The Week Ahead: Brexit Vote

So at the advice of my brother-in-law I am writing a bit about things on my radar screen for the upcoming week. Probably few things are bigger this week than the Brexit vote in Parliament. As always I preface this with the fact that I am American and only have my information from reading magazines like theĀ Economist and newspaper resources. I did ask my forecasting class to vote on this though, whether the May plan will pass or fail.

There are many potential lessons to learn from this whole debacle. First, on a referendum of importance like this you should very carefully establish the voting rules in terms of how many of the total available need to cast votes or the threshold needed for passage.

Second, it really is the case that the actual plan should be put up for a vote rather than the vague notion. Those that had faith that negotiations would create a successful exit that was not disruptive were fools to begin with, but I expect many that supported “leave” would have a second and third thought about it at this point.

Third, you really undercut the entire negotiation position of the government by having the referendum and then going to negotiate. The EU had no incentive to bargain in a timely manner, or in good faith, though I am not suggesting that they were anything other than open about their approach and the reasons for it. Given the parliamentary dynamics right now Theresa May is in as strong a position as she is going to be and I see it as an uphill battle that she can get any more concessions out of Europe.

There is really little knowing the extent of economic frictions occurring as a result of a crash out though I think the issue is scary enough that politicians really do not want that option. In my experience politicians will vote for just about anything when large scale economic uncertainty and downturn I a distinct possibility. I could be wrong here and maybe part of me wants to see it happen. (Dismal science note: we get so few opportunities for non-disaster or war related sharp economic changes like this that it would be somewhat cool to see the consequences, especially since I would likely suffer few of said consequences.)

If I had to offer up a strategy I would say the best chance for any more concessions or negotiations would be to pass Prime Minister May’s plan and then go back with a request for a few more changes. Nobody really wants a “crash out”, even the EU does not want that, so there is a chance for some better accommodations with some semblance of where you are starting.

This is an enormous event and my forecasting class and I are watching it as an example of major macro events that completely mess with your forecast. On another front my daughter and I are debating potential names for other departures. She likes “Italeave.” I thought the entire debate over the in Belgium would be called the Belgian Waffle. We will need to think about a few others for later. The next day or so will be really exciting to watch.

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