[petejh]

Rocksteady my gut reaction to the second referendum idea is that I'm against it. I'm against it for a few different reasons -
1. I honestly don't see it coming up with a result that was any clearer than the first referendum. What if the result is 50.1% for the proposed deal / 49.9% percent against. I think it would result in as much or more chaos and confusion as the first time. So then what?
2. I believe there comes a point where you need to let government govern and this is one of those points. To put that the other way - if we'd voted to remain and the result had been 52/48 I wouldn't be wanting another referendum.
3. You use the term 'try to reconcile'. In this case - leaving or not leaving he EU - I see very little room for reconciliation on the main point voted for by the 52% i.e. not wanting to be a part of the EU. I see attempts at having national referendum on a proposed deal as thinly disguised attempts at getting the decision reversed - what is the worst possible case that can happen - we break from the EU with no deal in place. That isn't desirable for anybody, and the forces at play are such that deals will come about that mean the world doesn't grind to a halt. Because if that didn't happen it would be disastrous for EU countries and businesses, not just the UK. I can obviously see large differences in how we potentially interact afterwards. But that's for afterwards. I just think we need to cross the rubicon. And then there'll be space to shape how we interact.

[petejh]

So what internal forecast made you vote Brexit, if not an economic one (genuinely interested, I didn't bother with the first 500 million posts on here so missed you reasoning somewhat)?

I guess my point is that if we're all making forecasts, I'd most like to listen to the forecasts of those who understand the area thoroughly, even if their forecasting record is mediocre. A random number generator might, almost intuitively, have more success at predicting unforeseen events, but less at predicting the directional impacts of known events, onto which we then superimpose the unforseen onces which will inevitably occur

I've said it a number of times over the last 2 years. Some of my view - not everything I believe - is explained here:

Not fatalistic nihilism Ru, though I can perhaps see how that label is easier to quickly be dismissive of than the label of ‘optimist’.
I’m optimistic that our country - one of the few among the current EU 28 - can do just as well, or better, out of the EU as it does in the EU. Without most of the negative consequences portrayed by the doom-mongers. 

Aptly you mention it, because to me it actually seems more fatalistic to remain in the EU and accept situation normal no change - i.e. an elected government which can never really be held directly accountable and have its feet held to the fire for what happens in its jurisdiction. The EU is a fine idea and institution. I just don’t believe they should ever have been allowed the power to govern member states to the extent they now do. Better as mostly a free trade organisation - trade, standards, harmonisation all good things and came out of a desire to avoid future major conflicts.

I agree with you about the EU in general, where we differ is that you think its worth rolling the dice to get out, being optimistic about the outcome, I don’t becuse I’m not optimistic about the outcome. Or to be more accurate, I think the risks outweigh the benefits.

Pete that's a very nice articulation of what this debate is all about. I agree with Ru though.

Trouble is because each side has staked out their position before it's clear what the risks or benefits actually might really be, as and when evidence emerges that supports one or the other, people spend more time trying to rubbish the evidence than engage with it. Lots of confirmation bias.

Which is why I can't remember seeing anything that suggested any concrete benefits that might emerge from 'being in control of our own destiny', and why Leavers can't see that any of the risks have any substance.

How do Leavers on this thread feel about a second referendum once it's clear what we're getting from whatever deal is negotiated?
My feeling is that this would be fair? I've drawn an analogy before between this and a small island with 15 people where 8 voted one way and 7 the other. My feeling is that in this situation everyone would try to reconcile rather than saying put up and shut up. It's only easy to do that because most of the opposition seem faceless and anonymous. Or are annoying figurehead politicos.

[highrepute]

Economic policy has been likened to driving a car using only the rear view mirror. Both the brake and the accelerator take 6 to 12 months to have any significant effect the extent of which is uncertain.

Love this!

I also find it very hard to drive using only the rear view mirror. How stupid would that be? And therefore, it only takes me a tiny leap of logic to dismiss all economic policy as stupid. thank you.

[abarro81]

"I’m optimistic that our country - one of the few among the current EU 28 - can do just as well, or better, out of the EU as it does in the EU. Without most of the negative consequences portrayed by the doom-mongers.  " - That's an economic forecast though, isn't it. Which you just said was a dumb thing to base anything on. If we're going to base decisions on dumb things then let's at least base them on the least dumb things out of a bad bunch, like I said above.

