Monday, June 27, 2016

Brexit or Fixit

Many commenters compare Brexit to the American revolution. I think the constitutional convention is a better analogy for the moment and challenge ahead. A first attempt at union resulted in an unworkable Federal structure. Europe needs a constitutional convention to fix its union.

The EU's first attempt was basically aristocratic/technocratic. Brussels tells the peasants what to do. The EU  needs a hardy dose of accountability, representation, checks and balances -- all the beautiful structures of the US Constitution. What little thought the EU put in to these matters is clearly wanting.

America did not wait for a state to leave. But, though even the Pope admits the EU structure wasn't working, the EU needed this wake up call. Bring the UK to the convention, and bring them back. Fixit. (#Fixit?)

Out of control economic regulation, labor laws, mandated social programs and "60% of British laws are made in Brussels" (I don't know the source of the widely quoted number, but the sentiment is as important as the fact)  are the most sensible arguments I heard for Brexit.

Fraser Nelson's WSJ essay expressed this well
The Brexit campaign started as a cry for liberty, perhaps articulated most clearly by Michael Gove, the British justice secretary... Mr. Gove offered practical examples of the problems of EU membership. As a minister, he said, he deals constantly with edicts and regulations framed at the European level—rules that he doesn’t want and can’t change. These were rules that no one in Britain asked for, rules promulgated by officials whose names Brits don’t know, people whom they never elected and cannot remove from office. Yet they become the law of the land. Much of what we think of as British democracy, Mr. Gove argued, is now no such thing.
The important point, I think, is not the outcome -- too much silly regulation, labor laws, and so on. The process is the important point.

America is, in my opinion, also a victim of stifling economic regulation, job-killing labor laws, incentive-destroying social programs. But, we still have a process in place -- in trouble, creaky, under attack by results-at-any-cost progressivisim.  But we have a process. Regulations are supposed to be authorized by Congress; should follow the Administrative Procedures act, with public comment, cost benefit analysis, and so forth; can be challenged administratively and then in court; and Congress itself can pass laws over-ruling regulators (which the President can veto, as he has).  Europe is missing this process; and european law is even worse than economic regulation here.

Last week's immigration ruling is an example of the same forces under strain in the US. I happen to agree with the Administration on policy grounds: People who have been here their whole lives, parents of US citizen children, should not face the constant risk of deportation, and should be allowed to work legally. (I had no idea there was such a thing as a "work permit" in the US, until President Obama mentioned it.) But, Congress passed silly laws mandating the opposite, and the Administration moved beyond its authority. When States are suing the Administration in the Supreme Court over its actions, we are in danger of Texit. But at least Texas can sue. Britain had no similar way to object to EU edicts.

Process matters, because democracy needs to form consensus and acceptance. When you force things down people's throats, they eventually gag.

Again quoting WSJ
Instead of grumbling about the things we can’t change, Mr. Gove said, it was time to follow “the Americans who declared their independence and never looked back” and “become an exemplar of what an inclusive, open and innovative democracy can achieve.” Many of the Brexiteers think that Britain voted this week to follow a template set in 1776 on the other side of the Atlantic. 
The answer for Europe is that it must allow people the option to change things they don't like. And 1787, not 1776 is the inspiration.

On economics, I think it's overblown.

Will this be a disaster for the British economy? Probably not. Norway, Switzerland, and Japan seem to get along.  If the UK decided to be a free economy free trade and open banking center, it could do wonders.

It is nice to see a consensus (though sometimes implicit) on the advantages of free trade. Leave did not argue for the importance of preserving British jobs with trade restrictions.  Alas, "free trade" now means "access to markets" or managed mercantilism.

The benefits of a continent-wide open labor market are easy to see in my business. As I visit universities around Europe, the typical smart young professor might come from Slovakia, have done an undergraduate degree in Spain, Masters' in the UK, PhD in Italy, is working in Sweden, with spouse working in London. The result is a resurgence of European universities, now dramatically better than they were two decades ago. The irony of Brexit is that English is the common language of Europe, making this integration possible.

So why are markets going so wild? I think political follow-on is very unstable. If Brexit leads to Britain becoming Norway it's not a big deal. If the UK breaks up, and the EU breaks up, we have big trouble ahead. Fixit instead.


  1. Great article, thanks. Barclays stocks are down 40% in GBP terms, should we be buying? Why did S&P downgrade Britian by two notches in one go? To add to the panic?

