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To the International Association for Official Statistics (IAOS),
Royal Statistical Society (RSS),
American Statistical Association (ASA),
Société Française de Statistique (SFdS) and
International Association for Research in Income and Wealth (IARIW)

Dear presidents Pullinger (IAOS), Ashby (RSS), Martinez (ASA), Marin (SFdS) and Reinsdorf (IARIW),

Your societies and associations have made public statements in support of Andreas Georgiou, former president of El.Stat Statistics Greece.

I have looked at the case and arrived at the conclusion that Georgiou was guilty as charged for the violation of duty, as was indeed confirmed by the Greek Supreme Court in 2018. It appears that Andreas Georgiou, Hallgrimur Snorrason (representative of Eurostat at El.Stat in 2010) and Walter Radermacher (Eurostat 2008-2016) have provided you with false testimonies about the Greek law of March 9 2010 that created El.Stat and the European Code of Practice of 2005 that was in force in 2010. They knew about the true legal situation and in fact worked to make changes in both the law (December 2010) and the Code (2011).

The documentation is in my new book “Forum Theory & A National Assembly of Science and Learning“. My discussion of the actual figures in national accounting of Greece 2009 is on pages 200-206, and there seem to have been made some arbitrary choices that are not fully clear to me. My discussion identifies many more points where important information is lacking. Overall, I advise that there will be a thorough investigation. I hope that you will indeed apply due diligence.

I already informed ISI and FENStatS via this letter, now online in slightly edited form to make it quotable for others. I regard the now online letter to ISI and FENStatS as an integral part of my letter to you now. I have the same requests for you as stated in that letter. Please inform your membership but please refer to my book instead of trying to rephrase the points in your own words because points might get lost in translation again. This letter to you is online now too.

Reading parts of my book, Richard Gill, emeritus professor in mathematical statistics in Leiden, and former chair of VVSOR (a founding member of FENStatS), informed me that he has revised his view, from an earlier signing of support to a (now disputed) statement by ISI. Klaus Kastner, retired banker who blogs on Greece, also has revised part of his view.

My disclaimer: I would like to see a thorough investigation in Dutch economics.

Sincerely yours,

Thomas Cool / Thomas Colignatus
Econometrician (Groningen 1982) and teacher of mathematics (Leiden 2008)
Scheveningen, Holland
http://thomascool.eu/
http://econpapers.repec.org/RAS/pco170.htm
https://zenodo.org/communities/re-engineering-math-ed

PS. At IARIW, Peter van de Ven (formerly CBS now OECD) was IARIW president in 2010-2012, when the issue of El.Stat case arose. Van de Ven proposed to IARIW in 2016 to support Georgiou, apparently with deficient study of the underlying events. At CBS in 2009, Van de Ven removed the Tinbergen & Hueting figure of environmentally Sustainable National Income (eSNI) from the Dutch monitor on sustainability, using fallacies, see THAENAES Chapter 25 p289. I copy to Van de Ven at OECD and Kees Zeelenberg at CBS who is involved in IAOS – OECD.

To the President of [the International Statistical Institute (ISI)] and the secretary general of [the Federation of European National Statistical Societies (FENStatS)]

Dear professor Bailer (ISI) and dr Silva (FENStatS),

There is this new (open access) book by me:

Forum Theory & A National Assembly of Science and Learning

The idea is that scientists and scholars create an assembly of their own, to improve the quality and impact of science and learning. The book discusses various problems. Some main problems are about national accounting and official statistics. There is the Tinbergen & Hueting approach on environmentally Sustainable National Income (eSNI). There is the El.Stat / Georgiou case.

The book webpage is [here].

The PDF of the book is open access [here].

A short text (discussing 2 of 7 storylines) is [here (pdf)].

Though the Tinbergen & Hueting case is much more important, it so happens that ISI and 80 former chief statisticians around [IAOS and FENStatS] put out statements of support for Georgiou, and it may be that you are alerted on this problem in more accessible manner just now.

Allow me to invite you to look at my deconstruction of “Greek statistics” in Part 6, starting p153.

My diagnosis is that the statistical associations, including you, have been misinformed by Walter Radermacher (Eurostat and current president of FENStatS), Hallgrimur Snorrason (representative of Eurostat and associated with ISI) and Andreas Georgiou (El.Stat). They knew in 2010 that the Greek law was that Georgiou had to seek approval by his board. He is guilty as charged for the conviction of violation of duty. I copy to them but do not have the email address of Georgiou.

