Krugman’s blog, 4/23/16

There were two posts on Saturday, and none yesterday.  Saturday’s first post was “Boris Is Bad Enough:”

Thank you, Boris Johnson. You’ve finally given me the moral courage to weigh in on a subject I’ve been avoiding: Brexit, Britain’s possible exit from the European Union. It’s not as easy a case as I’d like – but Johnson’s intervention makes it clear: Britain should stay in, lest it empower people like him.

Let me start with the economics. There are a number of estimates of the economic impact of Brexit out there, from HM Treasury and independent analysts, but I like to have a quick-and-dirty calculation I understand; it’s not out of line with other, more detailed results.

Here it goes: before it joined the EU, Britain did only about a third of its trade with Europe. Now it’s about half, and it’s unlikely that much of that represents trade diversion. So unless Britain can negotiate something that looks like Norway’s deal – which would basically mean accepting EU policies in which it would no longer have a voice – we might expect Brexit to reduce the share of trade in British GDP from about 30 percent to about 25 percent.

What’s that worth? I’ve previously used the elegant Eaton-Kortum trade analysis as a benchmark for assessing globalization; it tells us that real income, for given technology, is (1-trade share)^(-1/theta), where theta is a parameter reflecting how much comparative advantage there is in the world (don’t ask). Eaton-Kortum suggest theta=4 fits best. In that case, Brexit would reduce British real income by 1.7 percent. Call it 2 percent, with the understanding that there are big error margins around all of this.

Should we, as some argue, multiply this by two or more to reflect dynamic gains? In general, I’m not fond of this practice – it smacks way too much of 101 boosterism, deriving a policy argument from basic economic models then invoking factors not in the models to make the argument seem much stronger than it is. Why tout the dynamic effects of trade as opposed to lots of other things?

But 2 percent is a lot! It’s very, very hard to come up with policies that will make a country 2 percent richer in perpetuity. You’d have to have very good reasons to leave the EU to be willing to make that big a sacrifice.

What about income distribution, which is a big issue in many trade agreements? In this case, it’s pretty much irrelevant: the EU is, on average, comparable in wages and per capita income to the UK, with much of the trade intraindustry specialization that has little distributional effect. So Trumpsandersism shouldn’t matter here.

So what’s this all about? In a word, governance. The case for Brexit is, basically, that EU membership ties Britain to a very badly run institution. And that case is, unfortunately, reasonably strong. Eurocrats have a lot to answer for: the huge mistake of the euro, the reckless and feckless promotion of austerity, the hapless response to the refugee crisis and in general the failure to take seriously the strains of internal migration. Oh, and Europe has been largely useless in dealing with the destruction of democracy in Hungary.

But to point to the EU’s failings as a reason to leave is, as George Stigler used to say, giving the prize in a singing contest to the second contestant because you’ve heard the first. If Britain does leave the EU, and escapes the grip of the Eurocrats, who will it be empowering instead?

You sometimes hear people saying that the attitudes and character of the pro-Brexit forces are not a valid argument for staying in. But that’s wrong: asking who would call the shots afterwards, who would be strengthened, is extremely relevant.

And that’s where Boris Johnson’s tirade against President Obama is so wonderfully clarifying. It tells us who the anti-EU wing of the Conservatives really are; it tells us not just that they are pretty close to UKIP, but that intellectually and emotionally they live in the same fever swamps as the American right. And they would, all too probably, take on a strong, even dominant role in British politics post-Brexit.

So Britain, don’t do this. You would pay a fairly large economic price, and in return you would get governance so bad that it would make the EU look good.

The second post was “Nomentum and the Vindication of Political Science:”

Back in November — which seems like a very long time ago — I noted that political scientists were having some trouble with the nomination process; the whole “party decides” framework led them, by and large, to expect convergence on a mainstream candidate like Jeb Bush or Marco Rubio, not a duel between Mussolini and Torquemada. At the time I put this down to “regime change”; at this point I’d be more specific, and say that the political science profession basically had a blind spot about the transformation of the GOP into an extremist party. That’s why Norman Ornstein, who did face up to that reality, was so much closer to the mark than most of his colleagues.

But while poli sci had a big miss in the fall, since the primary season got underway it has done very well, at least as compared with standard political punditry.

Put it this way: there have been two narratives of the campaign. One is full of ups and downs, momentum and stunning reversals. Trump is doomed! He’s inevitable! Bernie has won seven in a row — can he be stopped?

The other sees a fairly stable race, with state-by-state results mostly reflecting demographic differences. In this view, momentum is just a bad metaphor; it involves treating what is basically noise — e.g., a string of very white states with open primaries, which favored Sanders — as signal. As Alan Abramowitz noted yesterday, the Democratic race in particular is quite well explained by a model in which just three factors determine the Clinton vote share: whether it’s in the South, the percentage of African-Americans, and the share of Democrats (as opposed to independents) in the voting. Nate Cohn has what I believe to be a similar although slightly more complicated model, and has been trying to make the same point. Here’s what Abramowitz’s analysis looks like:

Thus, Clinton’s big win in New York wasn’t a shocking reversal of Sanders momentum; it was what you’d expect in a state whose demographics looked much more like the Democratic party as a whole than the states Sanders had won in the preceding weeks. (Notice that Clinton’s overall lead in the popular vote, 15 percent, is almost the same as her margin in New York.)

The point is that horserace punditry has been consistently, er, trumped by statistical analysis all along. Quantitative political science is looking pretty good.

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