  2. Europe is slow and inefficient but has guaranteed and increased liberty and fostered international trade within and outside it's borders. UK people will be less free outside the EU as they won't be able to live and work in the continent. Young people understood that and indeed voted massively for remain.

    1. A solution to a problem created by European governments themselves.

      Your argument is essentially: accept our undemocratic process, in order to alleviate restrictions on movement which we ourselves imposed in the first place.

      But of course, you're exaggerating as well. EU will work a deal with UK to allow people from both sides to "live and work" where they please. EU needs UK more than UK needs EU. That's where all of the third and fourth rate European academics end up.

      And that's the fundamental problem that these "young people" don't understand: The EU is a solution to a problem which is created by the European countries.

      Of course, any solution which has "massive" support from "young people", ought to be considered the wrong solution on face value. Young people, means, ignorant people. The fact that they had half the showing in the Brexit referendum is evidence of how much they...cared.

      I.e., they didn't even bother to show up to vote, but somehow we're supposed to think that because "young people" want something, it must be a serious consideration.

      The problem the UK had with the "free and unrestricted" movement of people across the EU was not people...working in the EU, or vice versa.

      It was the fact that every third world refugee and immigrant...wanted to move to the UK, once they got unrestricted access to the EU. These are not people who are coming to "work", but people who are coming to live off the dole in the UK, as opposed to some other EU country like Greece or Italy.

      THAT...makes no sense.

    2. Generation Snowflake has not clue about anything.
      The reason London was 'remain' has more to do with preserving their inflated property prices which the rest of the UK subsidies through taxation.

      The state pays the immigrants rents [because as foreigners they qualify as more 'needy' than the natives who are obliged to sit like obedient dogs at the back of the queue] which an ever-growing army of landlords then spend and recirculate with ever-increasing velocity in London.

      'We are so much cleverer and sophisticated than the provincials,' say the London elites as they are served by docile serfs who themselves benefit from subsidized transport, energy, entertainment, etc., in the fond hope of eagerly snapping up their master's crumbs:

      'Oh, have you seen Metzger's Garbage Bag at the Tate?'
      'Well, I went - but, quelle horreur! the prole cleaners mistook it for rubbish and threw it out!'
      [This is not an 18th.c satire - it actually happened!]

      Thank goodness the Brits can finally put the blame where it lies - with their own elites who now stand a chance of being held to full account.

      There will be no free trade otherwise because freedom comes before lasting prosperity - not after.

  3. Europe is slow and inefficient but has guaranteed and increased liberty and fostered international trade within and outside its borders. UK people will be less free outside the EU as they won't be able to live and work in the continent. Young people understood that and indeed voted massively for remain.

    1. You say "..They won't be able to live and work in the continent...". Not true at all. In the UK here has always been freedom of work, travel and immigration and emigration but it was linked to demand and nominally under some sort of control - Like Australia and Canada now. Britain has always been very accepting - even SS POWs were allowed to stay in Britain after WW2 and raise their families - it didn't need the EU to tell us what to do.

    2. UK citizens currently living in Europe or immigrants currently living in UK cannot lose their rights because UK and EU dissolved their treaty (UN regulation from 60's). Changes can only apply to those who would like to go to UK or from UK to Europe after the treaty is dissolved.

  4. "The benefits of a continent-wide open labor market are easy to see in my business."

    That continent wide labor market is one of the Brexit campaigners main complaints. They want to shut it down so far as Britain is concerned and expel the Poles and Eastern Europeans.

    1. That's because "freedom of movement" is a good idea only in theory. In practice, it means that a disproportionate number of people looking for welfare benefits will move to the UK, instead of people looking for "work".

      Why would Romanians and Poles live in their countries, when they can get 3 times the benefit from sitting at home in the UK instead?

      Why would "refugees" from God knows where, sit in Italy or Greece, when they can get 5 times the benefits for free in London?

      In reality, the "freedom of movement" for the UK can be best seen at the "refugee" camps in Calais.

      You can't have no borders and a massive welfare state. Surely, the massive welfare state is the Brits own doing. But nonetheless, it's either one or the other.

    2. Brexit was a geopolitical issue as well as an economic issue. The EU was originally sold to Brits as a free trade issue - which appeals to Brits far more than other Europeans because Brits know they can't feed themselves without it - that's why they they repealed the Corn Laws in 1850's and followed Manchester School laissez-faire [ see: John Cowperthwaite who governed Hong Kong].
      But we know from von Mises that Manchestertum was loathed on the Continent - 'free trade' in Germany meant 'free of food imports'.

