What with the Brexit campaign already reneging on their promises (they outright lied to you and tricked you, to be clear), omnishambles doesn't even begin to describe where this whole thing is going. And never forget that Farage clearly stated in May that a 52-48 vote would require a second referendum because it would be too close to describe as anything like a democratic mandate.

The Brexit is not only bad for the UK, I think it is bad for the EU, too. I'm with the German foreign minister Steinmeier, who expressed his regret for the Brexit and his strong sense of loss for the EU on German TV:
I think before we look at the UK, let's take a look at ourselves. Because I think there is an illusion around, that we could just keep carrying on as 28 minus one. That can't be so and it's connected to, that I always advocated for the UK to stay within the EU, as I know for sure and have learned in [2 seconds accidently muted], that the UK has contributed a lot [to the EU]. We have had many a difficult talk with the British representatives, but in the end the UK contributed a lot. Experience. History. Tradtion. Cosmopolitanism! Britain has always been the country that taught us, so to speak, to look past the narrow European horizon, it was the member of the permanent Security Council. It is that, which will be lost to us.

Back to post #1...

Of the comments here, it looks like
11 NO votes and
1 YES vote.

About what I thought.

By See Noevo (not verified) on 26 Jun 2016 #permalink

Now I understand: See Noevo is The Donald's hairpiece's internet handle!

WC writes: [I think Timmy is correct. After exit we could – and indeed should – drop all our import tariffs. Whether we would or not is a different question -W]

I think you missed the point. Worstall was incorrect. As the linked article said,

"Thus, as Mr. Worstall sees all this, WTO rules would prevent the UK from eliminating tariff duties. But as noted, that’s completely wrong, and I’ve heard this kind of thing enough that I wanted to correct the record. An independent UK is certainly free to eliminate all of its tariffs, and would be applauded at the WTO if it did so.

Worstall's characterization was simply wrong. And Worstall's argument was indeed addressed by the very man he was ridiculing -- Director General of the WTO, Robert Azevedo. Again from the linked article: "The only other option available to the UK would be removing all barriers for all WTO members, effectively turning its economy into a duty-free one like Singapore and lifting the protections politically sensitive domestic industries enjoy under the EU. “That is possible. But that is also very unlikely,” he [Azevedo] said. "

So, once again we see libertarian fantasy economics at work. Brexit will work if we pass the politically unpassable. Do you really not see the absurdity of making policy contingent upon the impossible?

[This is all weird. Didn't you bother read what Timmy said. His point is that we should drop all import tariffs. And the problem with that is not economics - economically, its the best idea. The problem is the pols. So your jibes against economics are just silly -W]

By Kevin O'Neill (not verified) on 26 Jun 2016 #permalink

WC writes: "Didn’t you bother read what Timmy said."

I'd ask the same of you. Including the exact quotation I used earlier. Wortall said: "“I would prefer to believe that there’s been some mistake in translation, possibly reporting, than to believe that a major world organisation might be in the hands of someone so confused.”

As I said, it was Worstall that was confused. The WTO does not prevent the UK from removing all tariffs. In fact Azevedo directly addressed the issue. Azevedo was not confused. Worstall was.

You have avoided admitting Worstall mischaracterized the statements of Azevedo. You cannot admit Worstall was wrong.

By Kevin O'Neill (not verified) on 26 Jun 2016 #permalink

WC writes: "[....So your jibes against economics are just silly -W]"

Are they. Why? A choice that will only benefit the UK (theoretically) if they pass a politically untenable policy is not a choice. Politics is the art of the possible. If the benefits only accrue *IF* all tariffs are removed, but all tariffs cannot be removed due to politics, then the result is not beneficial.

As for the theoretical benefits. You do realize this is all based on homogeneous goods (fantasy), perfect competition (fantasy) and no geographical effects (fantasy).

It's like taking the results from the models of an aqua planet and claiming they are 'truth' for non-aqua planets. Ummm.... yeah. Let's not bet the farm on that.

Let's remember this is the same economic theory that predicted austerity was better than stimulus post 2007-8. Wrong.

This is the same theory that predicted increases in interest rates and inflation after massive central bank injections of liquidity and asset buying programs. Wrong.

Under exactly what premise should we believe this nonsense? That it sounds good to our ideological ears? Yep.

You also forget the very nature of how this all works out. If someone in climate told you that global warming is wrong because St Louis got colder, you'd say that isn't what global warming means.

Yet you are taking the converse approach and saying that global warming means St Louis *will* get warmer. No, you can't make that arbitrary statement in climate science or economics.

If all parties removed all tariffs then in aggregate we'd have more efficient production of goods and services. This *does not* mean any individual, or individual geographic region, or individual nation is guaranteed to be better off. Just as with globalisation there are winners and losers.

The specifics of the UK in this perspective are uncertain. First, not everyone is removing all tariffs - just the UK (and the handful of other countries that have previously). You (and Worstall) are confidently proclaiming the UK will be one of the winners. With *zero* evidence to back this up. It's theoretical charlatanism with no there there.

By Kevin O'Neill (not verified) on 26 Jun 2016 #permalink

You might find these to be interesting reads.

