The meaning of uncertainty in Brexit

The Brexit debate contains many uncertainties. Predictions on what might happen are simply that. They are predictions not facts and whether predictions come true or not depends on many factors, in particular the precise circumstances and responses after the vote. This is not a repeatable experiment either in which the outcomes can be checked and compared and the best outcome selected. Unlike weather predictions, people, states, and groups will make decisions that change the outcome and if they make different decisions the outcomes might well be different (better or worse). Whereas deciding whether to carry an umbrella or not based on a weather forecast isn’t going to change whether it rains.

I have heard, especially on newspaper reviews and “question time” style debates, that because of these uncertainties people, should ignore these “experts” and vote with their gut feeling. Experts have been wrong before and one side dismisses the reports of experts so the public is confused. In this mindset “no-plan” is no less uncertain than uncertainty in the predictions of experts. But in any project management field, no plan is quite open and totally unpredictable and anyone running a business would prefer an evidence based plan with risks and uncertainties in, than no plan with assurances of “trust me, it’ll be fine”. Unfortunately the media reports these uncertainties in a way that many people believe someone (Howard, Farage, IDS etc) saying “we don’t know what is going to happen” as being equivalent to an expert report (Treasury, BoE, IMF, IFS etc) saying “things are uncertain, but will be largely negative”.

There are similarities with the uncertainties in Climate Change. No model can predict what will actually happen because there are many imponderables and uncertainties. Yet the response of many is one of “it may turn out ok, then” as a reason to do nothing. In the Brexit debate, there are many who’ll take assurances from Leave advocates as “it may turn out fine, then”, especially (as in the climate change debate ) if they are pre-disposed to believe the Leave rhetoric.

In Climate Change, we cannot predict what the climate (let alone weather) will be at a particular location or particular year in the future. Yet we know from the laws of physics that adding CO2 to the air increases heat retention in the climate system ensuring that the climate will change. The uncertainties are in the precise distribution of that extra heat, not in whether the heat is there. Uncertainties on the detail are not good reasons to distrust the fundamental arguments.

In the case of Brexit, economists are almost universally agreed that Brexit increases impediments to trade within Europe. They cannot say precisely where (though can be sure some sectors are more affected than others) as much depends on the precise terms of Brexit (EEA being more benign and WTO, favoured by Brexiters, being more brutal). If trade is impeded, then there are adverse impacts to the economy as a whole, even if some sectors might benefit. Leave campaigners even largely agree with that high level assessment (just climate change sceptic scientists agree that increased CO2 does induce warming). They then naively respond with emotional arguments about having confidence in the British people, or “at least we’ll be in control of our destiny”.

There are economists such as Minford who argue that the UK should abolish tariffs on imports (even if unreciprocated) as this will benefit consumer prices just as there are scientists who argue increased CO2 might improve plant yields or that a warmer Britain will reduce mortality rates. These are, in both cases, small minorities of the experts who are given more prominence in the debates than they objectively deserve. These things might happen, but are  unlikely and the costs will outweigh the benefits.

As the LSE’s Henry Radice writes:

the denigration of ‘experts’ serves to level the playing field, to give the impression that any forecast of what might happen post-Brexit is as good as any other. Of course economists get things wrong sometimes in a complex, uncertain world. A cornerstone of higher education and research is scepticism. But really, where would you encourage your child to study economics, the LSE or the Nigel Farage University of Life? If the vast majority of economists might be wrong, does it logically follow that their opponents are definitely right? Er, no. One way of characterising the Leave campaign is as a group of mostly supremely privileged white men trivialising one of the few remaining engines of social mobility: education, and the benefits it affords of thinking about the world in a genuinely critical, independent way.

Remember, uncertainty works both ways. It may mean it’s far worse than predicted as much as “it’ll be ok”. We know that basic economics tells us that impediments to trade impact wealth creation and distribution. Basic economics isn’t quite as robust as the basic physics that tells us more CO2 must change the climate. But it would be unwise to ignore economics and take a punt.

See also:

Geo-Strategic Reasons for EU Membership

Geo-Political Considerations

What is meant by “Leave” the EU?

Analyses of Brexit Options

EU Laws: Are they really “pointless rules and regulation”?

Reciprocity: a glass half full or half empty?

Is the EU really undemocratic?

EU Cost of Membership

Implications for exPat Brits

Will we save money by leaving? The cost of EU Membership

Some tiresome arguments from BrExit advocates

It’s such an easy decision to leave, right?

Was Cameron shafted in the renegotiations?

Commentary on Gove’s BrExit statement

Does BrExit solve the migration crisis for the UK?

Boris at the Treasury Select Committee

Is it really Project Fear?

The Trade Embargo Strawman

The Government’s pro-Remain Leaflet

Obama’s Intervention

What should happen if we Brexit?

Summary of Brexit Alternatives