      Same words meant different things, hence to this day Brits had no veto on current and LOOMING financial regulation whereas France does on agriculture.
      Then there is the different view of rights - English culture sees rights as a negative hands-off affair - whereas egalitarian France sees rights as positive, directive managerial instruments.

      Add mass-immigration of people not entirely sympathetic to modern cultural norms to the mix and the result unsettling.
      Naturally, the MSM is constantly harping on the perils of hatred towards Eastern European plumbers but they few crazies they find tend to be the sort of people who shout at traffic cones and church railings.

      The main fear is a different type of immigration and it's not just native English who are afraid.

  5. The young people who actually bothered to vote voted overwhelmingly for Remain. Unfortunately for the Remainers, young people also exhibited the lowest voter turnout.

    1. So in other words...70% of "young people" didn't care enough either way to vote.

      And yet the narrative is "young people"! What do they mean by young people anyway?

      Brexit won the majority of 40+. It won close to 50-50 of 30-40. It only lost to the 18-30 crowd: i.e. the people who aren't working for the most part, and who aren't supposedly losing all these opportunities being sold. And of these 18-30 year olds, only about 30% showed up to vote.

      Their making it sound as if it was grandpa in a wheelchair vs. yuppie successful financial banker. When in fact, Brexit pretty much showed a strong or majority win in 30+ years of age.

  6. Great article, John, and thanks for pointing me to Fraser Nelson's essay. I agree with you that the economic arguments against Brexit were overblown. (In passing, I was amused to see some of the same people who dismissed economics as a pseudo-science after the GFC now hailing economists as "experts," on the basis that their opinions agreed.) I do feel, however, that Brexit will produce much more uncertain outcomes (in the sense of Knightian uncertainty) than remaining in the EU would have. With that in mind, it is interesting to note that the demographic most strongly in favour of Brexit was the elderly. What does that tell us about the relationship between risk aversion and age?

    1. Avoiding a sure loss by staying in the EU, vs...? It tells us that people are loss averse.

      And if by elderly we mean everyone 35 years and up, I suppose.

  7. John

    This is a great article and should appear in the NYT. That newspaper is such a load of progressive policy pessimism (sorry about the alliteration) that it is becoming unbearable. Also unbearable is the blind faith acceptance that greater access to EU markets has made Britain richer when all I see over time is a country with persistent current account deficits. Seems to me that the EU has been benefiting just as much if not more. I think these issues should be addressed in the NYT.

    How can we get you to write for the NYT?


  8. "If the UK decided to be a free economy free trade and open banking center, it could do wonders."
    Almost half of UK trade is with the EU. That trade won't stay free unless the UK accepts unrestricted immigration from EU countries, EU regulations and pays a membership, as Swtizerland and Norway do. What would be the point of the referendum then?
    "Leave" voters mostly wanted to restrict immigration ans get rid of regulation. If free immigration and regulations go, so does free trade. A huge concern for whoever in the UK does business with the Continent.
    Given the hostility to immigration, "The benefits of a continent-wide open labor market" can no longer be taken for granted. I assume that the EU staff and the deans in many a UK university (or at any other business) aren't sleeping quite nights

    1. "That trade won't stay free unless the UK accepts unrestricted immigration from EU countries, EU regulations and pays a membership, as Swtizerland and Norway do. What would be the point of the referendum then?"

      The not to do that simply to have access to "free trade". As I said, these are solutions to problems the EU creates in the first place.

      UK has voted for Brexit, which means...the EU will have to sit down and re-negotiate precisely all these points you raised.

      And if they refuse, then who will lose more? The EU will.

      Where will all the fifth-rate Greek and Polish and Italian academics go, if not to UK? :)

      Lets see who blinks first.

    2. Nobody can tell where the negotiations will lead. The outcome will very likely depend on domestic politics in EU countries, the international climate, as well as other factors we cannot forecast.

      The sure thing is that the UK has more to lose: 57% of its exports go to the EU while only 8% of EU exports go the other way (the source is the Financial Times, forgive me if I do not have time to cross-check.)

      Also, you claim that immigrants come to the UK to collect welfare. I am sure some do. In aggregate, though, immigrants are net contributors to the Exchequer (the source is again the Financial Times). Immigrants are mostly of working age: on average they pay more taxes, need less healthcare and collect fewer retirement benefits than Britons. Do you have evidence to the contrary?

      To avoid confusion: I'm not saying that British voters. It's none of my business. I was just responding to professor Cochrane: Brexit need not lead to freer trade.