"an elected government which can never really be held directly accountable and have its feet held to the fire for what happens in its jurisdiction" - guess we should all devolve into council run areas then? All this kind of argument strikes me as wishy-washy non-issue bull. But I guess that's where we differ

[highrepute]

So what internal forecast made you vote Brexit, if not an economic one (genuinely interested, I didn't bother with the first 500 million posts on here so missed you reasoning somewhat)?

Pete's position is clear - although I might get it wrong

There's a good chance it's going to be better if we leave but leaving is scary. The scary is why you're remoaning. The chance is worth the risk.The good & better is why 52% voted leave.

Maybe it's like leaving a job that is a bit shit but OK. It's stressful and hard work finding a new job. A new job might be worse but you'll only find out when you leave. Some would stay put, others would make the move.

[abarro81]

It seems - given that forecasting is apparently pointless - that it's more like deciding to leave your current job for a new job which you get assigned in a raffle. I suspect that that's not really true, and it's just that Pete backs his internal forecast more than that of the forecasters...

[tregiffian]

Economic forecasting is not entirely pointless but it is an inexact science and the further out you try to go the less exact it becomes. Ergo, in any putative second referendum, which heaven forefend, folk will be voting with their hearts or gut feelings as they did in the first. Issues like immigration are a bit different but still impossible to quantify in the, not too distant, future though even in the real referendum some folk had felt impacts that swayed their views.

[teestub]

Ergo, in any putative second referendum, which heaven forefend, folk will be voting with their hearts or gut feelings as they did in the first. Issues like immigration are a bit different but still impossible to quantify in the, not too distant, future though even in the real referendum some folk had felt impacts that swayed their views.

Except once an actual deal has been hashed out, it would be a lot harder for the leading leave proponents to pretend that the land of milk and honey is just the other side of the decision. As such folk may find their guts rumbling and their hearts palpitating away from their initial choice.

[petejh]

"I’m optimistic that our country - one of the few among the current EU 28 - can do just as well, or better, out of the EU as it does in the EU. Without most of the negative consequences portrayed by the doom-mongers.  " - That's an economic forecast though, isn't it. Which you just said was a dumb thing to base anything on. If we're going to base decisions on dumb things then let's at least base them on the least dumb things out of a bad bunch, like I said above.

"an elected government which can never really be held directly accountable and have its feet held to the fire for what happens in its jurisdiction" - guess we should all devolve into council run areas then? All this kind of argument strikes me as wishy-washy non-issue bull. But I guess that's where we differ

Bloody hell Alex for someone versed in how the cosmos works you've a shoddy grasp of comprehending others' points of view. Why do you have to go to absolutes? Oh yeah.. so you can argue against a point I wasn't making.

Perhaps we'd all get along fine in some simplistic parallel universe (perhaps you've spotted it in your lab?) where every significant political or economic decision was made according to 'Authoritative Predication Machine #1' (backed up by APM #2 in case of power failure). We could get on with life, without having to decide what we thought about anything outside our direct day-to-day knowledge. We could all just get on with training for climbing. But the prediction machine doesn't work for unprecedented complexity like brexit. I can't imagine how shit life would be if we always knew what was coming next.


Highrepute - not a bad analogy that. What's missing is the ideological element - the belief about ''an elected government which can never really be held directly accountable and have its feet held to the fire for what happens in its jurisdiction''.

Some have strong beliefs about immigration. I'm not so concerned about that but I'm not in an area where it impacts me. I do think a country should have a bit more control over who it allows in than is currently an option as a member of the EU (over/above the '3-month rule'). I fail to see how you can justify accepting every resident from a country within the EU if they choose to come and work, but not from say Morocco. What delineates someone as desirable - a blue flag with stars on?

I don't have strong views on the economics. I don't strongly believe we'll do better outside the EU - I just don't believe we'll do any worse. Especially longer term - over five-ten years from now. While opening up economic possibilities worldwide that staying in the EU doesn't allow. Two years from now? - sure, I think we'll experience some negative effects on growth. But I don't believe the sky will fall in.. Why not? - because resourceful people adapt to change, they deal with adversity and they make the most of new opportunities.