* Why the Article 50 notification is important
* Constitutional crisis ahoy!

Today's new word is Ochlocracy
"...Ochlocracy ("rule of the general populace") is democracy ("rule of the people") spoiled by demagoguery, "tyranny of the majority", and the rule of passion over reason..."

[I'd seen the first but not the second; thanks. I don't believe the Scottish-consent thing, though -W]

Hm. Perhaps Scotland could demand England's surrender, accept it, and inform the EU that Great Britan was now back to status quo ante? Moving the seat of government north to some site higher above current sea level would be a collateral benefit.

By Hank Roberts (not verified) on 26 Jun 2016 #permalink

Here's the elephant in the room that nobody really wants to talk about in polite circles. The photo of the Polish father and son is missing, but I've seen it and the injuries are horrific. Any wonder when populist politicians stoke it up with garbage like THIS?

There's a documentary series doing the rounds on cable (History/NatGeo/one of that lot) called 'Annihilation'. Episode 1 is scarily familiar.

Goldman Sachs economists Jan Hatzius and Sven Jari Stehn: After the Brexit Shock

"Following the UK referendum, we have downgraded our global growth forecast, sharply in the UK and more modestly elsewhere. Increased uncertainty and deteriorating terms of trade are likely to subtract a cumulative 2¾% from UK GDP, and we now expect the economy to enter a mild recession by early 2017. We estimate the cumulative hit to Euro area GDP at ½% and have cut our growth forecast over the next two years to 1¼%. We have also slightly shaved our H2 2016 forecast for US growth to 2%
However, the risks to this forecast are significant and further downward adjustments could well follow."

Apparently they have bypassed Worstall's Kool-Aid stand. Of course EMH is a theory that cannot fail -- it can only be failed. Yeay team Brexit!

By Kevin O'Neill (not verified) on 26 Jun 2016 #permalink

Article 50 will be invoked by the PM making a formal statement to the Council, or by a letter from the Govt to the president of the Council (this was made clear by a Council spokesdroid on Saturday No act of Parliament is required (this was already abundantly clear before the referendum).

By Nick Barnes (not verified) on 27 Jun 2016 #permalink

But Parliament can vote to not invoke Article 50 (the vast majority of MPs want to remain in the EU). Also, if there's a general election, and if a party that included a promise to not invoke Article 50 in their manifesto won, then Article 50 won't be invoked with the electorate's approval.

Nick, intelligent commentary suggests that an act of parliament is definitely required, as A50 effectively revokes the 1972 treaty, and PMs can't do that sort of thing by themselves (it's parliament that is sovereign in such matters).

[That seems believeable, unless politics kicks in. If I was invoking A50, I'd want a vote in parliament behind me, so everyone else would be to blame, too. OTOH, if I was a rabid Leaver and was doubtful I could get A50 through the HoC, I might be tempted to invoke A50 directly and worry about Parliament later -W]

By James Annan (not verified) on 27 Jun 2016 #permalink

WC, having it on dodgy constitutional ground would be very silly, as it adds a whole additional level of uncertainty - anyone coudl challenge the outcome at any point. A50 states that the decision must first be taken in accordance with the member state's constitutional arrangements, and then notified to the EU.

By James Annan (not verified) on 27 Jun 2016 #permalink

"“good” tariff – However, its a hypothetical one, not a present-day one -W"

All taxes impose costs on someone. So should all taxes be cut to zero?

[No -W]

A government is necessary for keeping the peace, defending the nation and trade, enforcing rules of free markets, building and maintaining port and navigation aids, roads and bridges, and generally advancing the general welfare. So we need taxes, of some sort.

Tariffs are one of many possible taxes. Some taxes are easier to collect, some harder. Some taxes are fairer, some are less fair. Tariffs on luxury goods might be both easy to collect and fair in their impact. Side effects are often important. A tariff that protects manufacturing of military significance is partly a means of national defense, for example. Tariff of 1789 was a key to the draw in the War of 1812, and to the advance of the USA as an industrial power. Domestic taxes, such as the tax on carbon dioxide releases, may require a tariff to equalize the burden on domestic industry.

To claim that tariffs are always harmful is not supported by the evidence. Oh, and this isn't new, this is basically straight out of "The Wealth of Nations" by Adam Smith.

[To claim that tariffs should be zero is indeed not new; its probably in WoN. To claim that it is unsupported is wrong, though. There's a lot of theory and obs on this, if you know where to find it. I, of course, don't. If you really want chapter and verse, ask Timmy, who does know where to find this stuff -W]

By Phil Hays (not verified) on 27 Jun 2016 #permalink

HL Mencken: "For every complex problem there is a solution that is clear, simple, and wrong."

By Susan Anderson (not verified) on 27 Jun 2016 #permalink

And yet, when Britain developed into an industrial power her industries were protected by tariffs and very aggressive, oppressive efforts to protect what nowadays we call intellectual property;

[Actually, you don't know that at all. What you know is, instead, that when Britain industrialised we had tariffs. However, since we were pretty well the *first* nation to industrialise, I doubt those tariffs were on steam engines. very aggressive, oppressive efforts to protect what nowadays we call intellectual property - really? Have you got any evidence for that? -W]

then when the U.S. industrialized it did so under the protective umbrella of tariffs.

