Referendum: Decision under Uncertainty
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Both sides in the debate put forward their assertions about the impact of membership. Those that wish to remain cite the absence of war within the member states which in the past used to engage in periodic violence against each other if not against their own citizens. For them it is an article of faith that the democratic and cooperative ideal of the European Union has contributes to peace in Europe. The anti-EU campaigners disagree. Some prominent members in the Brexit camp claim to be fearful of German hegemony. They have got off on the wrong track.
By S. P. Chakravarty-May 31, 2016, 7:33 am
(Emeritus Professor of Economics, The University, Bangor, Wales, UK)
The Brexit camp refuses to engage with an essential feature of trade amongst EU nations, the single market to which the EU aspires. Government expenditure is around half of the GDP in the prosperous countries of Europe. The single market allows non-discriminatory access to government contracts in all EU countries to companies based in any of the member nations. What is the likelihood that British companies could continue selling to the public sector in the EU without conforming to labour regulations and environmental standards agreed at Brussels? What is the probability that British exporters would be allowed to sell to companies in the EU goods and services which are used in fulfilling public sector contracts there? It is true that Norway is outside the EU but the country enjoys single market access. It has done so by surrendering the Brexit view of sovereignty, agreeing to implement EU regulations including the free movement of labour.
The idea that dispensing with environmental and labour standards would necessarily make British products more attractive outside Europe is questionable. International competitiveness does not necessarily improve by reducing labour rights and embracing polluting technology. For example, sharp reductions in the right of workers in the 1980s did not increase the share of British manufacturing in international trade. In fact, Britain lagged even behind France, one of the most regulated labour markets, as observed by the Adair (now Lord) Turner in his address to the Confederation of British Industry in 1996.
Both sides in the debate put forward their assertions about the impact of membership. Those that wish to remain cite the absence of war within the member states which in the past used to engage in periodic violence against each other if not against their own citizens. For them it is an article of faith that the democratic and cooperative ideal of the European Union has contributes to peace in Europe. The anti-EU campaigners disagree. Some prominent members in the Brexit camp claim to be fearful of German hegemony. They have got off on the wrong track.
It was not German malevolence which caused the Iraq war. It was not too much interference by the EU but, alas, too little influence on British policy of the German Chancellor and the French President that led to one of the worst military adventures, destabilising the Middle East, undertaken by Prime Minister Blair.
It is true that German economic policy aimed at generating relentless year-on-year trade surpluses is a detriment to long term financial stability even in Germany. When good are sold to those who cannot pay and the trade imbalance is not corrected at an early stage, problems develop. The international banking system, following financial liberalisation in the late 20th century, has developed tools of financial engineering to postpone adjustments in trade imbalance, thus creating huge financial bubbles that eventually burst contributing to economic instability. This is a case for the reform of the dysfunctional international banking system which has emerged in recent years. Conflating the spectre of a banking collapse with the spectre of German hegemony as a threat to peace misses the point that modern Germany is a moral force in support of democracy and human rights in Europe and is not to be conflated with the caricature of Germany in post-war British cartoons aimed at children. It is a conservative German Chancellor who has fearlessly urged on a moral stand on the refugee question to her colleagues at home and abroad.
What is more worrying for peace is the resurgence of the kind of identity politics about language and ethnicity which destroyed much of Europe less than a century ago. As explained by Peter S. Goodman (New York Times 20 May 2016) the main appeal for Brexit is angst over British identity "masquerading as an economic debate".
British exit could become a catalyst for reawakening destructive nationalism in countries where pluralist democracy has not yet established deep roots.
A vote in the referendum balancing the arguments of the two sides, according to some, entails forming an informed judgement on the probabilities of potential consequences of exercising the choice to leave or remain. Thus a House of Commons Select Committee has criticised protagonists on both sides for failing to lay down the facts correctly for the voter to make an informed choice. In our view, the Committee has missed the point about the nature of this referendum. Placing correct information in itself does not address the fundamental problem of voting in this referendum. Objective probabilities cannot be computed because Brexit is a unique event. Attempts at calculating subjective probabilities would be frustrated by the problem of infinite regress.
It is not simply that the voter has to decide what type of information that is needed to be collected to judge whether potential outcomes are good or bad, and the probabilities of the outcomes. Before making that decision, she has to know how to make sense of the data. To know how to make sense of the data, the voter has to decide on the relative reliability of different ways of making sense of the data. The point is that we have to collect information to decide what type of information to collect. An arbitrary deadline needs to be imposed cutting off the infinite regress of collection and analysis of evidence.
Whilst this difficulty of rational choice is also present in the selections of representatives to govern in a parliamentary election, ex post realisation of errors can be corrected albeit with some cost. No such opportunity exists in a vote in this referendum. Once a decision, especially a decision to leave, has been made, that is final.
It would be a rational course for the voter to dispense with attempts at weighing up incomplete information, imparting a spurious sense of precision on an exercise in infinite regress which is cut-off at some arbitrary point. It would be prudent instead to heed the principle of caution before disrupting the status quo of membership. There are more pressing problems for the well-being of the nation than a naval gazing angst over identity and sovereignty.
(Concluded)
