The Past Speaks

Some of the people who have advocated for hard Brexit (i.e. a Brexit that sees the UK outside of the UK customs union and regulatory divergence) have argued that leaving the EU would reduce the costs of regulation faced by British firms, thereby increasing economic growth in Britain. Their argument goes like this: being in the EU forces a national government to impose lots of regulations on firms that are mandated by EU directives. Brexit means we will be exempt from future EU directives and will be able to repeal the most unnecessary of the existing one. Even if a hard (i.e. a Brexit that sees the UK outside of the UK customs union and regulatory divergence) led to a bit more paper at the Channel ports, the net effect of Brexit would be to reduce the overall burden of regulation on British firms.

Opponents of hard Brexit say the exact opposite. They tell a story about the importance of regulatory harmonisation and avoiding differences in regulations that can impede the flow of goods and create headaches for firms. The extra red tape associated with Brexit will, according to this crowd, more than outweigh the effects of repealing  a few annoying EU directives. An article published in Prospect magazine today made this argument in the course of attacking Boris Johnson’s plan for a hard Brexit: “The PM’s Brexit deal is the biggest one-off imposition of red tape a government has ever inflicted on business.”

Non-British observers who presumably don’t have a dog in UK political fights have said something similar. For instance, Scott Sumner, a US economist who follows UK political by reading the Financial Times, has arrived at similar conclusions. I’m inclined to give his opinion on this matter a fair bit of credence because he isn’t from the UK and has based on his analysis on articles in an expensive, paywall-protected newspaper, which means that he has invested his own money in data collection.
Both sides in this debate share the belief that unnecessary bureaucracy and regulation are a bad thing. Which one is right?

I’m a big believer in prediction markets because they are a tax on bullshit, to quote the words of the great economist Alex Tabarrok, who once wrote: Overall, I am for betting because I am against bullshit. Bullshit is polluting our discourse and drowning the facts. A bet costs the bullshitter more than the non-bullshitter so the willingness to bet signals honest belief. A bet is a tax on bullshit; and it is a just tax, tribute paid by the bullshitters to those with genuine knowledge.

I’m thinking here of the the famous Simon–Ehrlich wager a ten-year bet made in 1980 that pitted overpopulation doomsayer Paul Ehrlich against Julian Simon. Simon won the famous bet and in 1990 Ehrlich mailed him a big cheque.

What I would like to see is someone come up with the metric for measuring the net effect of “red tape” on UK firms that will command the respect of both sides in the ongoing debate about hard Brexit’s likely effects. I suspect that the metric for measuring the costs of regulation will include elements of the World Bank’s (controversial but still useful) Ease of Doing Business ranking methodology and some measure of the total number of pages of regulations firms in the UK and the Republic of Ireland need to comply with. We would then create a bet contract that would, after vetting by lawyers, allow individuals on both sides of the debate about the regulator cost of Brexit to put their money where their mouths are and to invest serious resources in signalling to us that they are convinced they are correct and not just bullshitting.

The Long Now Foundation has expertise in constructing and managing these sorts of bets (seehere), so I propose they be entrusted with this important task. Their betting market place doesn’t yet feature any predictions related to the economic costs and benefits of Brexit, but they I have a UK-centric prediction there (a 31-year contract on the opinion that “Slaughterhouses will be banned in the United Kingdom by 2050.”)

Obviously for the bet to be really credible, its terms would have be enforceable by an English court, since most of the people pledging their assets in such a bet would likely be UK residents who hold their wealth in the UK.

The amount of money pledged by both sides on the bet I have described, along with the identities of the betters, would have tremendous informational value for us as citizens.