{"id":21615,"date":"2018-11-08T00:49:37","date_gmt":"2018-11-08T05:49:37","guid":{"rendered":"http:\/\/www.megalextoria.com\/wordpress\/?p=21615"},"modified":"2020-06-22T11:14:36","modified_gmt":"2020-06-22T15:14:36","slug":"the-unseen-economic-benefits-of-brexit","status":"publish","type":"post","link":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/2018\/11\/08\/the-unseen-economic-benefits-of-brexit\/","title":{"rendered":"The Unseen Economic Benefits of Brexit"},"content":{"rendered":"<p><a href=\"https:\/\/www.megalextoria.com\/wordpress\/index.php\/2018\/11\/08\/the-unseen-economic-benefits-of-brexit\/econuk\/\" class=\"attachment wp-att-25191 keychainify-checked\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/11\/econuk-1024x683.jpg\" alt=\"\" width=\"802\" height=\"535\" class=\"aligncenter size-large wp-image-25191\" srcset=\"https:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/11\/econuk-1024x683.jpg 1024w, https:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/11\/econuk-300x200.jpg 300w, https:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/11\/econuk-768x512.jpg 768w, https:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/11\/econuk-1536x1024.jpg 1536w, https:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/11\/econuk-180x120.jpg 180w, https:\/\/www.megalextoria.com\/wordpress\/wp-content\/uploads\/2018\/11\/econuk.jpg 1920w\" sizes=\"auto, (max-width: 802px) 100vw, 802px\" \/><\/a><\/p>\n<p class=\"selectionShareable\">In a now-famous essay, \u201cWhat is Seen and What Is Not Seen,\u201d the great economist Frederic Bastiat warned against judging the value of any activity in a vacuum.<\/p>\n<p class=\"selectionShareable\">Bastiat\u2019s\u00a0<a href=\"https:\/\/www.investopedia.com\/ask\/answers\/08\/broken-window-fallacy.asp\" target=\"_blank\" rel=\"noopener noreferrer\" class=\"keychainify-checked\">\u201cbroken window fallacy\u201d<\/a>\u00a0brilliantly exposes a common tendency to focus on the visible, tangible benefits of an action\u2014the \u201cseen\u201d\u2014while neglecting the \u201cunseen\u201d penalties and long-term drawbacks associated with the same activity\u2014the invisible cost of opportunities foregone.<\/p>\n<p class=\"selectionShareable\">Though he wrote the essay in 19th-century France, Bastiat\u2019s insights have a timeless wisdom. We live with the consequences of reductive \u201cbroken window\u201d thinking every day, especially where public money is concerned. Politicians often praise the visible benefits of public spending, e.g. the number of jobs \u201ccreated,\u201d without considering whether the funds could have been spent more wisely elsewhere or even how the taxpayer might have spent the cash had it remained in his or her pocket.<\/p>\n<p class=\"selectionShareable\">For my money, the fraught Brexit debate badly needs a dose of Bastiat.<\/p>\n<h2 id=\"link-0\" class=\"selectionShareable\">The Costs of Maintaining the Status Quo<\/h2>\n<p class=\"selectionShareable\">So far, discussions of the gains and losses of Brexit have understandably tended to focus on the most obvious costs, like the amount Britain may pay in any \u201cDivorce Bill,\u201d the potential \u201cBrexit hit\u201d to companies exporting to the EU, and so on. Of course, these concerns are vitally important, but our focus on the immediate costs of EU departure risks blinding us to the very real costs of maintaining the status quo.<\/p>\n<p class=\"selectionShareable\">Membership in the European Union carries huge unseen penalties whose implications may not be immediately apparent. The EU\u2019s Common External Tariff, for example, raises prices and so reduces the quantities of goods and services available to ordinary consumers. Since shoppers in the EU lack the counterfactual experience of trading at world prices, this penalty goes unnoticed, but it involves a misallocation of resources on a vast scale.<\/p>\n<p class=\"selectionShareable\"><span class=\"rte-quote\">In adopting the government\u2019s proposed model for close customs cooperation and a common rulebook, we run the risk of finding ourselves with little scope to diverge from EU regulations on goods and unable in practice to strike new trade deals with the rest of the world.<\/span><\/p>\n<p class=\"selectionShareable\">Negotiating the terms of our departure also comes with huge hidden dangers. In adopting the government\u2019s proposed model for close customs cooperation and a common rulebook, we run the risk of finding ourselves with little scope to diverge from EU regulations on goods and unable in practice to strike new trade deals with the rest of the world. It is often pointed out that the UK\u2019s interests in trade agreements are primarily in services, but this makes it even more vital to maintain flexibility over what we can concede in goods to incentivize potential trading partners to strike a deal. The status quo, or anything close to it, carries huge opportunity costs of its own.