    3. Before Brexit, Cameron actually got consession that jobless imigrants do not have to have full access to welfare.

  9. John: As I recall, the EU wrote a draft constitution (by French statesman Giscard D'Estang (sp?)). It was much too long and detailed and no country was willing to vote for it, much less vote. Knowing Brussels, this would happen at a second EU constitutional convention.

  10. Nice contrarian view of things. NPR was reinforcing my view that Brexit was a bad idea - didn't think of the 1787 angle. I'm now ready to slay 'em at my next cocktail party!

  11. Prof. Cochrane: it is obvious from the outset that when you comment on the EU, you haven't the slightest idea what you are talking about. And this deficiency is not compensated for with a couple of random quotes from the WSJ.

    That your blog posts on finance are so illuminating and well thought out make the C-rate opinionating in this piece stand out all the more. A man's gotta know his limitations - I promise not to write on portfolio theory publicly, as I don't know much about it; in exchange I hope you would refrain from commenting on how the EU works or doesn't work.

    1. I agree! I recommend to read JC something else than the WSJ and FT. The most favourable stance you can find about the EU in these newspapers is that of a "necessary evil".

      This would however require speaking at least one of the other European languages. You can't form a reasonable view without this.

      So JC repeats the common myths. About democratic deficit, overregulation etc. Shame that UK politicians use EU as the scapegoat for whatever ill on the world. You have to be a Eurosceptic in the UK as a Journalist or as politiciaan or at least a massive ranter. Everything else translates into political or professional suicide.

    2. I am amazed that you seem to be able to opine on what I know and don't know, what I read and don't read, and how many languages I speak. Alas, you have the facts wrong on all three issues.

    3. Prof. Cochrane
      I apologize if I suggested I'd knew which languages you speak, which newspapers you read and what you know or not. I do not. I reflected on what you opine.

      But your selection of citations of the WSJ and the corresponding opinion you form reflects to me - and only in my opinion and sorry to say that - a very simplistic understanding and view of European affairs and explanation for the decision to leave EU in the UK.

      And your quote :
      (I don't know the source of the widely quoted number, but the sentiment is as important as the fact)
      supported my Impression.

      But to end with a more amicable note a quote from your favourite guy Michael Gove: "People in this country have had enough of experts"

      When sentiment is so strong that most obvious facts can simply dismissed this way it is hard to expect a reasonable decision.

      Sorry again if supposed something I shouldn't.

  12. I'm a bit puzzled by your confidence in 'process' as a way to 'fix it'. There is a lot of process already, and more importantly, the European Commission is independent on the basis of the Treaties. They could put themselves behind a program for 'Economic Growth' in the way you described in your essay. But they don't. They'd rather compromise and give us more legislation, such as the Single Market Act (2011), that builds on the Single European Act (1986), that was the first major revision of the Treaty of Rome (1957). I'm not of those who think that Brussels is the principal source of this legislative mania in the name of 'growth and a highly competitive social market economy'. But clearly, they're not helping to overcome it either. I suppose that is because you can never escape politics. And in a democracy, you get the politics you deserve (which is still better than getting the politics you don't deserve). - I am wondering whether the negotiation with the Brexiteers on their new relationship with the EU could not be turned into a reform of the EU consisting entirely of the scrapping of existing legislation. With the Brexiteers telling the EC what they want: free movement of people, goods/services and capital, with 'free' meaning not only 'free of import quotas and tariffs' but also 'free of legislation'. At the moment, the others are saying 'no cherry picking', i.e. no freedom without the legislation. But what if the Brexiteers convinced a greater number of them that the rule of law is what remains when legislation is abolished? Ius sine lege. Jurisprudence without legislation. The hard bit of course is that the British would have to start with scrapping their own legislation.

  13. Ilya Somin has a thoughtful "Libertarian Critique of Brexit"

    It seems very relevant to this thread (HT: Cafe Hayek)

    1. He says Ireland has a 'freer' economy than the UK????
      It is so 'free' that it had to be bailed out by the UK taxpayers to the tune of £20+b after the ECB threatened to pull the plug!
      Ilya Somin has not a clue what he's talking about.

      Thank goodness for Brexit - at least the UK now stands a chance of moving forward.

  14. Before painting this aristocratic / technocratic caricature of the EU you should have checked the facts. The EU's constitutional setup may not be optimal but it provides many of the checks and balances you mention, including member states' ability to sue in front of the European court of justice.