[Stu Littlefair]

Pete,

I think what you're missing is Alex's point that you're voting based on an economic forecast; in this case your own. I can understand your political preference for 'freedom' from the EU, and I appreciate this is the biggest reason why you voted the way you did. But - would you still have voted to leave if you genuinely thought the sky would fall in, banks would fail, 10% unemployment, etc, all for the next 50 years? I'd like to think not...

So an economic prediction does underpin your voting decision, and why is yours any better than the more pessimistic ones? Personally, I find your panglossian economic view remarkable given the groundswell of educated opinion in the opposite direction.

Yes, you're correct that things have not been quite so bad as forecasts predicted at the time. But you don't consider all the other things not in those forecasts; such as the unexpected growth of the G6, and the fact that the BoE spent over 200 Bn after the pound crashed (the equivalent of more than 60 years of membership subs) to support the British economy. Maybe they're the reason the economy is surviving, and not that Brexit is going to be fine.

I can agree with you that the outcome is uncertain and unknown, but the balance of probabilities certainly suggests a shit outcome as opposed to a good one.

What makes these debates hard I think is that people on both sides are strongly persuaded by the halo effect; because you think leaving the EU is a good idea, you are strongly persuaded by evidence that fits that picture, so you downplay negative economic evidence. This makes it easy for you to have an optimistic economic outlook. Meanwhile, everyone else's brain is playing the opposite trick, so Ru sees all the valid legal issues with arranging the WTO schedules and panics, and downplays suggestions that some non-optimal fudge will allow people to keep trading next year somehow.

[abarro81]

What Stu said (far more eloquently and less combatively than me)

[shark]

the BoE spent over 200 Bn after the pound crashed (the equivalent of more than 60 years of membership subs) to support the British economy.

Whoa. QE isn’t spending money. It’s more like making a loan to the markets that will be repaid. EU subs however is spending money (some of which will come back in grants etc).

QE also wasn’t just driven by sterling weakness if that was a connection you were also making.

[Stu Littlefair]

QE was a minor component of the stimulus announced by the bank, which included cutting interest rates, buying back corporate debt and a huge funding scheme that allowed banks to borrow at extremely favourable rates.

Edit: also, you can argue that the difference between a repayed loan and the EU subs is that with the EU subs you get the money back (in terms of improved GDP) *and* the things the subs payed for - economic development schemes, cities of culture, science funding etc.

[teestub]

Whoa. QE isn’t spending money.

No, it's better, it's making magic new money!

[tregiffian]

Perhaps Omar Khayyam (and Fitzgerald) had it right.

Then to the rolling Heav’n itself I cried,
Asking, “ What lamp had Destiny to guide
Her little children stumbling in the Dark?”
And - “A blind understanding “ Heav’n replied.

[petejh]

Stu. What's the point underlying yours/Alex's though? That I made a decision using my internal decision-making processes. Is that even worth pointing out?
So yes, I chose to give less weight to economic forecasts that foretold of woe and doom; while Alex chose to give them more weight. But I'm not just putting my finger in the air and closing my eyes - as seems to be the implication that if you don't follow economic forecast x then you're basically a loose canon.
I'm hardly alone in the belief that economic forecasting is a woefully inaccurate line of business. It's almost a surprise they get paid for being so inaccurate but this is the self-justifying financial sector we're talking about. And I'm not alone in the belief that some economic forecasting houses are politically biased. Basically, for anyone who thinks an economic forecast beyond the next three months (and even some of those have been out) is worth the time then I advise doing some research on historical accuracy of forecasters. Especially if the forecast goes beyond 12 months. They're an extremely flimsy basis on which to make a decision - just as mine would be if all I based my decision on was 'I think we'll be at x-growth economically in 6 months, 2 years, 5 years, 10 years etc.'.

Balance of probabilities I agree suggests we'll experience some downturn in the short term. Beyond that nobody can possibly know.

[Stu Littlefair]

I guess it's that you seem quite sanguine about the economic prospects when the overwhelming opinion of "experts" is against you.

I also think you're guilty of making the classic "weather/climate" mistake. It's one thing to accept that all forecasts will be very poor 12 months on, but that's in an absolute sense. It's a lot easier to be confident in a prediction that brexit will have a negative impact on GDP than it is to say exactly where GDP will be 12 months time, in exactly the same way it's easier to say it will be hot in summer than to say whether it will rain on friday.

