Brexit: A Case Study In Preference Falsification

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About 20 years ago Timur Kuran wrote Private Truth, Public Lies. The book introduces the concept of preference falsification, whereby social pressure induces people to make public statements that are contrary to their private beliefs or preferences.

Preference falsification helps explain why revolutions, especially in totalitarian countries, or in oligarchic societies with substantial hierarchical social control, seem to come from like a bolt from the blue. Because of preference falsification, widespread dissatisfaction is concealed. In response to some shock - which can be very minor - people reveal their dissatisfaction or anger simultaneously, resulting in a revolt or civil unrest.

There is a coordination game aspect to the transition between passivity and revolt. People will reveal their preference by going into the street only when they are convinced that enough other people share their views. Widespread falsification makes it difficult to know how widespread the dissatisfaction is, and tends to cause people to remain quiet and at home. But if something triggers enough people to reveal it, a cascade is triggered and the equilibrium flips from no one revealing to everyone revealing.

In the UK, it is clear that numerous individuals were concealing their true preferences about Leave vs. Remain. The elite in the UK, and the EU as a whole, mounted a campaign of insult and intimidation. They had no positive message, but engaged in fear-mongering and ad hominem. Any brave soul who put his or her head above the parapet was immediately subjected to a barrage of invective. So many people stayed hunkered down, and concealed their preferences.

Social control worked, in one sense: it kept people's mouths shut. But unlike the revolutionary situation, there was no coordination problem, and no need for a spontaneous and simultaneous recognition that the socially ostracized beliefs were in fact widely shared in order to spark action. The Referendum allowed people to express their preferences privately, and to keep them private if they chose. People felt compelled to stifle expression of their preferences in public, but could do so in a way that did not expose them personally to obloquy if they chose not to reveal their vote. They didn't have to coordinate, which is the main impediment to translating dissatisfaction into action. The Referendum made it easy.

Although the mechanism was somewhat different, the result was the same: an outcome that completely shocked the elite at the top of the social and power hierarchy.

Indeed, I would say that the attempt to exert social control actually affected preferences. The bullying and scorn and insult from the Remain crowd revealed a lot about who they are and what they think of those who are not them. I think it is highly likely that many who might have actually been favorably disposed to the Remain side looked at that and said: "Are these the kind of people I want running my life? Hell No!"

The unfalsification of preferences that the vote allowed is why its effect was so cataclysmic. The smug priors of the better-than set were hit by an avalanche of information about preferences. Their confidence in their popularity, and in the shared belief in their superiority, has been shattered. They now have to update their beliefs about their popularity and standing in the rest of the EU.

In a sense, the British have done the Eurogarchs a favor, by giving them a big dose of reality that should shake them from their reveries. They have time to absorb this information and adjust course.

I predict that they will not. The initial reaction - doubling down on the scorn - is a pretty good indication of that. Furthermore, they seem to be finding all sorts of ways to rationalize the outcome, and suggest that it was a one-off that reflected English (and Welsh) eccentricity.

Good luck with that.

Now the Eurogarchs are confronted with a rather daunting choice. Do they risk referenda (or other means of expressing popular preferences about the EU and its current course) in other countries? That would reduce the cost of revealing true preferences, and risk a Brexit-like outcome. But if they refuse to countenance democratic means of preference expression, the preference revelation could come in a much more destructive and violent way, through civil unrest or outright rebellion.

Societies that rely heavily on social control to induce uniformity in the expression of opinion are inherently brittle. They tend to be tidier and more orderly than societies that don't, but more expression-tolerant societies provide means for people to blow off steam, and more importantly, to give those in government information that can induce them to change course before alienation becomes too extreme. This makes the tidy, orderly, tightly controlled societies more vulnerable to sudden and severe breakdown.

The great cultural, linguistic, and economic heterogeneity of the EU means that greater pressure is required to create homogeneity in expressions of opinion about political issues. Even greater pressure is needed when there is a big shock that raises questions about the competence of the leadership, and its consideration for the opinions of those they rule. Europe has experienced two big shocks - economic malaise, and perhaps more importantly, the refugee crisis.

This means that the EU is particularly vulnerable to preference falsification at present. It is also acutely vulnerable to a shattering of its brittle structure when those preferences are revealed. For this reason, I would say that the expectation should be that the EU will muddle through, but there is a substantial tail risk that it will shatter into 28 pieces. And when it does, it will not go with a whimper, but a bang.