    The referendum was also hardly the libertarian rebellion you have in mind. It was won mostly based on promises of 1) less immigration 2) higher state benefits to British (mainly healthcare) 3) more sovereignity to Britain.

    The referendum shows, in my opinion, how perceived inequality can lead to outcomes where the relatively poor can be willing to sacrifice total wealth in order to improve their relative standing in society.

    1. ..such as businesses using EU law to overide the Scottish Governments wish to curb cheap alcohol and save lives...

  15. "(....) Britain had no similar way to object to EU edicts."
    I do think Britain can sue, yet it would take forever to get the results.

    To my best knowledge, I do recall that European Court of Justice (ECJ) could handle legal dispute between member states and European Commission. However, I found more cases for Commission "referring" member states to the ECJ.

    For example: with environmental issues. (

    Recalling from class years ago, the Norwegian Professor argue that the best strategy for Norway should be joining the EU and discuss the matters before it is established. His argument is interesting: Yes, if something Norwegian government does not feel like to adapt, they could bring the cast to ECJ. However, the ECJ might take forever to decide whether Norwegian arguments have the point. Before then, Norway might still need to adapt the laws if that is critical to the fundamental values of common markets.

    So, simply put: "To kill the initiatives at the beginning, join the EU"

    Without speaking of European Union, general residents in Europe do not possess a positive feeling of bureaucracy. Take the Netherlands for example. Most Dutch I know usually make "jokes" about their bureaucracy system.

    "We cannot change them, so just make some fun out of them"

  16. Prof. Cochrane, really, from this post it seems that you don't have a clue about how democratic/legislative process in EU works and what the whole EU is about.

    Anyone has lack of knowledge here and there, my suggestion is that before talking about something unknown, an academic has to #fixit .

    1. It would be lovely if you and the other anonymous critics of the state of my knowledge could point to one or two factual inaccuracies. That would educate myself and other readers rather than just add insults to an already excessively discordant world.

    2. Prof. Cochrane: you requested some specific inaccuracies. Below are those that spurred this anonymous to comment previously.

      JC: "The EU's first attempt was basically aristocratic/technocratic. Brussels tells the peasants what to do."

      The reference to aristocratism makes zero sense. All key EU institutions are filled with democratic politicians. The power for nominating commissioners lies with the political group in power in the respective member state, which in all EU countries are chosen democratically. The Council consists of democratically elected heads of state, and the Parliament is directly elected. This is not the House of Lords or anything like it! Many key member states (incl. Germany and France) are republics. Monarchies, such as Spain, the Netherlands and Sweden are parliamentary democracies in practice. The UK is somewhat of an outlier in this respect, but the "leave" voters are not going to escape the House of Lords through Brexit. Regarding technocraticism, it is not clear what JC means - that there are public servants in the EU? That experts take part in preparing legislation? Whitehall is no different.

      JC: "The EU needs a hardy dose of accountability, representation, checks and balances"

      This statement is so general that it's not clear whether it actually says anything. JC's request for specificity reciprocated here. For example, the Subsidiarity Principle in EU law and legislative process is not only rhetorical, although it should be enforced more vigorously. See also about the ECJ below.

      JC: "Out of control economic regulation, labor laws, mandated social programs"

      So JC's argument is that aristocrats/technocrats are trying to impose labour laws against the democratically expressed will of the people and this is somehow relevant to Brexit? You should fault the process, not the substantive result of such laws. JC says as much a couple of sentences later but doesn't stick to his own advice. Most Western EU countries have had similar laws nationally enacted for decades; their harmonisation in some respects is not an affront to democractic principles.

      JC decries the EU process in many places, comparing it unfavourably to the American one. But, hand to heart, does JC actually know about how EU legislation is made? If he does, he sure hides his knowledge well, choosing instead to circulate rhetoric from the Brexit camp without any regard as to its validity. "Brussels" is a useful scapegoat for people like Michael Gove. It is of course true that the EU takes away power from the British executive, but that is not a real argument, merely a tautological statement on the very nature of the EU.

      JC: "When States are suing the Administration in the Supreme Court over its actions, we are in danger of Texit. But at least Texas can sue. Britain had no similar way to object to EU edicts."

      Britain has a way to object to EU legislation 1) during preparatory stages by issuing a challenge to EU's authority to legislate on a particular matter, and 2) by filing a suit in the European Court of Justice (Art 263 and 264 of TFEU) regarding lack of authority. Did JC not know about these provisions?

