Brexit is an illogical decision

Mac Valledor

BEHAVIORAL economists have identified many ways that human behavior deviates from standard economic theory. As it turns out, our decisions and behavior are not always logical, but are instead heavily influenced by emotions and cognitive blind spots.

Economic theory is built on the assumption that individuals are rational, that they decide based on self-interest; they run cost-benefit analyses; and they do not make mistakes. If they are deciding whether or not they want something, they figure out what it will cost and how happy they will be if they have it, and they act–or vote–accordingly.

However, people in the real world do not work quite like that.

Brexit should be a prime example of a decision that should have been decided based on standard economic analysis, but instead voters behaved in such a way that was divergent from rational economic behavior. Standard economics would think that voters would be making the kind of calculations that editors in the Financial Times, Wall Street Journal, and The Economist are doing by crunching a set of data and summarizing the pros and cons of being in the European Union, so on and so forth. Most voters are not truly thinking in a very analytic way. The people behind the leave campaign voted with their guts, not thinking or acting the way traditional economics expected them to behave. I tell you that if you can find me a hundred people in the United Kingdom that have made that calculation, I would like to talk to them.

Financially, the decision to leave EU did not make sense: arguments about how the UK would economically benefit from an EU exit have all been debunked. A simple cost-benefit analysis should have led to a “remain” vote. Nevertheless, most voters did not really think about it in a very analytical way. For them, there was no spreadsheet. This is very akin to a divorce without a prenup. You are voting to leave, and we will have to take care of all the financial details later.

There are a lot of issues like immigration, which are highly emotionally charged in Europe and more so in the United States and above all, are misunderstood by the general public. The UK would indeed be in a very horrible mess if they did not have any immigrants. Personally, I think that the vote to leave the European Union was a highly risky move.

Mind Games

Leading Brexiters concur that the UK will be financially worse off, at least in the short term. So if leaving makes the UK poorer, why did many vote for it?

The credit goes to the Vote Leave campaign who brilliantly managed our cognitive biases and, literally, played tricks with our minds.

The study of happiness reveals that people who score high on self-deception are happier, until their delusion is smashed. It is the cognitive equivalent of a sugar high with the ensuing inevitable sugar drop. Fueling this self-deception made more people vote for Brexit.

The body of science reveals that self-deception peaks with two conditions.

First, a lack of factual information. The Leave camp bred ambiguity. From the numbers on the side of their bus to the kind of trade deals the UK ends up with, nothing was clear. The campaign was filled with broad happy phrases like “Take back control”, “Freedom”, and “Power to the people”, and dreadful images, like the Turkish population massing up at the port of Dover or Britain writing a bank check to bail out Italy.

The very few facts that Vote Leave employed were used out of context, deploying what behavioral economists call the focusing illusion.

The Brexiters made much of the fact that the UK is the world’s fifth largest nation by GDP (California is the sixth, if taken as a nation) and so other countries will be forced to renegotiate trade deals, but they say nothing about the large gap between the UK and those above. The four richest nations account for 50 per cent of the world’s GDP. The next four, including the UK, account for only 13 per cent. To think that the UK would be at the priority table for global trade deals, you have to believe that Brazil (seventh) would be as well, which it is not.

Boris Johnson, the lead for the Vote Leave campaign, said he was in favor of having his cake and eating it. The Brexit imagery of life outside the European Union was filled only with adorable, but logically hopeless promises. Why would the Australian point-based system make such a difference when the UK already has a near-doppelganger for non-EU migration?

The second condition for self-deception was a high motivation.

The Brexiters painted a version of the feisty British who built an empire on which the sun never sets and foiled the odds to win not just one, but two world wars. The UK saved Europe, remember, not the other way around. Armed with a pint of warm (Belgian) European beer and the football (originated in Greece and Rome) match playing in the background, it is not hard to imagine that Britain’s greatness is natural and that the only thing that holds its people back is being bound to other, inferior European nations.

In four research studies, people were more likely to believe they would have a better future simply because the thought of it had entered their mind. The less effort required to reach this happy state, the more likely they thought they would get there.

Vote Leave were acutely aware that their delusions did not have much scrutiny and so, to distract voters, they turned their attention to a common enemy–Brussels, the de facto capital city of the European Union. Not even in the worst of comedies did the enemy come as perfectly caricatured as Brussels: puffed, arrogant, corrupt and stuck in the past. How would anyone want to be involved with them? No matter that the same could be said of the International Olympic Committee and Fifa and not many Brexiters argued against bidding for the World Cup or hosting the Olympics.

Brexit villains are not just Eurocrats. Vote Leave discredited everyone who claimed the UK was better off inside the EU: economists, scientists, historians, leaders of big businesses, leaders of small businesses, world leaders, independent world bodies (the IMF et al). In doing so, they turned “expert” into an insult, which is conveniently reassuring to those who might otherwise worry about their lack of expertise.

To regain momentum, the In campaign embraced behavioral science and neuroscience. The psychology of loss shows that we mind losing something twice as much as we would value gaining it. The question Remain should have kept asking was: at what cost?

The break-up of the United Kingdom as Scotland? Northern Ireland and Wales to follow? The loss of secure jobs in companies that have chosen to invest in the UK? More expensive flights and longer queues when the British go on holiday? A British child’s chance to study abroad or go interailing? The quality of the UK’s scientific discovery, research, and innovation? Its position as the fastest growing developed country (alongside the United States) of the last quarter century?