One might regard this as an old case, but Eurostat also arranged that the National Statistical Offices of the EU are now under a single head, while CBS Statistics Netherlands since 1892 was under supervision by a multiperson board. This change in governance has risks for the future. My book indicates that CBS likely did not protest strongly enough because the Dutch government managed to appoint a leadership that had no background in official statistics itself.

Since the Part on “Greek statistics” is lengthy, let me also point to p200-206 for some formulas en tables on the calculation of the 2009 debt and deficit.

[…] Richard Gill, former chair of [VVSOR] (a founding association of FENStatS), already informed me that he revised his opinion now (from signing an earlier ISI statement), see below under (1). (PM. I copy to Fred van Eeuwijk, current [chair] of [VVSOR].) Klaus Kastner, a retired banker who blogs on Greece, also has revised part of his view, see under (2). They may not have digested my book fully since it is just in print.

I already informed Walter Radermacher about my finding, since his background is in environmental statistics, and around 1990 he had friendly contacts with Roefie Hueting. Unfortunately, Radermacher did not comprehend the Tinbergen & Hueting approach, and has misrepresented it too. My criticism on the work by Radermacher is restricted to these two issues that I have looked at. I [expect him] to correct when errors are clarified to him. While I informed Radermacher earlier this week, he indicated that he had no time for this, and this is a complication.

Another complication is that Radermacher currently is the President of FENStatS. The Vice-President of FENStats is professor Maurizio Vichi, who also happens to be the thesis supervisor for the Radermacher thesis of 2019. I checked the thesis on the two issues of eSNI and the Georgiou affair. In my judgement, the thesis is biased and misrepresenting on these two issues. It should be retracted. Radermacher knew in 2010 that Georgiou was in violation of the Greek law, and as director of Eurostat assisted him in breaking the law of an EU Member State. He should have insisted that Georgiou would come clean with his board instead of helping him to bypass them. Subsequently, see my discussion of the actual debt and deficit calculations.

Thus, my request to Radermacher and Vichi and FENStatS is that Radermacher and Vichi step down from their positions at FENStatS, to that there is no conflict of interests between FENStatS and their positions on the thesis and Radermacher’s position in this case ueberhaupt. Hopefully Radermacher might reorganise his priorities and consider the criticism in my book.

After sending this email to you, I will relay it to some journalists, so please do not be surprised if they would contact you and know about this email. It also seems best that I include this email on my website, and check there for the upcoming link.

Earlier, see under (3), I already informed the DG CBS dr. Tjark Tjin-A-Tsoi about my book, and the finding that the erroneous ISI declaration had also been signed by some CBS researchers who had failed to check upon the Greek law, European Code of Practice 2005 [in force in 2010], and the particular data, and the false testimonies by Georgiou, Snorrason and Radermacher. I have been supplying the DG CBS with drafts of my book in the last month[s], and I offered CBS a final week to consider the argument, and provide for a more structured approach in informing the world of statistics about my book and finding. Alas, CBS did not indicate to me that they would take this opportunity. Thus, I am left with no other option than inform the world of statistics myself. The most efficient way to do so, at least for me, likely is to inform the media, though generally the media can be quite chaotic overall.

Let me also express that I am very annoyed concerning ISI. In 2012 I wrote to ISI with a request of an investigation, in which there was also attention for the views of the (other) board members. Instead, ISI apparently listened only to Snorrason at ISI. It strikes me as very unprofessional to allow someone to be judge in his or her own case. In BCC I will copy to some former El.Stat board members. My 2012 letter to ISI is [here].

Let me also express my [appreciation] to CBS for inviting Hueting and De Boer in 2019 to present their new book on national accounting and eSNI, which lecture was attended by some sixty statisticians at CBS. CBS also made a video (in Dutch) available, and since De Boer was late I myself had to step in for a moment. We must clearly distinguish the open and unencumbered discussion of issues on content at the “statistics work floor” and the issues of governance and management which gain more attention in my book. The link to the Hueting & De Boer lecture in 2019 is [here].

If you were to write on this, then my advice to you is to inform me with a draft text, to allow me to comment on possible errors. Please revise your (online) texts that contain erroneous statements, by heading them with clearly visible “Retracted, see link…” while keeping the remainder “as is” so that others can check the history of your errors. Please send your apologies to the Greek government, with copies to the press, for trying to infringe upon the separation of powers. Please inform your membership about this email and my book. Please do not try to restate my book in your own words, thereby taking attention away from my book, but simply correct and refer to the book for the details. Please respect my analysis that the Greek case is only an example, while the real issue is the creation of said assemblies, that also are intended for a better anchor for future governance of official statistics.