<\/p>\n<h2 id=\"link-1\" class=\"selectionShareable\">The EU Stands in the Way of Innovation<\/h2>\n<p class=\"selectionShareable\">Due to a combination of the precautionary principle enshrined in the Lisbon Treaty and the difficulties of getting 28 countries to agree on anything, the EU, intentionally or not, often stands in the way of innovation.<\/p>\n<p class=\"selectionShareable\">In particular, the precautionary principle, the preferred risk management strategy of EU regulators, places the onus on creators of new technologies to prove their invention is safe where some risk may exist\u2014even if there\u2019s no scientific consensus to suggest any actual harm will occur.<\/p>\n<p class=\"selectionShareable\">The result? It\u2019s often too much bother to innovate.<\/p>\n<p class=\"selectionShareable\">During the 19th century, many viewed the emerging railways with a great deal of suspicion. As recorded by cultural anthropologist\u00a0<a href=\"https:\/\/blogs.wsj.com\/tech-europe\/2011\/07\/11\/women-and-children-first-technology-and-moral-panic\/\" target=\"_blank\" rel=\"noopener noreferrer\" class=\"keychainify-checked\">Genevieve Bell<\/a>, critics of early locomotives believed \u201cthat women\u2019s bodies were not designed to go at 50 miles an hour\u201d and worried that their \u201cuteruses would fly out of [their] bodies as they were accelerated to that speed.\u201d Had Victorian Britain followed some version of the precautionary principle, it\u2019s hard to imagine a single track of rail being laid given the levels of contemporary railway fear.<\/p>\n<h2 id=\"link-2\" class=\"selectionShareable\">Missed Technological Opportunities<\/h2>\n<p class=\"selectionShareable\">Of course, moral panic over new technology is nothing new. Now, as in the 1850s, over-cautiousness risks hampering important drivers of future growth.<\/p>\n<p class=\"selectionShareable\">So far, the European Union has taken only tentative steps towards regulating artificial intelligence and robotics, though they are currently consulting on the issue. Yet given the EU\u2019s structure, history,\u00a0and current trajectory, the balance of probability suggests AI will be the latest in a long line of missed technological opportunities.<\/p>\n<p class=\"selectionShareable\">Take genetically modified crops. Since their commercialization in many parts of the world during the 1990s, GM crops have raised the quantity and quality of the global food supply while lowering fuel and energy usage, requiring fewer pesticides and reducing both soil erosion and carbon emissions\u2014all with no scientifically-documented evidence of harm to human health. And yet, EU-wide precautionary thinking has meant a de facto ban on GM crops, only one variety of which has ever been approved and grown in Europe.<\/p>\n<p class=\"selectionShareable\">While farmers outside the EU continue to develop newer, better technologies, hysteria over man-made pesticides has kept European farming methods behind the times. Ironically, foregoing the GM revolution in insect-resistant plant breeding has left European farmers more reliant on pesticides than ever (as has the ECJ\u2019s foolhardy ruling on\u00a0<a href=\"https:\/\/www.thetimes.co.uk\/edition\/comment\/absurd-ecj-ruling-will-hurt-farmers-and-push-up-prices-kvhw5cwzp\" class=\"keychainify-checked\">genome editing<\/a>\u00a0earlier this year).<\/p>\n<h2 id=\"link-3\" class=\"selectionShareable\">Hindering AI<\/h2>\n<p class=\"selectionShareable\">Just last week, the French Finance Minister claimed that EU member states are \u201cvery close\u201d to agreeing\u00a0on a counterproductive tax on the turnover of tech companies, a policy likely to discourage new entrants and inflate costs for consumers.<\/p>\n<p class=\"selectionShareable\">Given all the above, are the EU\u2019s hyper-cautious regulators likely to pursue a different path when it comes to AI and robotics? Or will it be \u201cbusiness as usual&#8221;\u2014namely, when in doubt, tax and over-regulate? Certainly, initial signs, including misguided calls for a \u201crobot tax\u201d from the likes of\u00a0<a href=\"https:\/\/www.project-syndicate.org\/commentary\/eu-ai-robotics-policies-by-guy-verhofstadt-2017-12?barrier=accesspaylog\" target=\"_blank\" rel=\"noopener noreferrer\" class=\"keychainify-checked\">Guy Verhovstadt<\/a>, don\u2019t inspire confidence.