I agree with you entirely about the long run, by the way, but you know what Keynes said about that...

[petejh]

He even proved it! Although I hope to be around in 10 years, maybe even 20 though that could be pushing my luck.

edit: I've just looked up the full quote:
''The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.''

[butterworthtom]

I agree with Stu.

When we model the weather we try to take into account everything we know that contributes to changes in weather patterns. We understand the things that contribute to the weather very well, sufficnetly well that we can make a pretty decent prediction of what the weather will be like in 24 hours time. However, the system is inherently chaotic and so long term changes are essentially impossible to predict, regardless of how much you know about the system or how powerful your computer is. Random fluctuations can lead to large pertubations.

 These are significant to you, as an individual on a microscopic level. When you look at the weather you want to know if it will rain tomorrow.

Climate, on the other hand, we also have a (pretty) good understanding of the factors that contribute to its behaviour. For example, we know exaclty how CO2 and CH4 absorb infrared radiation, and precisely the wavelengths this occurs at and how strongly they absorb. From this we can make long term predictions about how a change in the concentration of the gases can influence long term trends in global temperature. Again, the system is complex, but overwhelmingly given the many contributing factors, feedback loops, etc, we can predict that the global average temperature will increase which will lead to extremes in weather, sea level change, etc. There are different predictions about what CO2 concentration will cause what change in temperature, but we know the net effect is bad. This is change on the macroscopic level.

This analogy is transferable to Brexit. We are unable to accurately predict long term economic trends on a microscopic level, e.g. how will Apple be doing in 3 years time? There are too many pertubations in the economy to predict it well, will Samsung sue them? Will people stop buying Macbooks because they removed the headphone socket? Will aluminium prices soar due to the Trump?

But on a macroscopic level, we can make predictions about the general economy with relative accuracy. Admittedly, we (i.e. me) perhaps don't "understand" the economic system as well as the environmental one, so in some respects it is more difficult to model. Afterall, the environmental system comes down to the laws of physics, we understand the CO2 molecule. Human behaviour is far less predictable than the vibrations of the bonds in CO2.

 We can however make predictions of our economy based on what we know now about our current system (i.e. being in the EU) and the alternative available systems (hard brexit, soft whatever), and studying past events and retrospectively quantifying the effects of specific changes. For example, we know what we trade with the EU currently and we can estimate how this might change after leaving the EU, because we have a rough idea of which sectors might up-sticks and move to Europe (e.g. finance and the automotive industry), and how this will change our overall tax revenue. Based on past data from ourselves and other countres, we can also estimate how a change in the value of the pound will influence our economy based on what it is we import and export now.

The thing is, I'm on very shaky ground here. I don't understand the economy, I haven't studied economics and its too bloody complicated. I have studied the climate, and I appreciate the complexity of that system. I understand that we can predict macroscopic behaviour of complex systems pretty well, although the error bars get bigger as you predict further into the future. But we cannot predict microscopic systems even a few time steps into the future.

The post brexit UK economy is macroscopic. The prediction from most economists (i.e. some of the only people qualified to make the assesment) is that the UK will be worse off in the future. For the next 10 years, the error bars are small. We will certainly be worse off, error bars show it ranges between extremely painful and slightly painful. For the next 50 years, well, the prediction is more difficult as the effects of other pertubations become larger (e.g. climate change, changes in other economies). Yet still, the net effect of Brexit over those timescales is likely to be negative.

I mean seriously, who do you bet on? The economists who (although they may not be able to control it) have an understanding of the knobs and levers of their complex system? Or the brexiters, who have proven themselves to be utterly shambolic...?

[dr_botnik]

Some have strong beliefs about immigration. I'm not so concerned about that but I'm not in an area where it impacts me. I do think a country should have a bit more control over who it allows in than is currently an option as a member of the EU (over/above the '3-month rule')

I thought we were allowed to inflict harsher immigration rules than this by the EU, but our "sovereign government" chose not to? I.e the main thing lots of gammon faced xenophobes voted for is twaddle.

See https://m.huffingtonpost.co.uk/richard-bird/immigration-blame-the-uk-_b_13120104.html

[Oldmanmatt]

Stepping back to the “Second referendum” issue, for moment.