[Again, no, you don't know that. All you know is that there were tariffs; not that they did any good. Why do people make this silly mistake time and again? -W]

Perhaps once one has achieved industrial wealth, especially if one is an imperial nation with control over the value of one's own currency, one can embrace free trade without getting hurt across the board. However, to the extent that industrialization in poorer parts of the world is still possible, I highly doubt that it can be done under a deluge of untariffed foreign goods made, at least initially, more cheaply than the nascent domestic industry can make it. "Free trade" is a shibboleth we push upon those countries to pressure them to remain dependent upon us.

[Sigh -W]

Summary is that Adam Smith was in favor of moderate tariffs and duties.

Where to find? Oh, let me see. "port-duty" is a good start.

Book 5 Part 3. ARTICLE I.—Of the public Works and Institutions for facilitating the Commerce of the Society.

"And, first, of those which are necessary for facilitating Commerce in general.

That the erection and maintenance of the public works which facilitate the commerce of any country, such as good roads, bridges, navigable canals, harbours, etc. must require very different degrees of expense in the different periods of society, is evident without any proof. The expense of making and maintaining the public roads of any country must evidently increase with the annual produce of the land and labour of that country, or with the quantity and weight of the goods which it becomes necessary to fetch and carry upon those roads. The strength of a bridge must be suited to the number and weight of the carriages which are likely to pass over it. The depth and the supply of water for a navigable canal must be proportioned to the number and tonnage of the lighters which are likely to carry goods upon it; the extent of a harbour, to the number of the shipping which are likely to take shelter in it.

It does not seem necessary that the expense of those public works should be defrayed from that public revenue, as it is commonly called, of which the collection and application are in most countries, assigned to the executive power. The greater part of such public works may easily be so managed, as to afford a particular revenue, sufficient for defraying their own expense without bringing any burden upon the general revenue of the society.

A highway, a bridge, a navigable canal, for example, may, in most cases, be both made add maintained by a small toll upon the carriages which make use of them; a harbour, by a moderate port-duty upon the tonnage of the shipping which load or unload in it."

"single duty upon malt", "The extension of the custom-house laws of Great Britain to Ireland and the plantations, provided it was accompanied, as in justice it ought to be, with an extension of the freedom of trade, would be in the highest degree advantageous to both. "

And so on.

[Oh come on man THINK please. It is so painful otherwise. What he is trying to say here is that things should be maintained directly out of the expense of those using them, and not out of general taxation. This is a libertarian viewpoint. He is arguing for port-duty only sufficient to maintain the ports - not for "protective" tariffs. And notice that he argues for duty by tonnage - which is, by use - not by value -W]

By Phil Hays (not verified) on 27 Jun 2016 #permalink

Well, William, whether you truly support the "Leave" position or not, you did an admirable job arguing the position. You at least seem capable of doing justice to the counter-argument, which few of your correspondents seem able to do.

[I was hoping that "Say no to Brexit" was a hint -W]

"OTOH, if I was a rabid Leaver and was doubtful I could get A50 through the HoC, I might be tempted to invoke A50 directly and worry about Parliament later -W"

The PM can't invoke Article 50 without Parliament repealing the 1972 act first. I doubt the EU would accept the PM trying to sidestep Parliament, because it would lead to even further instability and would be against the EU's best interests. The then PM would end up looking like a complete fool and undemocratic.

[I don't think the position is anything like as clear as that. Nothing explicit stops the PM invoking A50 before anything else. Read the EU treaty. I'm pretty doubtful that repeal of the 1972 treaty is needed even for a decorous invocation of A50, either. Certainly, none of the discussion has suggested it. Nor would it make sense -W]

Single duty on malt. Hint. Hint.

By Phil Hays (not verified) on 27 Jun 2016 #permalink

I've read the EU treaty and it's pretty clear that this has to be done constitutionally. There's no such thing as a referendum deciding on treaties in our constitution and plebiscites (let's call it what it is) need their own Parliamentary approval as being binding (like the 2011 alternative referendum for example), which this referendum didn't have. Parliament took us into the EU with the 1972 act, and Parliament has to bring us out with a repealing of that act.

[Sure; the treaty says that. But it doesn't say what "constitutionally" means and neither, of course, does our "constitution" which doesn't really exist -W]

You could naturally argue that it is a historical coincidence that all rich countries rose to the top while they had tariffs. But the correlation is pretty good. Do you know of any country that was poor, lowered its tariffs and became rich?

[Errm, what correlation? Are you claiming to have seen, or presented any evidence for, any such correlation? And if you could, you would then claim that correlation was causation? -W]

I understand that there are comparative advantages of trade. But that is a one time static effect for a single good. If your comparative advantage in trade is that your labour costs are low, how do you get out of this situation, while the low tariffs support the low-wage economy and other sectors find it hard to compete?

