On Brexit, Globalisation and Bullshitism; Guns, Butter, and The Burden of Proof!

From: aditya rana
Date: 25 June 2016 at 15:34
Subject: On Brexit, Globalisation and Bullshitism; Guns, Butter, and The Burden of Proof!


Following the UK’s epic decision to leave the European Union, global markets went into a swoon with the World MSCI index posting a -5% decline for the day (-3% YTD), thereby more than erasing the hard earned recovery since the lows of early February. As expected, European markets suffered the steepest falls (-9%), with peripheral Europe taking the lead (Greece – 25%, Spain -15%, Italy -13%,) and the UK down -11% (all returns in US$). The US and EM markets performed relatively better, with both being down -3.5%. The best performing global market (YTD in US$s) continues to be Brazil (+34%). To look at the impact of BREXIT, Martin Wolf had a perceptive column in the FT. To summarise:

-David Cameron took a huge gamble and lost – while the fearmongering and lies of the exit campaign won the day – leading to a much diminished UK and a damaged Europe. “This is probably the most disastrous single event in British history since the second World War”.

-The UK (and to a lesser extent Europe) has entered an extended phase of uncertainty – with the new government being tasked with developing a plan for the exit. It is not clear that they will be up to the task. “They broke it; they now own it”.

-The UK will inevitably introduce controls over immigration from Europe, thereby ruling out memberships of the European Economic Area and the single market. At best the UK might be able to participate in the free trade of goods, but, critically, services (being part of the single market) would be excluded.

-Europe is likely to adopt a tough negotiating position, and cannot be seen to be granting a cheap option for an exit. While Germany has a current account surplus with the UK, it is very likely that they will continue to sell the high quality products which the UK does not produce.

-The weakness in the pound is expected to provide support to the economy over the medium term, but the continued uncertainty is likely to destabilize markets for years. The financing of the UK’s large current account deficit could be called into question with a loss of confidence in the UK.

-The UK’s structural fiscal position will become increasingly strained, as tax revenues (on which the provinces depend) come under pressure and eventually forcing fiscal tightening.

-UK businesses set up to benefit from the EU will have to be reconfigured and many will relocate to the EU single market. The city’s trading of euro-denominated assets will suffer. Investment in the economy is likely to decline over time. “The UK did well inside the EU, it is unlikely to do as well outside it”.

-“The UK’s decision to join the EU was taken for sound reasons. Its decision to leave was not. It is a choice to turn its back on the great effort to heal Europe’s historical division.”

A good summary of the negative impact of Brexit on the UK economy. The sharp drops in global markets outlined earlier, provide a good entry point to add to long positions as part of a globally diversified portfolio. While the uncertainty over the EU might persist for a while longer, this event is very likely to strengthen the resolve of Germany and others to keep the EU together. Peripheral European assets, which suffered the worst declines therefore present the best opportunities to invest in, albeit in a gradual and cautious manner. Avoid UK assets given the continued uncertainty – to quote Winston Churchill: “The trouble with committing political suicide is that you live to regret it.”

-One of the popular explanations for Brexit (and the rise of anti-establishment populism on the left and right in the US and Europe) has been a rebellion by “globalization’s losers”, the low-skilled workers who have been “displaced” by the “hollowing out” of the domestic manufacturing base.

-But have the prospects of low-skill workers deteriorated faster than their high-skill counterparts in recent years? Not really, at least in Europe, writes the economist Daniel Gros, in a recent column citing three reasons: 1) the differences in the employment rates of highly educated and less educated workers in Europe has remained fairly constant over the last decade, with the less educated actually narrowing the gap in recent years; 2) The “wage premium” in much larger in the US (300-400%) than in Europe (50-80%), as are employment rate differences between the two groups, yet the US economy is less open – and less affected by trade- than Europe is; 3) lastly, in Europe the share of low-skilled workers is declining rapidly with university graduates now nearly out numbering low-skill workers, versus being a third less in 2000.

