Was the Brexit referendum a good reflection of "the will of the people"? Possibly not.

by Viva Avasthi

There's something both Leave and Remain supporters have missed. Discussing it matters for the short and long run of this country. 

Two weeks on, there is still furious debate among and between Leave and Remain supporters. Yet there appears to be consensus on one thing: that the referendum result was "the will of the people" and therefore "must be respected". Leave supporters are brandishing this as their infallible weapon against attempts by the Remain side to prevent or soften Brexit. Remain supporters, broadly conceding, are limiting their actions to lamenting the lies told by the Leave campaign and attempting to find (varying degrees of) obscure methods to prevent our leaving the EU. 

Both sides miss the point. 

There is a case for the referendum not being a good reflection of "the will of the people". The reasons come under two umbrellas. First, the problems with the information provided prior to the referendum; second, the problems with the structure of the referendum itself.

Missing: democracy featuring an informed electorate

For democracy to function well as a reflection of "the will of the people", it is essential that voters are well-informed. The first thing that the electorate should have been informed of was where to turn for an impartial and - crucially - thorough and accessible analysis. This did not happen. Instead, they were offered lies from the Leave campaign, list after list of influential figures backing the Remain campaign, and an extremely poor quality of public debate. Not a mix conducive to effective democracy.

The reader might justifiably wonder whether such impartial sources even existed. In fact, they included: The UK in a Changing Europe, a website based at King's College London and funded by the Economic and Social Research Council; fullfact.org, a non-partisan fact-checking charity; and, produced by the libraries of the House of Commons and House of Lords, this impartial analysis.

There is also some ground for criticising the BBC's role. In attempting to fulfill their remit of being non-partisan they gave roughly equal air-time to both sides on each aspect of the debate (the economy, immigration et al.). In reality though, if we take, say, the analysis on the economy, the sheer volume and quality of argument was on the Remain side. The BBC's coverage, therefore, may well have harmfully distorted the public's views by diluting some critical arguments.

All this matters immensely. Those who condemn Leave voters as "stupid" or "racist" do not appreciate how little information was actually provided to people to help them vote in an informed matter. They do not appreciate how little time people had to uncover and then analyse the intricacies of the UK's relationship with the EU once they'd come home from each hard day's work. Is it really a surprise, then, that large numbers of people brought sheer emotion rather than reason to the ballot box? Had people been aware of the facts, they might not have confused what lies within the remit of the EU and what does not; which problems were caused by our being in the EU and which were not; what our position might be outside of the EU and what it will not.

Then there is the issue of so-called "apathy" among young people. Rather than laziness, the very low turnout among 18-24 year olds was more likely a result of the paralysis stemming from simply not knowing which was the "right" side to vote for. Again, a sign of an uniformed electorate. That paralysis was possibly exaggerated by the fear created by the knowledge that the outcome would affect them for the longest of any of the voting categories. A low turnout necessarily means that such a referendum is only a limited reflection of the "will of the people".

Second, the electorate should have explicitly been made aware or reminded of the crucial difference between voting in a general election and voting in a referendum. This would have reduced the numbers of people voting Leave simply because they did not think we actually would (protest voting) and increased voter turnout - making the referendum a far better reflection of "the will of the people" than at present. Effective democracy depends on the electorate knowing how the system works. It is not acceptable to simply assume that the electorate surely must.

When is a referendum any good?

There's another angle. Even if we ignore everything said above, there are further legitimate reasons why we might not accept the referendum result as being a good reflection of "the will of the people".

First, the Condorcet paradox applies in the case of this referendum. In his fantastic (and accessible) article written prior to the referendum, Jonathan Portes outlines what the Paradox is and how it is relevant to the British case.

The introduction to his article reads:

The problem with referenda, writes Jonathan Portes – and especially this one – is that they often present binary choices which do not necessarily reflect voters’ true preferences. This can force politicians to implement policies that are at odds with the will of the majority. He uses the Condorcet paradox to illuminate the difficulty, and asks what it mean for Parliament after the referendum.