[Sorry, I didn't understand the "low tariffs support the low-wage economy" bit -W]

By Victor Venema … (not verified) on 27 Jun 2016 #permalink

The Cabinet Manual (PDF page 6 - The UK Consititution)

What is the UK Constitution?
"It has been suggested that the British Constitution can be summed up in eight words: What the Queen in Parliament enacts is law. This means that Parliament, using the power of the Crown, enacts law which no other body can challenge. Parliamentary sovereignty is commonly regarded as the defining principle of the British Constitution."

So, going back to the 1972 European Communities Act passed by Parliament...

Errm, what correlation? Are you claiming to have seen, or presented any evidence for, any such correlation? And if you could, you would then claim that correlation was causation?

European countries had tariffs when they got rich, USA had tariffs when they got rich, the rich Asian countries have a strong government and tariffs. Sorry, it is not my field, I do not have a peer reviewed reference for you.

Sorry, I didn’t understand the “low tariffs support the low-wage economy” bit

The low tariffs help the current export industries. Like the commodities exports of Australia makes the Australian Dollar expensive and makes it hard for other sectors to compete on the world market. Same for Germany before we had the Euro, when the Mark was expensive due to machine and auto exports and other sectors had more trouble competing. More in general, how has, gets. The other side of that is that you get locked in into an economic structure that does not allow for long-term growth.

By Victor Venema … (not verified) on 27 Jun 2016 #permalink

Evidently there is a correlation between Tarrifs and economic growth. The correlation suggests a switch, that high tarrifs and high growth went together before 1950, and that high tarrifs and low growth go together after 1950. Curious.

By Michael Hauber (not verified) on 27 Jun 2016 #permalink

A gathering of the befuddled, befuddleing each other ever more...

By David B. Benson (not verified) on 27 Jun 2016 #permalink

@ Kevin O'neill re #20

"effectively turning its economy into a duty-free one like Singapore"

this already being mentioned as possibility by brexiteers - I nearly fell of my chair laughing

although it may fit the cherry-picked ideal of a "free market"

Singapore certainly does not fit the Brexiteers ideological mantra of a non interventionist government…

we would end up with the worst of all possible world - Gangsta Capitalism

Still I heard a Brexiteer on the radio saying Ghana have already been on the phone asking about a trade deal

so every cloud!!!!!

[You seem to have confused "duty free" with other concepts -W]

in what way?

[Oh good grief how hard is this for you people? You quoted “effectively turning its economy into a duty-free one like Singapore" and then segued into 'Singapore certainly does not fit the Brexiteers ideological mantra of a non interventionist government'. Geddit yet? Please try thinking instead of just asking questions -W]

William: "You seem to have confused “duty free” with other concepts"

Tariffs are nowadays low and not the main problem. To not expect much more benefits from comparative advantages of trade by lowering a tariff of a few percent.

France just introduced a new scheme for weathering houses. The building firms that work on it have to follow a course, which is in French. Many German firms near the border have lost access to the French market that way. Similar for many quality norms.

If the UK does not want to automatically implement EU rules for consumer protection, all its exports will need to be checked, that will be the main barrier at the border, not the tariffs. If you want to reduce such barriers you will have to collaborate in something like say the EU. With apologies to the island libertarians.

[I agree with what you've said, though I think you've hung it off the wrong hook -W]

By Victor Venema … (not verified) on 28 Jun 2016 #permalink

The latest episode of Mr. Farage Goes To Brussels is entertaining.

Sounds like your politics are descending to the level of ours.

[Meh. I can't say Juncker is very appealling. His "what are you doing here?" to Farage is stupid and childish. We'd be better of with someone more competent -WZ

By Raymond Arritt (not verified) on 28 Jun 2016 #permalink

"To claim that tariffs should be zero is indeed not new; its probably in WoN. -W"

You might actually read Wealth of Nations.

[I have. See #35 where I prove rather better at reading it than you -W]

By Phil Hays (not verified) on 28 Jun 2016 #permalink

Just one more from the UK Constitutional Law Association.

"...One of the earliest limits on the prerogative was that it could not be used to undermine statutes; where the two are in tension, statute beats prerogative.
A quick pull of the Article 50 trigger is unlikely to be feasible under the UK’s constitutional arrangements and may well not be desirable for any UK Government or Parliament, even one committed to eventual withdrawal from the EU."

@ WC # 46 "Geddit yet"

no not really, the ideologues behind "Brexit" are neo libertarian free marketers.

so to paraphrase it's (not just about) the economy stupid!

For them to now push the Singapore option - gives them one but not the other

> things should be maintained directly out of the expense
> of those using them, and not out of general taxation.
> This is a libertarian viewpoint.... duty by tonnage –
> which is, by use – not by value

How is this 'ibertarian? I'd think the duty on a ton of food should be less than the duty on a ton of diamonds or copper.

Otherwise the people paying to use the ports for consumable food are paying most of the price of operating the port system, and those shipping small weight high value material get an almost free ride.

[Because, like PH, you have missed AS's point, because it is so totally alien to your viewpoint. AS wants the port to be maintained from fees from those who use it - not from the general population. And he wants those who use it to pay in proportion to how much they use it - how much wear and tear they cause, hence tonnage - *not* on their ability to pay -W]

By Hank Roberts (not verified) on 28 Jun 2016 #permalink

@Hank, the cost of operation for a food port seems to me to be far less per pound of cargo than a diamond port. After all, what is the cost of losing or damaging a pound of green beans or corn? Compared with a pound of diamonds.