-“Clear-cut economic explanations for a complicated political phenomenon, while appealing, are rarely accurate. Calling the rise of populism in Europe a revolt by the losers of globalization is misleading. Playing on popular fears and frustrations – from “dangerous” immigration to the “loss of sovereignty” to the European Union – to fuel nationalist sentiment “ seems to be the root cause.

-So the natural question to ask is why has it become easier for a broad spectrum of demagogues to play on popular sentiment? Princeton University philosopher Harry Frankfurt and author of a recent book “On Bullshit” provides a persuasive reason:

-"People should care about the truth, because the truth is the truth about how things are and it’s important us to recognize how things are, not to pretend that it’s something else.If you have the truth you know what reality is like, if you don’t you’re ignorant of reality".

-"We are living in an age in which there’s another alternative to the truth, and that’sbullshit". The reason why there’s so muchbullshitI think is that people just talk. If they don’t talk they don’t get paid. The advertiser wants to gain sales, the politician wants to get gain votes. Now, that’s ok, but they have to talk about things that they don’t really know much about. So since they don’t have anything really valid to say, they just say whatever they think will interest the audience,make it appear that they know what they’re talking about – and what comes out isbullshit."

-"The danger is that there will be a loss of concern for the truth, and that I believe is an insidious assault on the fundamental principles of society."

On Guns, Butter and The Burden of Proof:

-A great piece by Dr. David Katz, Director of the Yale University Prevention Research Centre , on the parallels between the pro gun lobby in the US and “saturated fat is ok” food lobby.

Huffington Post, 22/6/2016:

-In all of biomedicine we subscribe to the “precautionary principle.” Basically, it says: if there is a chance something can be harmful, assume it is. The burden of proof is in the other direction. You are not obligated to prove something is dangerous; you have to prove it is safe. That is precautionary, because a default assumption in that direction protects people. Or, at least, it’s supposed to do so. There are inevitably gaps between the principle and practice, such as when a doctor is reckless, a vaccine tainted, or a drug rushed to market by a manufacturer disclosing only the positive data.

-In clinical practice, the precautionary principle famously situates itself in the oath we physicians take: primum non nocere (first, do no harm). In research, the statistical threshold for showing a treatment does work is conventionally set much higher than the threshold for deciding it does not, in the service of avoiding a “false positive” outcome. A false positive finding suggests a treatment effect that is really just a statistical fluke, and imposes the risk of promulgating a treatment that is ineffective. There is some risk involved in virtually any treatment, just as there is a risk in crossing the street or taking a shower, so there has to be a potential benefit to justify that risk. Ineffective treatments offer no such benefit, so any risk is too great.

-Now, to the matter at hand. As my title implied, this is a bit about guns and a bit about butter (well, saturated fat, actually), and the precautionary principle pertains to both.

As I am writing this, I am disappointed, but not surprised, in the immediate aftermath of Senate votes here in the U.S. defeating all of the proposed gun control measures following our latest mass casualty calamity. The measures defeated included the “obviously preposterous” idea that people deemed by the FBI unsafe to board a plane might be unsafe to buy high-capacity semi-automatic weapons.

-But leaving such arguments aside, we might simply invoke the precautionary principle as bedrock for matters pertaining to public health, as the flow of guns clearly does. As noted above, it offers clear and relevant guidance: the burden of proof resides with those seeking to demonstrate safety/advantages, not with those concerned about harms.

-The available evidence all goes the other way. Compared to peer countries with tighter gun controls, the U.S. has massively higher rates of gun related deaths of every description. Peer countries with tighter gun controls and democracies are as stably democratic as are we.

-Anyway, moving on. The arguments for more guns are predicated on theoreticals, while ignoring the mass of real-world evidence. The arguments for the exoneration of saturated fat, or if you will, the “eat more meat, butter, cheese” platform- are exactly the same.

-In the real world, none of the healthiest, longest-lived, most vital populations on the planet have a diet high in saturated fat or its prominent sources. Quite the contrary, in fact. Diets associated with optimal health outcomes over a lifetime, and generations, vary widely in total fat content, but are all plant-predominant, and low in saturated fat.