Second, we must not forget that the choice of referendum-winning majority was an arbitrary one. Cameron decided that a "win" for either side would require gathering over 50% of the vote. Other countries choose a best-of-three-referendums system, or a two-thirds majority system, for example. Was our choice necessarily the best one? As the Economist puts it:

[...] what about the 16,141,241 voters who endorsed remaining in the EU? The 52% of those aged 35-44? The 56% of Northern Irish voters? The 60% of Londoners? The 62% of Scots? The 62% of those aged 25-34? The 67% of Asian voters? The 73% of 18-24 year-olds? The majority of Britons in full- and part-time work who voted to Remain? And the large minorities of most other groups, as well? Not to mention the 1.1m Leave voters who, one poll by Survation suggests, now wish they had voted differently. Or the millions of Britons abroad who could not vote in Britain. Or the roughly 3m residents of Britain—who work, pay taxes and contribute to society like everyone else—who by dint of their foreign EU passports may soon be pawns in Ms May’s negotiation.

The long and short of it

The are two things to take from this.

If MPs have the chance to vote on triggering Article 50, as is likely, they have a difficult decision to make. Should they vote to Remain, which they overwhelmingly believe to be right, based on their expertise? Or should they honour "the will of the people" and vote to Leave, despite personally believing the opposite outcome to be best for the people they represent? If the referendum does not really reflect "the will of the people" this decision is no longer so difficult. Britain is a representative democracy and MPs should follow their professional judgement - as they have been elected to do.

In the words of Burke (1774):

To deliver an opinion, is the right of all men; that of constituents is a weighty and respectable opinion, which a representative ought always to rejoice to hear; and which he ought always most seriously to consider. But authoritative instructions; mandates issued, which the member is bound blindly and implicitly to obey, to vote, and to argue for, though contrary to the clearest conviction of his judgment and conscience,--these are things utterly unknown to the laws of this land, and which arise from a fundamental mistake of the whole order and tenor of our constitution. 

The second thing to take away is this: we as a society need to collectively reconsider how democracy can work best for us. We need to understand that there are different forms of democracy and that each of these forms is more or less appropriate depending on the context. We need to actively consider how to ensure that the electorate is provided with the vital information it needs to make decisions, and that young people aren't left confused or disinterested. In the context of an increasingly globalised world with the rise of technology in forming and shaping debate and opinion, we are likely to find that, upon observation, our democracy cannot and should not continue in its present form.

Special Relativity

By Caitlin French

Introduction to Special Relativity

Special relativity, developed by Albert Einstein in 1905, completely transformed our ideas about space and time. Although Newtonian mechanics provides good approximations at low speeds, Einstein corrected mechanics in order to handle situations involving motion near the speed of light. Einstein replaced the Galilean transformations of Newtonian mechanics with the Lorentz transformations in his theory of Special Relativity.

Einstein’s theory is based on two main postulates, from which many interesting things follow. But the main idea of Special Relativity is that, if you move fast enough through space, the observations you make about space and time differ from the observations of other people who are moving at different speeds. 

The Two Postulates of Special Relativity

Special Relativity is based on two postulates:

1. The laws of physics are invariant (identical) in all inertial systems (non-accelerating frames of reference moving at a constant speed).

2. The speed of light (c) in a vacuum is the same in all frames of reference, regardless of motion relative to the light source. This is required for the laws of electrodynamics to apply equally for all frames.

Thermodynamics, Entropy and the Arrow of Time

by Caitlin French

The Arrow of Time

Why does a pane of glass smash but it doesn’t piece itself back together again? Why can an egg scramble but not unscramble? Why does an ice cube melt but it doesn’t spontaneously become solid again? In our everyday macroscopic world, we experience time asymmetry. Time only flows in one, forwards direction, creating the arrow of time. However, physical laws at the microscopic level have time reversal symmetry – it is theoretically possible for events to run both forwards and backwards. If you played a video of a swinging pendulum in a vacuum, you would not be able to tell whether it was running forwards or backwards.

Imagine you filmed a particle falling towards the ground, accelerating downwards due to gravity. If you then watched the film in reverse, the particle would decelerate upwards, which would be possible, provided the particle was given an initial velocity. By giving it an initial velocity, momentum is conserved. This initial velocity in the time-reversed scenario would be provided by the vibrations of atoms as the particle hit the ground in the initial falling scenario. The fact that these vibrating particles have kinetic energy means that energy is conserved in both scenarios as well. This is all theoretically possible. However, we don’t see these time-reversal effects in everyday life. Evidently, there is a conflict between time-reversible microstates and the one-way time of macrostates.