I have to say I, personally, think it a terrible idea.

Because Plebiscites suck, as evidenced by the first one...

However, the irony that some are all too happy to accept the results of the first as some sort of gospel, but object to a second, or suggest that the first was conclusive, but then assert that a second at similar split, would not be conclusive, etc, etc, is pretty stunning.

Or, to Pete’s “let the government, govern” thing: What if the Government simply decided that the whole thing was bad for the country, and halted the process?
I suspect, what you actually meant was, the government should enact the result of the first referendum, regardless of their knowledge or of their own conscience...

[mrjonathanr]

People’s approval tends to reflect whether they like the outcome rather than the merits of the process.

[petejh]

Stepping back to the “Second referendum” issue, for moment.

I have to say I, personally, think it a terrible idea.

Because Plebiscites suck, as evidenced by the first one...

However, the irony that some are all too happy to accept the results of the first as some sort of gospel, but object to a second, or suggest that the first was conclusive, but then assert that a second at similar split, would not be conclusive, etc, etc, is pretty stunning.

Or, to Pete’s “let the government, govern” thing: What if the Government simply decided that the whole thing was bad for the country, and halted the process?
I suspect, what you actually meant was, the government should enact the result of the first referendum, regardless of their knowledge or of their own conscience...

You're free to suspect whatever you like Matt, but you don't speak for me.

What ifs are just that. You can conjecture all you like it doesn't achieve much.

It isn't sensible or accurate to use the label 'irony' to describe the expectation that the result of a referendum which had a 72.2% turnout - dwarfing the turnouts for most recent general elections - with the result being 52% in favor of leaving the EU, to be followed through without re-running the referendum. It simply isn't irony by any measure.

What *IS* hugely ironic though is this post-2008 new-found faith in economic forecasters by people upset by leaving the EU as a means to validate their fears about something they don't like.

Anyone using economic forecasters to validate their fear for the future really owes it to themselves to research what they're basing their views on.

[petejh]

Economic forecasters...

https://www.theguardian.com/business/economics-blog/2017/jan/08/economic-forecasts-hardwired-get-things-wrong

''It took the Queen to show that the emperor had no clothes. On a visit to the London School of Economics in November 2008, when a second Great Depression was looming large, she asked a simple but devastating question: why did nobody see it coming?

Almost a decade later, the Queen might be tempted to lob another grenade at the economics fraternity: why did you get it wrong again about Brexit?

In fairness, the economics profession had its Cassandras in the run-up to the financial crisis and not all economists thought a vote to leave on 23 June meant instant Armageddon. Even so, it is a valid question. How can it be that the     not to mention the vast majority of academic economists, all predicted so confidently and yet so wrongly that the UK economy would plunge straight into a stonking great recession after a Brexit vote?

On both occasions, economists have been guilty of groupthink. On both occasions they pretend to have forecasting powers that don’t really exist. As the economist Paul Ormerod points out, in the short term it is nigh-on impossible to sort out genuine information from noise. Andy Haldane, the chief economist at the Bank of England, last week compared his profession to poor old Michael Fish, who insisted there would be no hurricane on the eve of the biggest storm to hit southern England in living memory.

Meteorology has moved on in the past three decades: the use of satellite technology has made forecasting more reliable. The same cannot be said of economic forecasting, which is no better now than it was half a century ago.

The models, however sophisticated, don’t work awfully well, particularly when big shocks occur. And that, of course, is when they are needed most. The “great moderation” – the period in the 1990s and 2000s when growth was steady and inflation low – lulled economists into a false sense of security.

There are lessons to be learned. The past is not a reliable guide to the future. The consensus is not always right. Economic forecasting is not a hard science, even though it pretends that it is.

The fallback position for those who said the sky would instantly fall in after the referendum is that they were right about everything apart from the timing. Armageddon has been postponed, not cancelled. The consensus is that in the long term there will be a sizable and permanent hit to the economy from Brexit, caused by a loss of trade and inward investment. The Treasury’s central forecast is that the cost of leaving the EU is an economy that will be 6% smaller in 2030 than it would be under the status quo.

Yet models are only as good as the information they process: garbage in equals garbage out. The garbage factor increases if forecasts are designed to serve a political end, as was the case with both sides during the referendum campaign.

