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Thursday, September 11, 2014

'Scotland and the SNP: Fooling Yourselves and Deceiving Others'

Simon Wren-Lewis on Scottish independence:

Scotland and the SNP: Fooling yourselves and deceiving others: There are many laudable reasons to campaign for Scottish independence. But how far should those who passionately want independence be prepared to go to achieve that goal? Should they, for example, deceive the Scottish people about the basic economics involved? That seems to be what is happening right now. The more I look at the numbers, the clearer it becomes that over the next five or ten years there would more, not less, fiscal austerity under independence. ...
Scotland’s fiscal position would be worse as a result of leaving the UK for two main reasons. First, demographic trends are less favourable. Second, revenues from the North Sea are expected to decline. ...
The SNP do not agree with this analysis. The main reason in the near term is that they have more optimistic projections for North Sea Oil. ... So how do the Scottish government get more optimistic numbers? John McDermott examines the detail here, but perhaps I can paraphrase his findings: whenever there is room for doubt, assume whatever gives you a higher number. ... It is basically fiddling the analysis to get the answer you want. Either wishful thinking or deception. ...
Is this deception deliberate? I suspect it is more the delusions of people who want something so much they cast aside all doubts and problems. This is certainly the impression I get from reading a lot of literature...
When I was reading this literature, I kept thinking I had seen this kind of thing before: being in denial about macroeconomic fundamentals because they interfered with a major institutional change that was driven by politics. Then I realised what it was: the formation of the Euro in 2000. Once again economists were clear and pretty united about what the key macroeconomic problem was (‘asymmetric shocks’), and just like now this was met with wishful thinking that somehow it just wouldn’t happen. It did, and the Eurozone is still living with the consequences.
So maybe that also explains why I feel so strongly this time around. I have no political skin in this game: a certain affection for the concept of the union, but nothing strong enough to make me even tempted to distort my macroeconomics in its favour. If Scotland wants to make a short term economic sacrifice in the hope of longer term gains and political freedom that is their choice. But they should make that choice knowing what it is, and not be deceived into believing that these costs do not exist. 

    Posted by on Thursday, September 11, 2014 at 09:04 AM in Economics | Permalink  Comments (20)


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