      JC: "Leave did not argue for the importance of preserving British jobs with trade restrictions."

      Not directly, but immigration controls were a key issue in both the official campaign and in popular sentiment. The latter also contained a large dose of old fashioned racism. This is hard to measure reliably, but for a good overview see e.g.

      Following the Brexit, Britain will be free to decide on how to deal with immigration from the EU. What grounds does JC have to believe that this would increase or maintain a free movement of labour from EU countries (and other countries, for that matter)?

    3. "Factual inaccuracies" does not mean "opinions which I disagree with."

      You also seem to be conflating trade and immigration for some reason.

    4. That's great. See how much more effective it is than uninformed schoolyard taunts about who knows what and how many languages they speak?

      I'll stick by my comments however. I am, in fact, perfectly aware of these provisions. My comments were not about the paper structures of the EU, but how they function -- or seem not to. Yes, the EU is not literally an aristocracy -- it is not run by hereditary landowners who ride around on horses -- even I know that. But Michael Grove's quote is telling (he surely "knows" how the EU works, no?) He seems to think he has no recourse.

      For a concrete example -- and this is a genuine question, as I have not been following British, French, and Italian news sources as often as I would like -- Just how often have EU states "issued a challenge to EU's authority," or filed "a suit in the European court of justice?" Are these structures working, as America's creaky and leaky checks and balances sort of still do?

    5. All EU-level legislature that I know is actually result of consensus. To put it into US perspective, it would be as if all the governors jointly signed the draft of Obama's immigration bill, and then one of them sued.

      Recent new proposed law:
      Companies that operate in several countries tend to pick good workers from countries with lower wages and send them for a few months to the centres in high wage countries, paying them their original wage plus extra for travel expenses, all together much less than their workers in high wage countries. Commission wanted to pass the law that would mandate that those workers are paid the same amount as the eqiuvalent workers in the country they are comming to work. More than 1/3 of the countries rejected the proposal. Commission can try to bring the proposal back with some changes, but it is effectively dead without serious changes (and they would undermine the intention of the law).
      Nobody in EU has the power to make unilateral decisions at the level US President can. Everything is done through negotiations and compromises, and mostly unanimously.

    6. I cannot reply exactly to the "how often" question, yet in recent years there is one really interesting case:

      Commission v. Kingdom of Netherlands and ING.

      This is about State Aids, about capital injection in times of limited liquidity and restructuring plan.

      The whole case is quite interesting: The Dutch government offered an early repayment program to ING; EC considered that as a "state-aid": given the early repayment program demand less interest. Such state aid would tilt the competition in banking industry in Europe. Hence, they impose some restriction on early repayment, and further demand break up of ING.

      If I remember it clear, ECJ annulled part of EC's decisions. And this is a recent case when member states stands in court against EC.

  17. The House of Lords does not create legislation - it acts as a restraint -as a legislative review. It is more like a Supreme Court than the EU parliament which is just a rubber stamp machine where there's no real parliamentary debate [unless Farage is speaking] debate is just fig-leaf.

    What am I voting for? says one MEP to his neighbour - I've no idea just press yes.

    ""Brussels" is a useful scapegoat for people like Michael Gove. It is of course true that the EU takes away power from the British executive, but that is not a real argument, merely a tautological statement on the very nature of the EU."


    Brexit strips the UK parliament of excuses - it is now all on the UK MP's and the people who vote them in.

  18. I'll begin with a disclosure: I’m an Italian working and leaving in London. My opinions are probably biased and I think it is better for you to know this.

    Of course, I disagree with most of the post. First, Brexit is mainly supported by anti-immigration feelings:

    Theresa May, Home Secretary and the favourite in the run to become the next UK prime minister:

    Second, the UK is quite free even within the EU (it’s number 10 in the latest Economic Freedom ranking by the Heritage Foundation, with other EU countries such as Germany, Ireland, Netherlands, Finland, Austria and Denmark close by or even better ranked): how much the EU is limiting UK economic freedom? How better can it become outside the EU, considering the first point? A good overview of this point is given here:

    And here:

    Regarding Norway, beside being heavily dependent on oil, it is still in the European Economic Area: simplifying a bit, it’s like being in the EU (free movement of goods, services, labour and capital; contribution to the EU budget), but without any participation in the decision process. Yes, there is one and it’s driven by either democratic governments or people appointed by the democratic governments of the EU states:

    Switzerland is outside the EEA but still part of the common market thanks to agreements with the EU on several issues. Switzerland wants to put restrictions on free movement of labour (following a binding referendum in 2014), but the EU is ready to cut their access to the common market, which makes the Swiss quite worried:

    A final note on Michael Gove: he does not only say that he has had enough of decisions made by the EU, but he sais also "people in this country have had enough of experts". British economists’ opinions for example:

    Apologies for the long comment, but there would be even more to say!