-Moreover, at the level of an entire population, when a concerted effort was made to reduce intake of saturated fat in a sensible way (i.e., not replacing it with Snackwells), the result was as good or better than hoped or expected. Cardiovascular disease rates went down over 80%, and life expectancy increased by ten years. In a study of some 85,000 spanning 20 years, cardiovascular disease rates declined significantly when saturated fat calories were replaced with either whole grain calories, or unsaturated fat calories from the customary sources: nuts, seeds, olives, avocado, and fish.

-And all of this is entirely consistent with a vast and diverse body of evidence encompassing methods from cell culture, to animal models, to randomized controlled trials in people. How, then, can there even be a counter argument? As with guns, it’s a case of supposition over substance. It’s a case of making perfect evidence we don’t have the enemy of the very good evidence we do. Because, admittedly, we don’t have perfect evidence.

-Consider what it would take to prove, beyond the last shadow of the last doubt, that more guns in more hands mean more, not fewer, good people in body bags. We would need several sizable populations- let’s say, about 100,000 people each. These populations would need to be almost exactly matched for demographics, socioeconomics, education, vocation, temperament, mental and physical health, and of course, laws and law enforcement. We would then need to assign these populations randomly to no guns, some guns, or guns for all; these guns, or those guns. We would then need to follow them for a decade or so, and count up the body bags. The study has not been done, and I advise against holding your breath.

-The same pertains to saturated fat and its prevailing sources. To know with absolute certainty that more saturated fat from the usual suspects- pastrami, cheeseburgers, ice cream, and so on- is directly responsible for more, not less, chronic disease would require the same construct. Those same, several, comparably comparable populations would need to be assigned randomly to exactly matching diets and lifestyle practices differing only in saturated fat intake from specific sources, and followed for a decade or more to compare outcomes. Then, and only then, with all other factors exactly matched, could we say with unassailable certainty what saturated fat did, or didn’t do.

-For whatever it’s worth, the food trial is even harder than the gun trial- because inevitably, eating more of X means either eating less of Y, or simply eating more overall. Either way, you’ve changed something other than X. Is more meat, butter, cheese “bad” for us because it’s bad for us, or because it displaces beans, lentils, nuts, seeds, and whole grains that are better for us? There is almost no way to answer that question with anything other than: who cares?

– If we focus on thedietary pattern that most reliably promotes vitality and longevity, that contrived detail ceases to matter. The evidence we do have is imperfect in both cases, but the way the weight of it tips is perfectly clear. Where there are more guns in more hands, there are more bullet holes in good people. Where there is more meat, butter, and cheese in place of vegetables, fruits, whole grains, beans, lentils, nuts, and seeds- there are more years lost needlessly from life and life lost needlessly from years to chronic disease. Even more conclusively, the “eat more meat, butter, cheese” argument is on the wrong side of history, and the great imperatives of our time: climate stabilization, water use, sustainable food production, ecosystem protection, and the preservation of biodiversity.

-The same liabilities attach to Coca Cola, Snackwells, and multicolored marshmallows for breakfast, of course. The notion that we must choose between an excess of sugar and an excess of saturated fat is one of the great diverting boondoggles of modern nutrition. A diet of wholesome foods in any sensible combination reliably navigates around both.

-There you have it. Arguments for more guns and bullets, and arguments for more meat, butter, and cheese both put profit-driven “what ifs?” ahead of the weight of evidence. Both represent ideology ahead of epidemiology. They are shot full of holes with every reality check. Those making those arguments dismiss, disdain, or simply misconstrue the burden of proof. It is theirs.

-The parallels between the Brexit lobby, the pro gun lobby and the “saturated fat is ok” lobby are striking and troubling. Will end with this excerpt from an ancient Vedic prayer:

“Tamaso maa jyotir gamaya – Lead us from from darkness to light”


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