For anyone with an interest in behaviour and decision making, Brexit is the gift that keeps on giving study material. After a wild couple of weeks since the referendum in which everything changed, there is little clarity as to what actions will be taken, when, how and by whom. But one thing is certain: at some point in time the Gordian knot will need to be cut, and a decision will need to be made. And that promises to be a rather fascinating affair.
During the campaign, the then leading character for the Leave camp, Boris Johnson, was asked a how he would handle the thorny question around membership of the European single market and the free movement of workers, in case his side would win the referendum. In response he referred to a joke he had cracked years before (Mr Johnson is a witty person): “My policy on cake is pro having it and pro eating it”.
Humorous as this statement may be, the proverb to which it alludes encapsulates a fundamental constraint on pretty much every single choice we face. Our lives are rife with scarce resources, and we are confronted with continuous succession of trade-offs. Long before Adam Smith invented modern Economics, people were well aware that it was not possible simultaneously to have a piece of cake, and to eat it. We need to evaluate which of the two options serves our interest best, and decide accordingly.
Such trade-offs are relatively straightforward to make if the options we need to weigh up are easy to compare, in particular when they have many features in common. If I offer you a choice between two bananas, identical in all respects except how ripe they are, your preference for either more or less ripened variants will effortlessly guide you towards the fruit that gives you the most pleasure. If you need to buy a car and have a choice between two vehicles, equivalent in all details other than that one is 5% cheaper than the other, again the choice is simple.
As more characteristics are different, the effort needed to work out the trade-off increases, but it can still be done. Assuming you prefer riper bananas, would you rather have one of those, or three slightly less ripe ones? Or if you can choose between two very similar cars, one with air conditioning but with 20,000 more miles on the clock, the other one without air conditioning but with Bluetooth so you can easily listen to the music on your smartphone — which one would you favour?
We have to make such complex choices quite regularly. If our preferences are weak, we generally can’t be bothered to spend much time on this and turn into satisficers, people who are content with any choice that is good enough. When we do have strong preferences, we may well agonize for a while, and even use a spreadsheet program to help us weigh and score different aspects. (I have been known to do this to select a holiday cottage; needless to say that internet access always was a non-negotiable item.)
Living in the immaterial world
It may be quite hard to compare the availability of a dishwasher, a view of the sea, or a good pub nearby. But all of these features provide some kind of specific, identifiable benefit — even the sea view does, or at least it’s possible to use money as a proxy for it, as the prices of hotel rooms in coastal towns illustrate. Mainstream economics assumes, often quite correctly, that unequal things can still be compared by applying an exchange rate to a common currency. Companies happily compare business cases for vastly different projects on this basis. And while people are a bit more complex, because we use different mental accounts for different things, the same approach pretty much applies.
If we are late for our train, we may decide to fork out for a taxi in order to make sure we’re home on time to read one of the kids a bedtime story — or not. That’s the trade-off we make, and by doing so we reveal what getting home in time is worth to us.
It is even possible to work out how much it is worth not to accept, or not to stay in a certain job. Tony Hsieh, the boss of online retailer Zappos, has been using this kind of trade-off in the recruitment process for his firm for many years. After an induction and training period, newly hired employees can choose between staying on, or leaving and getting a $2,000 bonus if they decide the job is not for them. About 2–3% of the new staff take up this offer. More recently, even long-standing employees are offered a generous severance package if they are not willing to work in the company’s new organization model, the so-called Holacracy.
This illustrates how even hard-to-measure, immaterial matters like being home in time, or like a particular company culture, can be mapped onto a currency, and once you can do that, trading off deciding what is best becomes quite feasible.
That is not necessarily so when deeply held beliefs or principles get involved, though. In other trade-offs, even those involving immaterial stuff, there is often scope for negotiation. You can trade away a little of it (“the pub is a bit further away, but there is a beautiful view of the bay”), or perhaps make a small sacrifice now for a larger gain later (“let’s not go for the sea view this year, but next year we’ll rent a house with a sea view and a pool”). Not so with principles: by nature they tend to be rigid and indivisible, and not really amenable to compromise.
Sometime relatively soon, someone will need to make up their mind when it comes to invoking the infamous Article 50 of the Lisbon Treaty, and decide what kind of relationship between the UK and the EU will best serve the national interest. But there are principles involved here: some of those who opted for the UK to leave the EU want to halt the freedom of movement, and severely restrict net migration to less than 100,000 per year (currently it’s more than 330,000). But other Leave voters hold the principle of free trade within the European Single Market (or EEA) very high (and believe immigration is, on balance, a force for good for the UK economy).
At present, membership of the EEA requires signing up to free movement of capital, goods, services and indeed people — none of which are negotiable. You want to be in the EEA? Accept free movement. You don’t want to accept free movement? You cannot be in the EEA.
Pragmatism vs Principles
But even if there was no externally imposed tension between the two principal factions in the Leave camp, the internal conflict would still be untenable. It is really hard to see what kind of fudge would reconcile absence of freedom of movement with free trade. Despite Boris Johnson’s quips, you can’t have your cake and eat it. So we have a situation in which a majority of the voters agree on one principle (being outside the EU is better than being in it), but are diametrically opposed on what being outside really means. It is impossible to devise a solution that does not ignore a significant portion of the winning camp. How to choose between these two principles?
A pragmatic way out might be, before invoking Article 50, to invoke the democratic process and let parliament, with or without a general election first, debate and decide — or indeed ask the citizens of the country again, in a second referendum. Genius idea, were it not for the fact that this course of action would be at odds with another principle: the principle of not breaking one’s promises and commitment. Arguably, this principle may not have weighed heavily in recent weeks, but would the prospective new PM, whoever she is, go back on assertions that there will be no general elections, and no second referendum?
Or, of course, as some suggest: Article 50 might never be invoked — when all action leads to insurmountable conflict or certain misery, the do-nothing option is tantalizing. But that would mean the UK remains part of the EU by default, in some weird and probably horrible limbo. Unless, that is, a firm decision is made that it is in the interest of the nation to positively never to trigger Article 50. Unfortunately, this too violates a principle: that of not wanting to make a fool of yourself by going back to where you were before, tail between your legs.
Principles don’t let themselves be captured in a trading model with criteria and weights. The utility they represent cannot be meaningfully expressed in quantifiable units: it is pure emotion. Thankfully it is rare for us, as individuals, to be deeply torn by conflicts between principles we personally hold dear. Usually they are mutually pretty compatible with each other. And even if that is perhaps not totally true, situations where a conflict between principles really troubles our decision-making are very rare.
But a nation is not like an individual. Different groups of people hold different principles, and these are of course not mutually compatible. Most of the time, as these principles stay below the surface, that is not a problem; they generally don’t even play a significant role in the political process of an indirect democratic system.
Until a referendum is held. Politics is indeed very much a matter of pragmatism, but pragmatism and principles are awkward bedfellows. That is why a country that catapults principles to the top of the political agenda through a referendum has a problem with principles. A gigantic, self-inflicted, and insoluble problem with principles.
Better pull up a chair — the spectacle promises to be fascinating.
Originally published at koenfucius.wordpress.com on July 8, 2016.