So… what shall we talk about?
1. I won’t go into my own feelings about it – you can ask me privately, but make time for a long conversation – though I will say that the vitriol I’ve noted on both sides since the result was announced is not a good look for anyone. There has been some good and measured writing on the topic (not much, but it is there). First off, Ben Casselman from FiveThirtyEight has an excellent guide to making sense of what’s going on right now in the economy. He says, and I agree, that we need to ignore the initial market reaction, which “… will tell us next to nothing about the longer-run impact a Brexit will have on markets or the broader economy.” That said, economists everywhere have basically got the popcorn out (“Have you seen gold yet?!”), because frankly, no-one knows where the new equilibrium is, including the market. Planet Money wheeled out Tim Harford for a quick podcast on it here (transcript). Alex Tabarrok spots some bad timing on google here. Owen Barder talks first about the risks and opportunities for ODA and development, and secondly, in an excellent and impassioned piece, about what he thinks it means more broadly.
2. An interesting side-debate has been about the polling. It’s now three major UK political events in a row that the polls have got wrong, and there are two interpretations to this. One is that there is something different about the way people are making decisions about, responding to and reporting their preferences about political and economic events that our sampling models and questions have yet to capture. The second, more scary, interpretation is that politics are simply fundamentally less predictable. Andrew Gelman, who literally wrote the book about this, leans towards interpretation one and does a good job of explaining this. As an aside, it’s also made many American commentators reassess their models dealing with events they deem unlikely – like a win for Trump. Nate Silver has predicted a slightly less than 20% chance of President Trump, but also points out that this does not mean we should bank on Hillary yet.
3. Last thing on this topic: economists weren’t an influential voice in this debate, it seems. Tyler Cowen has been thinking about why economics isn’t taught from a younger age to more people here and here. It’s something to ponder, though I have little idea what the ‘right’ answer is.
4. Changing the subject, as hard as it seems to be for everyone out here at the moment, here’s something I would have included last week: a fantastically interesting study of whether small ‘situational’ nudges can change people’s behaviour. The intervention is simple: a fridge full of drinks, with a chit in front so you can tally up how much you took in order to repay at a later date. The ‘treatment’ is whether a pen is left hanging in front of the chit, and the ‘control’ is no pen. Depressingly, it seems that honesty in reporting is significantly increased by the presence of a pen. This doesn’t so much imply that people are dishonest as that the presence of even a tiny cost to honesty (finding a pen) is enough to change their behaviour. Perhaps, though, the willingness to ‘pay’ for honesty will increase as the consequences of dishonesty increase. Perhaps.
5. The American Economic Association notes that Democratic presidents have a much better growth record than Republicans, and asks why this might be. Interesting, though ultimately insufficiently convincing to me.
6. Venezuela is completely falling apart – and 538 have a good idea why: oil, and a catastrophic failure of investment policy.
7. I really dislike some of Cass Sunstein’s (apparent) views, but this is a really interesting and entertaining conversation between him and Tyler Cowen. “Proponent of judicial minimalism and libertarian economist have good-natured love-in” isn’t exactly a headline, but there’s a huge amount of interest here, and Cowen remains an absolutely brilliant interviewer.
8. Lastly, because I want to end on something that makes me smile, here’s my favourite stat of the week. 99.8% of Iceland’s TV sets were tuned to their match against England in the Euros. Presumably, the rest of them were TVs left on by the 10% of the population in France to see it live, or the people who could hear the Icelandic commentator going nuts without the need for a television. What a moment.
Have a great weekend, everyone!