The Schrödinger Equation

By Caitlin French

Introduction to Quantum Mechanics

Quantum Mechanics is the mathematical description of the structure and interactions of particles on atomic and subatomic scales.

It developed from Planck’s suggestion that energy is made up of individual units (quanta), Einstein’s photoelectric effect, de Broglie’s proposal of wave-particle duality of both energy and matter and Heisenberg’s uncertainty principle.

There has been much philosophical debate about the different interpretations of quantum mechanics, ranging from Bohr’s Copenhagen interpretation (criticised using the Schrödinger’s cat thought experiment) to the Many Worlds theory. Different formulations of quantum mechanics came about, including Heisenberg’s matrix mechanics and Feynman’s sum over histories or path integral approach.

Quantum mechanical processes are extremely important, having applications in computers and also in keeping us alive, as quantum tunneling allows nuclear fusion in the Sun.

Third bailout for Greece - at what price?

The land of olives. The country that gave us the Olympic Games. The birthplace of democracy...and now the sick man of Europe. We’ve all been watching the Greek tragedy unfold over the past few months. What an economic nightmare! My question here is; will the latest bailout really help the Greek people?

There are some positive aspects of the latest bailout. Greece could be privy to €50 billion from privatisation, which would go towards paying off debt and helping the Greek economy recover. The downside, though, is that the money would come from the selling off of some of the Greek government’s assets. Yes, the money is much-needed in the short-term but this measure means that some wealth is lost. In the long run the government may be losing a source of revenue.

In order to even have a third bailout seriously considered the Greek government had to pass a severe reforms bill in Parliament yesterday. This included harsh economic policies such as increasing VAT, other tax rises, as well as reducing pensions; the latter would be partly achieved by raising the pension age to 67. Unpalatable prospects for anyone but more so for the Greeks, who have been used to retirement at 62 and a lax tax enforcement system. Economically, labour would become more demotivated as less salary could be taken home. This could result in lower tax revenue for the government and reduced economic growth. Moreover, Greece may be subject to further spending cuts.

Antimatter and CERN's Large Hadron Collider

If you watch a lot of the popular sitcom, 'The Big Bang Theory' or if you're a big science nerd like me, you've probably heard about these terms, but failed to understand. Let's see if I can be of any help :)

So, lets start with the most popular physics equation, E=mc².It basically says that mass is concentrated energy and mass and energy are interchangeable, kind of like two currencies but with a huge exchange rate. 90 trillion joules of energy is equivalent to 1g of standard mass. If we concentrate huge amounts of energy in a tiny space, new particles will come into existence. If we look closer we see that these particles always come in pairs, like twins. That's because particles( each and every one of them) always have their counterpart an 'antiparticle' and these are always produced in exactly equal amounts (1:1 ratio). This might sound like science fiction, but it's actually true and is the daily life at particle accelerators, CERN LHC  (We'll discuss that soon). 

                                      

 In the collisions between two protons between CERN's LHC, billions of particles and antiparticles are produced every second. Consider for example the electron. It has a very small mass ( in physics we call it infinitely small)  and a negative charge. It's anti particle, the positron has exactly the same mass but an opposite positive charge. But apart from the opposite charges, both particles are identical and perfectly stable. And the same is true for the heavy cousins, the proton and the anti-proton. Therefore, scientists are convinced that a world made of antimatter would look, feel and smell just like our world. In this anti-world, we might find anti-water, anti-gold, anti-food and maybe anti-you & me! 

                                                                                                                                

Now imagine a matter and an antimatter particle are brought together. These two apparently if are in contact, would completely disappear into a big flash of energy, equivalent to an atomic bomb! Because combining matter and antimatter would create so much energy that it can run future spaceships like in Star Wars, cause energy content of antimatter is a billion times more than the conventional fuel. The energy of 1g of antimatter would be enough to put a rocket in our orbit. So why not use antimatter in energy production? Well, antimatter isn't just sitting around. We have to make antimatter before we can combust it. 

Deflation: What's in Store?

Everyone likes to treat themselves to a little something now and again and one such way to do this is with some chocolate. Gone are the days when you could buy a Freddo bar with your spare change of 10p since its current price is now a huge (well, relatively) 20p.