  19. Prof. Cochrane, while in principle you may have a point, you are choosing the wrong cause to make it. It would be like supporting the south during the civil war to defend state rights while ignoring that the right the secessionists were fighting for was that to own slaves. European institutions certainly need more transparency and more accountability, and I think they are moving in that direction but change in the EU is slow because it requires any decisions to be unanimously approved by all member states. But the Brexit is not about the quality of European institutions but about two different things:

    1. Nationalism/unilateralsm: Some Brits, as well as other Europeans, do not want to surrender national sovereignty to supranational institutions. It is similar to the citizens of Vermont wanting to opt out of NAFTA if they so choose regardless of what the Federal government says because, well, it should be up to the citizens of Vermont to decide. To the extent possible, I agree that states should have that right to govern themselves but I think we all agree that interstate commerce should be an exception. Well, some of the Brits who voted to leave are not willing to accept even that much, on the basis that foreigners should have no say at all in what happens in the UK. If that is how they feel then indeed the UK should not participate in a Federation, which by its nature requires such a compromise. That is fine, but let us not make it seem like the issue is democracy, when in reality it is national sovereignty.

    2. Protectionism: Before the European Union, European nations had traditionally stronger protectionism and regulation (agricultural subsidies, preferential treatment to state-owned enterprises, highly regulated labor markets, etc.). It may seem like the EU is engaging in over-regulation, but the truth is that whatever European regulation is in place is the result of a compromise in order to convince member states to abolish many of their own protectionist policies. In most European countries, labor markets have become more flexible and commerce more free as a result of the mandates of the European Union. This is, in fact, why many of the people who voted for Brexit did so. These are people in the poorer and de-industrialized areas of England who believe that if the UK leaves then Land Rover plants will move back from India to the UK, that Pakistanis will stop migrating to the UK and taking their jobs away, etc. It is the UK equivalent of Trump's isolationism.

    As a libertarian-leaning myself, I am troubled by Brexit and the trend towards greater nationalism/isolationism in other parts of Europe. I believe that the UK made a bad decision, and I think the politicians know it, which is why they are not in a rush to leave. Contrary to AIG's claims above, Europe will be fine without the UK (in fact Scotland and Northern Ireland may secede to join the EU) but the reverse will not be true. It is, I think, why European officials want a quick and clean break-up. They want to make an example out of England, by showing what happens to sheep when it wonders off.

    1. There is no comparison with NAFTA - its free trade full stop. The EU case is more like merging the USA and Mexico and Canada as one country with complete freedom of movement and employment, then being extended to other Central then South American countries with no chance of the USA having a voice to prevent it.

    2. What do u mean, no voice to prevent it? If USA had the right to stop it with a veto and didn't, as the UK can do within the EU, why is it powerless?

  20. So Ukraine will get free trade but not freedom of employment - how is it that the UK wanted just that and were told if you don't accept freedom of employment you don't get free trade - i.e. quote "you cannot cherry pick" - can someone explain please?

    1. Dear Paulatepc, Ukraine is not getting a complete free trade agreement from day one. It's limited to some areas and it will be implemented gradually if certain conditions are met. Such conditions include harmonization and implementation of EU laws and regulations in Ukraine. Do not Brexiters want to be free from EU laws and regulations? In the agreement it is also stated that EU and Ukrainian people in both Ukraine and the EU must be granted equal rights and that movement restrictions need to be gradually removed. Ukraine is also considered as a potential future member of the EU, even if only in the long term. A country that doesn't want to join the EU will be probably treated quite differently. Member states (through their democratically elected representatives) can also reject trade agreements, so UK cannot be sure of what it can get even if reaches an agreement with the EU commission. Please check the long list of ratifications for the Ukraine trade deal:
      Yet, according to Brexiters, member states are powerless against the EU...

      Besides these "details", is really UKraine a role model for the UK?
      It would make more sense to look at Norway or Switzerland. Ah yes, Switzerland:

    2. This proves my point - in fact, despite objections to extending the free movement zone to Ukraine and Turkey etc etc, free trade is in fact the bait for federalism. Anyone who dares speak against it is ostracised and the inevitable outcome softened as only happening "in the longer term", as if to suggest that you don't have to worry about that just now children - it might never happen.

