Saturday, 22 February 2014

The Chicken / Sunset Exchange Rate

I did mention previously that I would do a part 2 to the previous post regarding Scot's Independence, looking at the viability of an independent state in the north. This has not been forgotten, but may take slightly more digging to find all the relevant figures (not helped by the Government not producing regional budgets). This particular piece is also tangentially relevant to the independence debate. So, with European elections pending and the spectacle of Msrs Clegg and Farage about to do metaphorical battle, the issue once again needs to be addressed: how many chickens is a pretty sunset worth?

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Clearly I am not actually about to launch into the logic and equations required to equate fowl and orbital phenomena (though for those interested the answer is 60), instead the point is to illustrate the difficulty, or perhaps impossibility of comparing things that come in wildly different units or contexts. It's easy to say which of two objects if more expensive, or which of 2 films if longer, because the unit of comparison is consistent (GBP and Minutes respectively). Likewise it can sometimes be possible to equate two things a third object to produce a comparison (in the example about the figure of 60 is based on the GBP cost of a chicken and the cost of renting a chalet on the Isle of Skye - apparently the best place to watch a sunset in the world). But what do you do when the two just aren't comparable at all?

The particular issue at hand is the pro's and con's of EU membership.

The pro-EU camp then to lean towards arguments around the economic situation Britain would find itself in were it to leave, compared with retaining membership. Whether or not you agree with the figures provided, or the arguments advanced, the debate itself seems to make sense - if we (as a nation) lose money by being outside the EU then we should stay inside.

The problem is that the anti-EU camp has a second road of attack, and one that the (largely pro-EU) media do their best to downplay - that of sovereignty, national identity, and shared culture (for the sake of ease through the rest of this piece, I'm going to refer to this as the "cultural" route). The point many (myself included) make is that even if we will suffer economically from being outside the EU (a point I don't concede), it is still preferable to be sovereign. As the say goes, better a poor free man than a rich slave. This therefore raises the inevitable question: How many jobs, or what % of GDP, is being a sovereign nation worth?

Unfortunately I can see no way of answering this question - the two concepts exist in such different contexts as to be incomparable. Instead the two have to be considered independently, leading to a few possible outcomes if you wished to rationally compare the inside/outside scenarios:

Firstly you may consider that on both the economic and cultural strands one of the two options is preferable, thereby becoming a clear winner. This is the "better in every way" style of outcome, there is no trade off, no advantage parred with a disadvantage. In a sense if one of two options is superior in all relevant aspects it is the "correct" choice, and all others can be dropped.

Secondly, and far more likely, you get a scenario of one option is superior in one regard, and weaker in another. (The whole idea of economics is to understand this kind of choice, where different options present different advantages and disadvantages). In fact this is the scenario that occurs in virtually every interaction we ever undertake; do you prefer the tasty £4 sandwich or the acceptable £2 sandwich, do you prefer a three door or a five door car; do you want a safe, low return investment, or a risky, high return one.

How do we resolve this issue in real life then (i.e. outside of politics)? Usually by considering which of the various strands is the most important, and which of the various aspects are "must haves" and which are "nice to haves."

If money is the most important thing then the £3 sandwich beats the £5, the cheaper car beats the nicer car, and so on.  If pleasure in the experience is more important than you get luxury sandwiches and sports cars. Just to reiterate its not that one is "better," in the sense of having an absolute advantage, rather you have chosen to rank the advantages of the preferred option as more important than its disadvantages.

We can, in fact, apply exactly the same logic to the matter of EU membership - do "we" (national We now), care more about the economic impacts of EU membership, or the political/cultural implications?

If we choose the economic thread as the dominant one then the matter becomes purely academic. Undertake some serious, detailed, independent, research into the most likely scenarios for a Britain inside, or outside the EU, and pick the option with the best prospects for growth in the UK economy. If the results are close (i.e. more akin to the safe low return investment or the risky high return one) have a referendum to see if the people think the potential risk is worth the potential pay off.

Likewise if we have a predominately cultural concern, lets have that same level of research into the impacts on British life in the case of an in or out scenario. To what extent will our Parliament lose its powers? To what extent will British votes and influence in various international bodies be subsumed into an EU voting block? What is the genuine, unbiased research into the impacts of significant immigration into a largely homogenous community? What are the likely changes in population make up, size and skill set, and what impacts will this have?

As above again if a clear winner emerges, all good, and the economic costs can be disregarded, and if the case is close put it to a national vote.

Why will this not happen? Simple - the current situation gives both camps a counter-argument to whatever the other side is pushing. Either group can give an economic answer to a cultural point and vice versa. This suits everyone in the political world, and guarantees the answer will never get resolved.

Would it be possible to resolve with less politicians and more  realists in charge? - Maybe.

If we look at the two strands it is clear that a research consensus could never be reached on the cultural front because you have ranking systems (or 2 sources of authority in ethics speak). Those who style themselves Europeans would see the breakdown of national identities and boundaries and the creation of a new homogenous European cultural group as a positive. An enlightened move onto the next stage of civilization, just as the nation state was the successor to the feudal barony. On the other hand nationalists will say exactly the same thing is bad, a loss of history, place and identity into the grey gloop of institutionalized bureaucracies. 

On the other hand it should be possible to deliver an answer with regard to the economic strand. Generally the measures of economic success only go in one direction; more wealth is good. A higher GDP/capita is better than a lower one, a higher growth rate is preferable to a lower one and so on. Hence if one of the options in the EU debate could be shown to deliver an absolutely superior economic output (i.e. higher GDP, higher GDP/capita and a higher growth rate), then this strand can be definitively "closed." Its possible you will get a multi-strand situation again, i.e. a higher GDP but lower GDP/capita, in which case you have to put the main debate on hold and have a sub-debate on which metrics are deemed the most important. However, this point aside it still seems more probable an economic argument could be resolved in a way the cultural one can not.

So, having got an economic answer, what comes next?

This is actually the easy part, if a vote shows that people find the economic arguments more important then the cultural ones then your research provides the final answer. If people say the cultural issues are more important than the economic factors can be set aside as a "known known" and issue addressed via a vote purely on cultural grounds.

I doubt we will ever have an electorate that is well enough informed, or a voting system sufficiently response to have this kind of "decision tree" voting structure. Therefore I feel we will just have the same argument repeated ad nauseum until the election. In essence; how many UK jobs is an independent seat in the WTO worth?


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I'd like to end with a completely unrelated note about Darwinism, and the extent to which it is misunderstood. The phrase "survival of the fittest" should, in common parlance, probably be rendered "growth of the most suitable". Fittest in this context is not about speed, strength, intelligence, ability to earn wealth and so on. It is about fitting into your environment - the creature or population most "suitable" to its environment will thrive and reproduce faster than those less suited. As far as I'm aware there is no evidence that this process can go into reverse.

The exact example I found today was about wolves and dogs. Yes wolves are faster, stronger, better hunters and so on. But dogs are more suitable to a world dominated by humans. Thus, the dog is more "suitable" or "fitter" to their environment then the wolf. It is not "reverse" Darwinism that lead to dogs being less physically capable than wolves, it was real Darwinism leading to an adaption to a new environment .

This is also a point worth barring in mind next time you see any of the studies about changing intelligence in various populations. One study I found (and which was widely reported) concluded the average Victorian was 14 IQ points above today's average.

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Happy Trails.

/Z


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