This price rise, not sudden I hasten to add, is inflation in action. Inflation is a persistent increase in the level of prices and we measure what level inflation is at by comparing prices to the same month the year before. And not just any old prices are measured either, the Office of National Statistics has its own ‘basket of goods’ of about 600 different goods and services which are used for this comparison.

The target rate of inflation set by the Bank of England currently stands at 2.0%. This is also the same for many other central banks. This particular rate ensures that there is just enough economic growth and thus paves the way towards a ‘Goldilocks economy’.

However not all inflation is positive. We can also get deflation which is negative inflation. This has already set in, in the Eurozone and is a threat looming on the horizon for the UK.

Just to clarify; low inflation is not the same as deflation!

Molecular Inactivation and the role of PTHrP

by Maharshi Chakravortee

Ever wondered why male Homo sapiens have nipples on their chest? Are they vestigial like the appendix, the wisdom teeth or body hair? Or they’re just present for weird piercings or to taunt hungry infants? Well, the answer is quite interesting. Turns out, human males have nipples because at some point of the embryonic stage, we were all girls. Yeah, you heard me tough guy!

Unlike the other vestigial organs, nipples aren’t those organs that are just left overs from any evolutionary event where male humans used to breast feed, at any point in the course of evolution male humans did not have mammary glands to do so. So the evidential fact that male humans have nipples is kind of flattering.  With that in mind, male mice are the only mammals that do not have nipples, so one might think they’re probably tougher than us guys! Thus the question still remains, why do males have them?

The human gestation period goes from zygote, to embryo, to foetus and then to a baby, which is either a male or a female. As the sex of a baby is determined whether one chromosome from the dad is either an X or a Y, what’s interesting to know that all human embryo’s start off with a female blueprint, i.e. presuming to have two X chromosomes. (Yes, we were all girls at one point of our life).  Up until the sex is determined (activation of the Y chromosome), the process of a typical female embryo development is already started. Within the first several weeks, pair of ‘milk ridges’ or milk lines form on every embryo, either male or a female, which serves as the foundational mammary tissue for the development of nipples and mammary organs.  After the sex is determined, i.e. one of the sex chromosomes becomes a Y, a protein called PHTrP is synthesised which causes the embryo to develop male hormone receptors. 

Thoughts on the Royal Economic Society Annual Public Lecture 2014

By Viva Avasthi

Last week I attended the RES Awards Evening and Annual Public Lecture at the Royal Institution in London. As you may be aware, my essay for the RES Young Economist of the Year competition was awarded joint third place. Below you can see some pictures from the evening. I end this post with some thoughts on Stephanie's lecture and the event as a whole.

Receiving my award from Sir Charlie Bean.
He is the President of the RES and was one of the judges.

With Stephanie Flanders, who was another judge, and
who I believe is an excellent role model for young women.
"Hooray for women in economics!"

John Nash: Game Theory and the Equilibrium

By Calvin Price

In 1950, John Forbes Nash Jr. earned a doctorate for his work on game theory.  His dissertation focused on what players do in non-cooperative strategic games.  Since his original work, game theory has been hailed as one of the greatest intellectual advances in economics and has had applications on a vast range of fields.  It was truly a worthy cause for Nash to win the Nobel Prize in 1994.

Game theory can be summed up in a disarmingly simple question: what will the other guy do?  It focuses on what a person will do when confronted with the move of another person.  This is called game theory because that’s where it can be most obviously applied.  While it’s unnecessary in games such as rock-paper-scissors or tic-tac-toe, game theory becomes much more useful for something like chess.  This has clear implications as a mental construct for thinking about complex games, but it otherwise seems like an exercise in mathematical thinking.  What about real-life situations?

The most famous of game theory applications is called the prisoners’ dilemma:

Two men have been arrested.  The police have them on minor charges, but suspect a larger crime.  If they get the testimony from one of the men, he will be freed and the other will be locked up for 10 years.  If neither man betrays the other, they both get 1 year imprisonment.  If both men talk, then they each get 5 years.

So, what do you do?