AS. "The French system of taxation seems, in every respect, inferior to the British." Why? One reason is because it collects less taxes.

By Phil Hays (not verified) on 28 Jun 2016 #permalink

> maintained from fees from those who use it
> – not from the general population

Hm. Let's apply that to the Internet, then.
Every time I block an ad, I'll save an advertiser wasting money using the Internet.

By Hank Roberts (not verified) on 28 Jun 2016 #permalink

WC writes:[...And he wants those who use it to pay in proportion to how much they use it – how much wear and tear they cause, hence tonnage – *not* on their ability to pay -W]

One of the problems in many organizations is that institutional knowledge gets lost. In other cases people outside of an institution don't even know such knowledge exists.

Bulk cargo vs containerized cargo. Distinction? Yes. Per this simplistic plan? No.

Net effect of plans like this - ship more expensive, net profit per tonne products. And staples (wheat, lettuce, bananas) rise in price. BMWs and Cortinas? More BMWs!! Average person screwed. Let them eat cake!!!

By Kevin O'Neill (not verified) on 29 Jun 2016 #permalink

A simple question: Should we encourage, discourage, or adopt a neutral stance to actions that carry a social benefit?

Economics used to be about social benefit. Appears to have lost its way. Shipping 100 ktons of wheat to a hungry populace should bear the same port costs as 100 ktons of BMWs.

Who wrote this program? The code simply doesn't make any sense.

By Kevin O'Neill (not verified) on 29 Jun 2016 #permalink

Okay, one more....

Bill of Rights [1688]
The Subject’s Rights... Dispensing Power.
That the pretended Power of Suspending of Laws or the Execution of Laws by Regall Authority without Consent of Parlyament is illegall.

Mr Erminea claims that the EU should play nice and negotiate terms that are "fair" because punishing the UK would imply that the only real reason to remain in the EU is fear of reprisals for leaving rather than the benefits of staying. I disagree. First of all, "fair" is a subjective term. Was the Treaty of Versailles fair? The answer seems to depend on whom you ask. In this case, the EU made it quite clear that they thought it would better for everyone if the UK remained. So did the US, Japan, and pretty much every other ally and/or major trade partner of the UK. The UK responded with a resounding "fuck you, dirty foreigners!," apparently because the Brexiters convinced people they could keep the benefits of EU membership without paying the costs. If this ends end up being true, Other members may see no downside to leaving as well. Even when the benefits of membership clearly outweigh the costs, members may be tempted to leave if they think they can increases the benefit/cost ratio by doing so. Thus it would be logical for the EU to make leaving as disadvantageous for the UK as possible. As Machiavelli pointed out, it is better to be feared than to be loved.

It cannot be fair or reasonable to give the UK terms that are as attractive as membership, or the members will all want them! Thus, it's inevitable that we will lose.

[I know what you mean, sort of, but what I'm trying to say is: the EU is a free trade area, and some other stuff: scientific, cultural, agricultural subsidies; and so on. What you - and those saying "don't give the UK equal terms to the free trade (together with accompanying regulations) aspect" - appear to be saying is that only the free trade aspect has positive value. Everything else is a loss, that people would leave if they could. That seems to be a terrible thing to say, put that way -W]

By James Annan (not verified) on 30 Jun 2016 #permalink

The real stumbling block is that free trade includes free trade in people. No-one really cares about the rest (perhaps ECHR a little).

[Yeeesss. I notice that all the pro-EU types always elide the two together really quickly and then move on. Nobody every *justifies* why the two are linked. However, even accepting that, that's not the whole story, since we (apparently) wouldn't be allowed a deal for "free trade plus free movement". Not that the rabid leavers would take that, anyway.

In related news, Boris appears to be a total and utter tosser -W]

By James Annan (not verified) on 30 Jun 2016 #permalink

James: Life's not fair. The EU needs GB more than GB needs EU. Sorry your grants are held up, go cry to the redundant factory workers and fishermen if you want sympathy.

It might not hurt to think about this thing rationally rather than emotionally and as part of your tribe.

Controlled immigration does not drive down the lower end of the wage scale. Uncontrolled immigration does. Open borders policy really does.

Controlled immigration does not introduce large numbers of persons with habits and worldviews that are difficult to assimilate into a stable society. Uncontrolled immigration does and open borders policy really does.

Controlled immigration does not raise the risk of importing large numbers of potential terrorists that cannot be adequately screened. Uncontrolled immigration does and open borders policy really does.

Regular people understand these things, and when they saw what Merkel did they said, quite reasonably, “won’t be long until we are forced to do this”. This means they are rational, not racist.

So many on this thread have mixed up a confused hash of ideas about tariffs, regulation, socialism vs. neoliberalism and then applied it to their backs as they congratulated themselves with vigorous patting for not being racist.

I’m not sure if this vote was a good idea or not, but it has been proven beyond measure that the elites are out of touch. The big worry for them, other than blows to national self-image seems to be how hard it is to get research grants now.

