Tuesday, 2 August 2016

In a post-Brexit world, a look at the economics of secessions

“Many governments are besotted to their political maps and reluctant to see the benefits from autonomy and economic integration”

A thoughtful summary of how wrongly economists normally assume political structures to be fixed without possibility of adjustment, and therefore how wrongly the same economists think this ought to influence trade.

The article pushes the views of Alesina & Spolaore, which are that freer trade (and continually freeing trade) erodes the whole point of the nation state, especially if “standards” (whatever they happen to be in each market) harmonise cross-border.  In such world, a secessionist state would (irrationally?) feel the need to re-create all of the historic baggage of the state - border controls, foreign offices, embassies, defence policies, etc - which could otherwise have been pooled into one larger entity.

The article discloses:
  • Alesina’s & Spolaore’s qualification of a country as the optimum trade-off between the gains of size and the costs of ethnic diversity.  
  • Riker’s two factors of federalism, being the strength of the national government and how autonomous local representatives are in decision-making.

The article summarises common sense.  And it should have been the fundamental part of the EurIn campaign, but those idiots went instead for Project Fear.

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