A Golden Opportunity

By Daniel Longenecker

Market analysts would love know the future. The problem is—they can’t. So how can a prospective investor know what to expect in the coming years? I believe that investors should investigate proven market factors like supply and demand. In the gold market, several factors have surfaced that indicate shifts in the supply curve and demand curve for gold. Market forces of supply and demand can be trusted to accurately predict prices in a free enterprise system. Thus, decreases in gold supply, increases in gold demand, and the history of demand spikes all suggest that the price of the precious metal will rise in coming years.

How could gold supply decrease when gold mines operate around the clock? The answer lies in the decreasing available supply. China recently has bought up billions of dollars worth of gold from the west. One estimate states that China has increased its gold holdings by more than 1,600 metric tons in the past five years, a change worth more than 77 billion dollars [1]. Instead of allowing gold price to rise, gold ETFs (commercial commodity hoards, often comprised of natural resources, which trade ownership similarly to corporate stocks) have exported heaps of gold to the Far East, to meet their demand. But since gold is a scarce good, the ETFs are depleting irreversibly [2]. Thus, this supply shifter, the move from commercial ownership of gold to governmental ownership of gold, indicates that available supply is decreasing dramatically, and when supply decreases, price rises (Figure 1).

Figure 1. Supply Decrease Curve [3]

Pareto Optimal and Perfectly Disgusting

By Daniel Gurevich

One of the fundamental measures of efficiency in economics is Pareto efficiency (or Pareto optimality). A society is called Pareto efficient if resources have been allocated in such a way that it is impossible to redistribute them so that at least one person is better off and nobody is worse off. In other words, Pareto efficiency implies that any “improvement” requires a value judgment. One could argue that any Pareto efficient distribution could be considered optimal by some definition.

In 1951, Nobel Prize-winning economists Kenneth Arrow and Gerard Debreu published a mathematical proof that a perfectly competitive free market results in Pareto efficiency in the long run. So there is proof that free markets really do work! But not so fast – according to 1998 Nobel Prize winner Amartya Sen, Pareto efficiency is not all it is chalked up to be. In his 1970 magnum opus, 'Collective Choice and Social Welfare', Sen writes, “An economy can be optimal in this sense even when some people are rolling in luxury and others are near starvation as long as the starvers cannot be made better off without cutting into the pleasures of the rich. . . . In short, a society or an economy can be Pareto-optimal and still be perfectly disgusting.” Sen asserts that freedom and equality are far more important than Pareto efficiency, and he is right.

Consider Qatar. With the world’s highest GDP per capita (over $100,000), an official unemployment rate of 0.1%, and no residents below the poverty line, it could pass for a Pareto efficient paradise. Pareto efficient it might be, but a paradise Qatar is not. The restrictions on freedom in Qatar, especially for non-citizens, are appalling. According to the United States Department of State’s Trafficking in Persons Report (TIP) for 2014, immigrants who come seeking unskilled work live in conditions of effective slavery:

The Old Lady of Threadneedle Street

By Deepa Mathew

She is comfortable in her position in Threadneedle Street, having been there since 1734. Walking up from the depths of Bank Underground Station one quickly makes her acquaintance. Her nickname came to be only in 1797, created from the creative mind of the cartoonist James Gillray. Yet there is much more to the Bank of England...

Her birth came in 1694 in order to help the government with raising funds during King William III’s war with France. This was achieved by collecting money raised from private investors. She has evolved over the years to give many more uses; issuing bank notes, storing gold and protecting the economy from shocks – as befits her job as a central bank.

Minimum Wage Raise: Hurt or Help?

By Caroline Kimbro

An overview of the minimum wage rates across the US.
(Click to enlarge image.)

As the possibility of raising the minimum wage from $7.25 to $10.10 an hour is discussed by US government officials, we hear much about the extra money it will provide for households all over America and the ways it will strengthen the economy. However, we know that most changes come with an opportunity cost and this change in wages is no exception. If businesses are required to pay their workers $2.85 more than they currently do, most will reconsider who they’re hiring. Since they have to spend extra money on employees, many businesses will want workers they think are worth this higher wage: in effect, a raise in the minimum wage will cause a shortage of jobs, particularly for the average American teenager, unskilled worker, and minority worker.

The Evolution of the Capital Asset Pricing Model: How an Economic Model Evolves and Improves

by Calvin Price

In 1964, William Sharpe and John Lintner developed a formula called the Capital Asset Pricing Model (CAPM) for predicting the pricing of stocks. It was mathematically simplistic and intuitive; it asked the right questions; it was an immediate success in the economic community. It was taught in virtually all business schools as the stand-alone method for pricing stocks. There was just one problem with the model: it didn't work. 