Tom C writes: " has been proven beyond measure that the elites are out of touch."

And who are these elites? David Cameron and/or Boris Johnson? These two Eton-educated classmates would seem pretty elite to me, but one was in favor of Brexit and the other wasn't.

Using unnamed 'elites' is always a cop out. As is the phrase 'out of touch.' Out of touch with what? Reality? What voters want? Economic predictions? Propaganda techniques?

Remain was a vote for 'soft' neo-liberalism. Brexit was a vote for 'hard' neo-liberalism or possibly even libertarianism. There was no real option of a vote for a progressive or socialist choice.

Your notions of open borders, immigration, wage spectrum, etc. are devoid of facts, historical examples and logic. One need only consider Mexican immigrants and the USA over the past 50 years to see the inherent contradictions. between your theory and reality.

As for "This means they are rational, not racist." - no it means they have no moral decency. Your 'rationality' is the worship of arbitrary lines on maps and the accident of which side of the line you were born on. You call that rational? I call it insane, immoral, or self-delusion -- take your pick.

BTW, the drop in the pound was an immediate 10% loss for everyone that holds or gets paid in pounds sterling. Economists see little chance for a recovery of the pound anytime soon - rather that it will probably drop even more by year's end. And as long as that drop persists in accumulates every year.

By Kevin O'Neill (not verified) on 30 Jun 2016 #permalink

Burning down the house leaves you homeless. Whether it's Trump, Brexit, or Berniebusters, throwing tantrums and hero worship is not a substitute for doing the hard work of understanding and working for change. Blaming victims for what the perps did doesn't solve anythhing.

By Susan Anderson (not verified) on 30 Jun 2016 #permalink

That's right Susan, it's best not to threaten the Goldman Sachs vig on breathing air.

I have to agree with Kevin O here. Teh "elites" are not out of touch. The are in firm control of lemmings afraid of stepping out of line to smack back the other lemmings as soon as they quit the queue.

We don't need to be in the EU to subscribe to the ECHR, but no doubt Murdoch and Dacre are working on making sure we leave that too. Free movement of people (initially for economic but now also for political reasons with EU citizenship) was just a means for integration and mixing nationalities to discourage our bad habit of going to war with each other, which seems to have worked so far. But it does seem reasonable that if money doesn't need a passport, why should people need one?

Howard, I don't have any grants, don't have a job to lose, am effectively immune from the outcome either way. I still have an opinion, which is that it is a stupid and unworkable idea which will undoubtedly be catastrophic for the UK.

By James Annan (not verified) on 01 Jul 2016 #permalink

KTO wrote: "Who wrote this program? The code doesn't make any sense."

And Noah Smith writes on the subject: Some Stuff Economists Tend to Leave Out

Putting it in econ language: 1) Social preferences are probably very important in reality. 2) Utility functions often contain inputs like inclusion, human connection, and a sense of meaning, for which no markets exist.

Econ rarely deals with these things. When is the last time you heard an economist talk about how minimum wage policy affects people's desire to feel like society cares about them? When is the last time you heard an economist talk about the need to include strong interpersonal relationships in GDP? When is the last time you saw a welfare analysis of tax policy that took inequality preferences into account?

The formal machinery of economics is totally equipped to deal with these things. You can put love in a utility function right alongside consumption, just call utility u(c,L). You can incorporate community stability into an urban model or a model of migration. You can put social trust as an input into a production function. You can give people a utility boost from having a job, and call it the "dignity of work". You can model the alienation of arm's-length market transactions as a transaction cost, and remove this cost for long-term informal contracts. Almost anything, except for some fairly exotic behavioral biases, can be dealt with using the standard tools of utility maximization and cost minimization that every econ student learns in school.

So why do economics classes, papers, and policy recommendations so rarely include any of these things?"

[> When is the last time you heard an economist talk about the need to include strong interpersonal relationships in GDP?

Of course they don't. It would be silly. GDP measures a thing; changing it to measure a different thing would be confusing. However, you will regularly find mainstream economists discussing the shortcomings of GDP, and proposing other measures -W]

By Kevin O'Neill (not verified) on 01 Jul 2016 #permalink

"Controlled immigration does not raise the risk of importing large numbers of potential terrorists that cannot be adequately screened. Uncontrolled immigration does and open borders policy really does."

The EU has controlled immigration - it does not allow everyone in (contrary to what some people claim). The UK has controlled immigration, too - and it is not even a part of Schengen, so no open borders. So far, its (islamic) terrorist attacks have been committed primarily by people from its former colonies (Pakistan, Nigeria, Jamaica). Oddly, I don't see people in the UK screaming for an end to the Commonwealth, even though many from Nigeria and Jamaica (and also India) can quite easily come to the UK because of these countries being part of the Commonwealth of Nations (Pakistan is a bit of a weird story).