      The disparity between the faceless EU representatives and the referendum results in the Netherlands and the UK (and almost certainly France if they have one) proves the point that those who speak in the EU forum do not speak for the people who are impacted in practice, where they live, competition for jobs, the communities they live in. Anyone who dares object is branded ignorant and racist. Calling Britain racist when we are probably the most open country on the planet is a deep insult.

      I voted Remain because I believed what I was told about the benefits of membership, but the subsequent venom directed at the UK and Netherlands by Junker, papers like the Economist showing the Union Jack on a pair of underpants at half mast, I now feel that we are breaking free from some kind of bullying religious cult.

    3. Decisions on the expansion of the EU are made by the elected government officials of the EU member-states and it is one the the decisions that require unanimity (as opposed to qualified majority). If these officials do not speak for the people who are impacted, then why are those same people voting them in office? The matter of the fact is that the UK had been the most rebellious country (voting no) in the EU, often opposing alone everyone else. Hence, don't be surprised if some Europeans act somewhat relieved; the UK's exit means that they will have an easier time moving the EU forward.

      Second, free trade is not a bait for Federalism. The EU has free trade agreements with many countries. Some agreements are with countries that are not and cannot be considered for EU accession, such as Egypt, Israel, Chile, etc. Others are with countries that are being considered, such as Albania, or have the potential of being considered, such as Turkey and Ukraine. Now, membership in the EU federation, and forming "an ever closer union" was a goal mentioned in the Treaty of Rome which is the founding document of the EU, specifies a fixed set of privileges and obligations, including free trade (though the UK had been able to extract some concessions on some matters). Countries that are not members must negotiate a trade treaty, and it has to be one that the EU leaders deem to be in the best interest of the EU citizens. It is quite clear that UK citizens do not want to participate in a federation, which is fine. But this also means that the UK cannot take any of the privileges associated with membership for granted, given that it its unwilling to abide by the same rules as everyone else. For example, the UK wants to be exempted from the new European banking rules, for obvious reasons. It will also not have to abide by the EU-set fishing quotas. I think this gives the right to the EU to re-examine how it should treat fish imports from the UK and whether to place restrictions on off-shore banking (off-shore here being the UK) by EU citizens. It has nothing to do with bullying.

    4. I absolutely agree with Constantine, I wouldn't have been able to say these things so clearly. Thank you.

      I would like just to say to Paulatepc that I'm sorry some reactions from EU officials and the press offended you. But personally I find much more offensive that Brexit leaders clearly don't have any concrete proposal or plan for a new relationship with EU: after the victory they just managed to say a few random things and backtrack from their claims (admitting 350 million to NHS was a lie, saying immigration couldn't be reduced, etc. etc.), before disappearing completely. Disentangling the UK from the EU and establishing a new relationship is an extremely complicated process that will take many years, directly costing lots of money and resources while slowing down the economy due to the uncertainity - and we might not even get a good deal, let alone one better than the current one. It is very offensive that who wanted all of this is not willing to deal with it. Of course reactions by EU officials have been caustic, observing such a beaviour. Leading people (even with outright lies) in one direction and then ditching them doesn't look to me as a good example of democracy.

  21. This article from the London School of Economics seems to be an interesting analysis of the Brexit vote:
    "Karen Stenner, author of the Authoritarian Dynamic, argues that people are divided between those who dislike difference – signifying a disordered identity and environment – and those who embrace it. The former abhor both ethnic and moral diversity. Many see the world as a dangerous place and wish to protect themselves from it."

  22. The news report that Britain had voted in favor of leaving EU in a referendum held on 23 June 2016 proved this writer right. This Vedic astrology writer had analysed economic prospects of global powers in monumental article - " Stressful times ahead for world economy in 2015 and 2016" - published on 2 June 2014 , TWO YEARS PAST from now, in online magazine (blog) Countries were identified for substantial concern and expressed by first letter with which name of a country or Capital or association of countries begins. The aspects of life becoming the cause to bring about specific economic scenario were also identified and mentioned in the said article. Having said that briefly , it was predicted that , among others , “U”( denoting UK) or “B” (denoting Britain) and “ EU” ( denoting European Union) would face a major concern in economy during first half of 2016, particularly around April 2016. These predictions have come accurate with Britain leaving EU. But challenges , both political and economic , remain for new PM to deal with.


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