<\/p>\n<p class=\"selectionShareable\">The EU\u2019s new General Data Protection Regulation (GDPR), implemented earlier this year, will almost certainly hinder the development of artificial intelligence by raising costs and limiting access to data. In particular, Article 22 creates a new requirement for humans to review certain algorithmic decisions, a restriction that will significantly raise labor costs, thereby creating a strong disincentive from using AI. After all, the whole point of developing AI is to automate functions that would otherwise be slower, costlier, and more difficult to complete if performed by humans. If you have to get a human to explain the logic, why bother investing in an AI solution in the first place?<\/p>\n<h2 id=\"link-4\" class=\"selectionShareable\">Hostility Toward Innovation<\/h2>\n<p class=\"selectionShareable\">These may seem like small concerns in the grand scheme of things, but taken as a whole\u2014and the EU creates a whole lot of regulation\u2014it adds up to an environment often hostile to innovation.<\/p>\n<p class=\"selectionShareable\">It\u2019s no coincidence that Europe has lagged behind the US for decades when it comes to new inventions, innovations,\u00a0and entrepreneurship. There are of course important cultural differences between these continents, but much relates to the US government\u2019s comparatively light-touch regulatory approach. Not for nothing are there no tech giants in Europe to rival Facebook, Google, Apple, or Amazon.<\/p>\n<p class=\"selectionShareable\">Creating a competitive, innovation-friendly atmosphere is a huge potential hidden \u201cwin\u201d of Brexit\u2014with correspondingly huge opportunity costs from failing to do so. Indeed, with more leading universities than the rest of Europe put together and an already thriving tech sector, Britain has much to lose compared to many of its neighbors.<\/p>\n<p class=\"selectionShareable\">One can only imagine what Frederic Bastiat would have made of things like robotics, AI, and machine learning. But I suspect the spirit of his advice would be the same: consider the unseen, and don\u2019t destroy the jobs of the future in a misguided attempt to protect the jobs of today.<\/p>\n<p>Source: <a href=\"https:\/\/fee.org\/articles\/the-unseen-economic-benefits-of-brexit\/\" class=\"keychainify-checked\">The Unseen Economic Benefits of Brexit &#8211; Foundation for Economic Education<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In a now-famous essay, \u201cWhat is Seen and What Is Not Seen,\u201d the great economist Frederic Bastiat warned against judging the value of any activity in a vacuum. Bastiat\u2019s\u00a0\u201cbroken window fallacy\u201d\u00a0brilliantly exposes a common tendency to focus on the visible, tangible benefits of an action\u2014the \u201cseen\u201d\u2014while neglecting the \u201cunseen\u201d penalties and long-term drawbacks associated with the same activity\u2014the invisible cost of opportunities foregone. Though he wrote the essay in 19th-century France, Bastiat\u2019s insights have a timeless wisdom. We live with the consequences of reductive \u201cbroken window\u201d thinking every day, especially where public money is concerned. Politicians often praise the visible benefits of public spending, e.g. the number of jobs \u201ccreated,\u201d without considering whether the funds could have been spent more wisely elsewhere or even how the taxpayer might have spent the cash had it remained in his or her pocket. For my money, the fraught Brexit debate badly needs a dose of Bastiat. The Costs of Maintaining the Status Quo So far, discussions of the gains and losses of Brexit have understandably tended to focus on the most obvious costs, like the amount Britain may pay in any \u201cDivorce Bill,\u201d the potential \u201cBrexit hit\u201d to companies exporting to the EU, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":25191,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[351,622],"class_list":["post-21615","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-politics","tag-brexit","tag-economics"],"_links":{"self":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts\/21615","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/comments?post=21615"}],"version-history":[{"count":0,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/posts\/21615\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/media\/25191"}],"wp:attachment":[{"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/media?parent=21615"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/categories?post=21615"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.megalextoria.com\/wordpress\/index.php\/wp-json\/wp\/v2\/tags?post=21615"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}