Well Kevin O’Neill, the mask slips pretty easily off of you. Borders are “arbitrary lines” that can be crossed by any number of people at any time along with demand for welfare benefits. To think otherwise is “insane and delusional...” and I along with more than half of the British population have “no moral decency” to think otherwise. No doubt you would blather on, in other venues, about the importance of “sustainability”, and no doubt that you consider yourself a champion of the common man, just that you happen to despise the common man. Further, you probably think that multi-national corporations are inherently bad, but it is imperative that we have an EU to further their interests.

All this contradictory mish-mash is held together, miraculously, by your moral vanity, which appears up to the task.

I think the 52% of the British population is scared to hell by people with opinions such as yours (elite is the wrong word – pseudo-intellectual is better) and their vote is looking more wise as each day passes.

James: I'm glad you are immune from economics. Where do you get catastrophic for England? I'm neutral on the whole thing as this will not end England's role in Europe and the World. The EU has too much to lose if England has an economic collapse, so I doubt the Bankers will allow that.

Howard, I'm not immune from economics, but basically rich enough not to be materially affected by the consequences. Much of our economy and international investments have relied on the UK being in the EU, there have already been moves to poach some of the finance. There is no question that brexit will be bad for science, it is hard to think of a single positive consequence in that area.

By James Annan (not verified) on 03 Jul 2016 #permalink

Government lawyers have decided that the government can trigger Article 50, but Parliament has to repeal the European Communities Act for it to be legal. Article 50 won't be triggered until well after France's and Germany's elections next year. French constitutional lawyers have also informed the French government that we can reverse Article 50 even after it's triggered. We'd need to join the EEA in a Norway type of deal to keep trading within the EU with any beneficial results (any EU or EEA state can veto it off the table - just sayin') that means freedom of movement anyway but little to zero say in the EU. My guess is nobody will have the stomach to take it any further and we'll be having a second referendum with multiple choices on what type of agreement we want with the EU, plus a box to tick for us to forget Article 50 and remain in the EU, once the threats of civil war and hanging traitors from lampposts for wanting to stay in the EU have finished being said but not forgotten.

In all my years and under different governments of all stripes, I have never witnessed such a colossal short-termist clusterf**k of incompetence of such epic proportions committed by any government in power. It's been like living a bad Carry On film but without Sid James's laugh.

I also reckon that the likes of Britain First and EDL will be feeling the wrath of the authorities (see lampposts above), and there'll be a clampdown on the neoNazis that crawled from beneath their 1970s rocks. There's more to Tommy Mair than the sad loner he's made out to be.

And Malcolm Rifkind and Ken Clarke informally chatting away in a Sky News studio while the cameras were still rolling was hilarious.

WC writes: "Of course they don’t. It would be silly. GDP measures a thing; changing it to measure a different thing would be confusing."

And inflation? Is this not a "thing" that economists measure? And isn't there an essentially non-measurable component to inflation? There sure is in the US.

"The recorded information is sent to the national office of BLS, where commodity specialists who have detailed knowledge about the particular goods or services priced review the data. These specialists check the data for accuracy and consistency and make any necessary corrections or adjustments, which can range from an adjustment for a change in the size or quantity of a packaged item to more complex adjustments based upon statistical analysis of the value of an item's features or quality. Thus, commodity specialists strive to prevent changes in the quality of items from affecting the CPI's measurement of price change."

I assume every country's CPI has similar features/quality function. Perhaps you need to rethink this.

BTW, I think you've completely missed the point. Economics is supposed to be about social benefit - not abstract numbers. You're ideological blinders make it difficult/impossible to recognize this.

By Kevin O'Neill (not verified) on 05 Jul 2016 #permalink

@Howard #67, that is unrelated to what I wrote. Agenda much? However, your response is typical of the line of country I was complaining about. Tantrums and taking toys and going home solve nothing.

By Susan Anderson (not verified) on 06 Jul 2016 #permalink

WCX - since several of the previous posts where discount rates were discussed are now closed, I'll post this here:

Larry Summers: A Remarkable Financial Moment:

"The US 10 and 30 year interest rates today reached all time low levels of 1.32 percent and 2.10 percent. Record low 10 year interest rate were also registered in Germany, France, Switzerland and Australia. Notably Swiss 50 year interest rates are now for the first time negative. Rates out 15 years are negative in Germany and 9 years in France. ..."

Do you think it time to 'mark-to-market' your notion of what the appropriate discount rate should be?

[I don't even know what you mean by that. "m-to-m" isn't obviously relevant here; nor is your quote, which is about interest rates, not discount rates -W]

By Kevin O'Neill (not verified) on 06 Jul 2016 #permalink

WC writes: [I don’t even know what you mean by that. “m-to-m” isn’t obviously relevant here; nor is your quote, which is about interest rates, not discount rates -W]

'mark to market' means to assess your assets to reality - not their theoretical value. Marking your beliefs to market (or as I said, your notion of the appropriate discount rate) is the same process with ideas instead of assets.

As we've discussed before, the discount rate as used in economic models is essentially an estimate of future real per capita GDP. Additionally, it should be obvious that both short and long-term interest rates are correlated to estimates of future growth on the relevant timescales.

In our previous discussion you used 5% in an example; I said that was unsupportable. I also said that even 2.5% had little evidence to support it. And if anything, the past few months and the long-term economic outlook (especially post-Brexit) have reduced the market's estimation of future growth as evidenced by the historically low bond yields all over the world.