A new Cambridge University study* shows that forecasting the medium to long term can be just as prone to error as forecasting the short term. Their argument is simple. Leaving the EU is a unique event. No other country has tried to do it. There is no past experience to draw on, which means that the best forecasters can do is construct “a series of scenarios based on assumptions about future trading arrangements, migration controls and about the short-term uncertainties which could affect business investment in the run-up to the likely leaving date of 2019”.

This is what the Treasury purportedly did in its study of the long-term impact of leaving the EU, published last April. It concluded that leaving, but remaining a member of the single market, would carry a 3.8% of GDP cost after 15 years; leaving with a negotiated bilateral trade deal would cost 6.2%; while having access to the single market on the same terms as any other member of the World Trade Organisation (WTO) would cost of 7.5% of GDP.

The Treasury used what is known as gravity modelling to come to these conclusions. So do other forecasters, such as the IMF, which is why once they have all crunched the numbers they all come up with the same result.

Gravity modelling is Newtonian physics adapted for economic forecasting. Just as the attraction between two heavenly bodies is directly proportional to their masses and inversely proportional to the distance between them, so the volume of trade and the amount of foreign direct investment between two countries depends on how big and how geographically close they are.

Using this approach, the Treasury says there would be a 43% loss of trade with the EU were the UK to revert to WTO rules, and because almost half the UK’s trade is with the EU this would result in a 24% loss in total trade. The assumption is that there has been a 76% increase in UK trade as a result of membership of the EU and that all of these gains would be lost. There would be no gains in trade with non-EU countries to compensate for the loss.

How plausible is this? Not very, according to the Cambridge economists. They note that the share of UK exports going to Europe peaked in the late 1980s and has been falling in recent years as a result of weak demand in the eurozone. EU external tariffs average only 3% and the Treasury forecasts take no account of movements in the exchange rate. The Cambridge paper estimates that the 15% drop in the value of sterling since the referendum would be enough to offset the impact of a 10% external tariff on cars, which perhaps explains why the government has been able to persuade Nissan to build a new model in Sunderland.

The paper expresses similar doubts about the Treasury forecasts for inward investment, since they are heavily influenced by the wave of capital attracted by the ultra-cheap labour on offer in eastern Europe after the collapse of communism.

Using different but still relatively pessimistic assumptions, the Cambridge study says the loss peaks at 3% of GDP early in the 2020s. The loss of GDP per head is smaller – never much more than 1% – and soon recovers.''

[petejh]

The Cambridge paper referenced in the article above.

http://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/working-papers/wp483revised.pdf

Abstract.
''This working paper uses the new CBR macro-economic model of the UK economy to investigate possible futures following the referendum decision to leave the EU. The paper briefly explains why we felt the necessity to build a new model and describes some of its key features. Since Brexit is a unique event with no precedent it is not possible to do a normal forecast in which a few assumptions are made about a limited range of exogenous variables. The best that can be done is to construct scenarios and two are presented here. The difficult part is to decide what scale of adjustment is needed to reflect the likely realities of Brexit. Gravity model analysis by HM Treasury of the potential impact of various outcomes for trade outside the EU is examined and found wanting. The gravity model approach is replicated but with data only from the UK’s main trade partners and not from a large number of emerging economies with which the UK does little trade. The results suggest that the approach is unstable but the impact, if anything, of EU membership on UK trade is much less than suggested by the Treasury.
In addition the actual experience of UK export performance is examined for a long period including both pre- and post- accession years. This augments the gravity model results in suggesting a more limited impact of EU membership. While we include a scenario based on Treasury assumptions, a more realistic, although in our view still pessimistic, scenario assumes a much lower level of the trade loss than that of the Treasury. The results are presented through comparing these scenarios with a pre-referendum forecast. In the milder Brexit scenario there is a 2% loss of GDP by 2025 but little loss of per capita GDP, and also less unemployment but more inflation. In the more severe, Treasury based scenario the loss of GDP is nearer 5% (2% for per capita GDP), inflation is higher and the gain in unemployment is less.''


I think that's a half-decent rebuttal of Stu's and ButterworthTom's points about accuracy of economic forecasts and the climate/meteorology analogy. Of course provided by economists so I can be discounted by my own logic.