Models attempt to simplify the real world, find a rule, and then apply that rule in reality. Through this stringent means of testing and retesting, hypothesizing and theorizing – applying the scientific method - researchers can find rules that govern economics. To reduce the complex system of variables that apply in any situation into a linear formula is no easy task – but it is especially difficult, and probably impossible to do so for the stock market. The stock market is subject to a complex scheme of crowd psychology, moods, global affairs, and seemingly unrelated topics all have the potential to shift prices. It is highly doubtful that any theory would be able to accurately measure these effects and create a theory from that.

In 1994, a famous investment company called Long-Term Capital Management (LTCM) was founded and was praised as being the largest gathering of academic and practical knowledge on the stock market in existence. It had several Nobel Prize winners, professors from prestigious academic institutions, and weathered pit traders and quantitative analysts from Wall Street. They enjoyed risk-free borrowing from banks and had access to the latest technology. Within three years they were hailed as possibly being the greatest investment company ever founded having made unheard of returns on investments. In 1998, the company flamed out of existence in a period of less than a month in a relatively non-volatile market. They are one of the most well known examples of trading errors, are frequently examined in case studies, have been the subject of a book and numerous academic articles, and relied heavily on the CAPM.

Friedman & Health Care: A Modern Look

By Sarah Becker 

Milton Friedman

In 1996, when Milton Friedman wrote an article for the Wall Street Journal entitled "A Way Out of Soviet-Style Health Care," Milton very well describes America's current state of affairs when it comes to health care. How did he perform this feat? Did Milton know that recent legislation such as "Obamacare" would be passed or that we'd currently be facing a shortage of physicians? Probably not, but it seems that Milton saw America walking down a healthcare path that we have only continued on.

In this article, Milton argues that employers should no longer provide health insurance plans of the type that are currently being offered. In the current model, resources from the employer, or part of an employee's salary, is used to pay for a health insurance plan. Because a worker is enrolled in the plan through their employer, taxes on this money are able to be avoided. Americans, myself included, always want to evade the notorious and always-prowling tax man!

Vietnam over China?

By Dennis Fisher 

Image Credits: english.vietnamnet.vn

Where do most of your goods come from? If you asked anyone this question a typical response would probably be China. It feels like every time you look at a tag on a piece of clothing, shoe, toy, car part, or even furniture it will simply state “Made in China”, and in fact, the US spends about $29 Billion dollars on imports from China (1). Most big name companies will have at least some of their goods produced in China. Corporations such as AT&T, American Eagle, Coca-Cola, Dell, Gerber Foods, Hershey Foods, Honda Motor, Huggies, Ikea, and LG produce in China (2). The list goes on and on. The benefits of producing in China have been cheap labor on large scale orders, but recently another Asian nation has been attracting business away from China.

Quantum Fluctuations and Cosmic Inflation

By Maharshi Chakravortee

Let me ask you a question. Has it ever struck your curious mind as to how all these incredibly beautiful structures - these planets, stars, galaxies - came from a mere singularity, or in simple words the ‘Big Bang’? Since the Big Bang was hypothesised, all theoretical, experimental and astronomical physicists went bonkers to find out exactly how ‘inflation’ (I will come to that) can be proved to cement the Big Bang Theory, or if the Big Bang Theory is just a crazy idea to satisfy our minds temporarily about the origins of the universe. Are we all in a state of oblivion, or does science actually play God in this?

Look at this image for starters:

                     

This is a baby photo of our universe, from when the universe was about 380 thousand years old. Now if you’re thinking that 380 thousand years doesn’t sound that young and asking yourself why we can’t get an image of the universe before that, this is because at that time the universe was so hot, that all matter, including protons and electrons, were in a state of plasma, a sort of jumbled mess. Any light that passed through it would be scattered or absorbed. This made the universe opaque, until 380 thousand years ago when the universe was cool enough to make these protons and electrons, allowing the formation of Hydrogen atoms and allowing light, or photons rather, to spread out. So from the 380 thousandth year to the present day, roughly 13 billion years, these photons would travel through the space-time continuum until it hit our detectors, which made us this image.