Real world data shows that since 1960 growth in per capita GDP is diminishing. You can see this by taking the World Bank's GDP data, adding a column for yearly change in percent, and graphing it for yourself.

World per capita GDP, constant 2005 dollars, 1960 - 2014

Given the data and the trend it should be no surprise that economists have been continually shifting their estimates of the discount rate downwards over the past few decades. They have marked their beliefs to market.

By Kevin O'Neill (not verified) on 06 Jul 2016 #permalink

Comment in moderation?

[Not quite. It had been marked as spam -W]

By Kevin O'Neill (not verified) on 07 Jul 2016 #permalink

Good idea.

[:-) -W]

By Vinny Burgoo (not verified) on 07 Jul 2016 #permalink

WC writes: [Not quite. It had been marked as spam -W]

And it can't be unmarked? Whatever.

Mark-to-market is assessing your assets to reality, not their theoretical or paper values. Marking your beliefs to market (or notions of the appropriate discount rate as I wrote) is the same process, ground them to reality. In essence, revise beliefs based on new evidence.

By Kevin O'Neill (not verified) on 09 Jul 2016 #permalink

LOL - and now it shows up :)

By Kevin O'Neill (not verified) on 09 Jul 2016 #permalink

And now it's gone again?

[I'm not sure what happened there, assuming you mean currently-#-83, beginning "WC writes: [I don’t even know what you mean by that". It got marked as spam, I un marked it, it appeared, and somehow it became spam again. Apologies for whatever caused that. Incidentally, feel free to email wmconnolley (at) if your comment appears to be stuck -W]

WC - there is a basic fact from the past 8 years that people like Worstall simply have not come to grips with: increasing the money supply does not necessarily lead to inflation.

This was one of their basic tenets. Marking their beliefs to market would necessitate that they re-examine their beliefs in light of this new data. But it is such a core belief that they really have no option other than to grasp for a multitude of reasons why inflation hasn't surged despite the US supply of reserves increasing by more than 400% since 2009.

Ideology trumps reality for those like Worstall. Here he is just in September of last year: "... increasing the money supply would, ceteris paribus, increase inflation. But government could then reduce aggregate demand by increasing taxation. So, there, you see, it all works!"

At what point in time do we stop and say, Hey bud, I think your full of shite?

[Certainly not at that point. Because I doubt Timmy ever said, baldly, increasing the money supply does necessarily lead to inflation. In the quote above he doesn't, because it is qualified with "Ceteris paribus" meaning, as we all know, other things being equal.

I really find it hard to understand what you're trying to do here. You don't like Timmy; I know that, you know that I know that. But his words above are unexceptional. To describe him as "full of shite" because of them is just silly. If you want to convert me away from relying on him as knowing more about economics than me or you, you're going to have to do very much better than that -W]

The past 8 years have also shown that austerity policies in economic downturns are usually counter-productive and can actually lead to more debt - not less. Counter-cyclical fiscal and monetary policies have kinda been known about for a century or more. This really ain't rocket science.

[Err, yes indeed. As Timmy has already told you: -W]

Yet, there is little evidence that people like Worstall have recalibrated their beliefs in light of the past 8 years. Meanwhile, those that actually understood the macroeconomics of the situation (Dean Baker, Paul Krugman, Brad DeLong, et al) are generally dismissed by those who were wrong.

[You're wrong. See link above -W]

If you were serious about economics you would read the economists who called things correctly -- not those that missed by a country mile.

By Kevin O'Neill (not verified) on 09 Jul 2016 #permalink

Who the hell is "Theresa May"?

[Erase my hat [anag] -W]

By Raymond Arritt (not verified) on 11 Jul 2016 #permalink

Theresa May, by all accounts, is the best of the possibles. I'd like to hear if anyone who actually knows something about the subject knows what views she has on the environment. Her party, to date, has been woeful. They're pushing fracking and handicapping cleaner forms of energy, which seems a terrible idea for your small island. Not to mention hiring the Chinese to install an old-tech nuclear plant, which seems like giving away the store in the stupidest possible way ... but if someone has something nice to say about that, I'm willing to be told.

[I know little about her. The best thing to say is that she's been home sec for years, and non-competent people don't tend to survive there. She is compared to Angela Merkel, which is promising. But no mention of carbon tax, boo. There's… -W]

By Susan Anderson (not verified) on 11 Jul 2016 #permalink

Raymond Arritt writes: "Waitaminute… Boris Johnson is your new foreign secretary?"

Seems like an appropriate application of the Pottery Barn Rule: You break it, you own it.

The more interesting question is why in the world would BJ accept it? Hard to envision a painless, happy outcome.

By Kevin O'Neill (not verified) on 14 Jul 2016 #permalink

Kevin, it puts him in the limelight. What more does he want?

So now we know. Amber Rudd and abolished your climate department. Bad news. And how stupid is it to have a Foreign Secretary who has insulted the likely next US president, among others. Sounds like wheels within wheels. Sad for you all ...

By Susan Anderson (not verified) on 15 Jul 2016 #permalink