Sincerely yours,

Thomas Cool / Thomas Colignatus
Econometrician (Groningen 1982) and teacher of mathematics (Leiden 2008)
Scheveningen, Holland
http://thomascool.eu/
http://econpapers.repec.org/RAS/pco170.htm
https://zenodo.org/communities/re-engineering-math-ed

(1) ================================

From: Richard Gill
To: Thomas Cool / Thomas Colignatus
Cc: […]
Subject: Re: N.a.v. uw ondertekening van de ISI verklaring uit 2013 over Andreas Georgiou
Date: Sun, 26 Jan 2020

Ik wil best zeggen dat mijn mening veranderd is. Ik heb het gezegd. Je mag me citeren.

(2) ================================

https://klauskastner.blogspot.com/2020/02/andreas-georgiou-was-it-breach-of-trust.html

(3) ================================

Date: Sun, 09 Feb 2020
To: DG CBS dr. T. Tjin-A-Tsoi, Kees Zeelenberg, […]
From: Thomas Cool / Thomas Colignatus
Subject: Published “Forum Theory & A National Assembly of Science and Learning”

Dear dr Tjin-A-Tsoi and dr. Zeelenberg and […],

My book is now online for all:

Forum Theory & A National Assembly of Science and Learning

[pdf relocated]

The printshop will take some more days.

You might enjoy the national accounting on page 200-206. I just included this this weekend, while finishing the book, and it appears that finishing touches can be quite important.

If you would have comments, feel welcome to send them. I can include additions and corrections in a file with “Reading Notes”, and eventually there might be a 2nd edition.

Let me call your attention to some CBS employees mentioned on p292 who did not properly check the Georgiou case and who signed the erroneous ISI declaration. Allow me to request the DG to forward this email to them. […] is an appreciated contact of mine from the student days in Groningen, and I send him my regards.

I also wonder whether you would have some advice as to how to approach the world of official statistics on this book and its findings. It is easy for me to dispatch some emails to some of the associations and persons involved. It might be less effective and needlessly chaotic. If there would be scope that the CBS would take a week to digest the book and formulate a statement, and be willing to discuss the draft of the statemnet with me (with me only giving advice), then this would seem to be advisable. Please let me know in the coming days whether you would be willing to do so.

Sincerely yours,

Thomas Cool / Thomas Colignatus
Econometrician (Groningen 1982) and teacher of mathematics (Leiden 2008)
Scheveningen, Holland
http://thomascool.eu/
http://econpapers.repec.org/RAS/pco170.htm
https://zenodo.org/communities/re-engineering-math-ed

Science and scholarship are much appreciated in our societies when we consider the lavish funding by tax payers and private donors. In contrast there is also a structurally weak position in the very functioning of our democracy. Our best research minds are allowed to discover the wonders at the frontier of knowledge but their findings might not be actually used. In examples like climate change, overpopulation, miseducation, inequality, political science of electoral systems, and the revolutions in computing, biology and medicine, and so on, and even in the issue of Greek statistics of the national debt and deficit of Greece around 2009, we see that science and learning are hardly listened to, and that policy makers and opinion leaders follow their own illusions, leading the world towards foreseeable disasters. Humanity as a whole acts mindless, drunk or crazy.

Trias Politica versus Tessares Politica

There is a system to the madness. Our democracy has the Trias Politica separation of powers between de Executive, Legislative, and Judiciary branches of government. What is lacking is the Epistemic branch. This means that the Trias Politica model allows too much room for manipulation of information. The alternative is a High Definition Democracy that has this Epistemic branch to protect information. This would give a Tessares Politica – from the ancient Greek “foursome”.

Epistemic branch

The Epistemic branch has two elements.

  • The first aspect concerns economic planning and the management of the State. The national budget is crucial for policy making. The Legislative branch or Parliament votes on the national budget to authorise the Executive to tax and spend funds. The economic planning agency resides currently under the Executive. However, planning is systematically abused. We better create an Economic Supreme Court at the same constitutional level, with the task to control the quality of information, and the power to veto the budget if it contains misleading information according to the court. This leaves all freedom for politicians to determine policy but they will lose the room they have now for manipulating information.
  • The second aspect concerns all fields of research. Parliament currently has the Senate and the House of Commons. In the French Revolution of 1789 the Chamber of the Clergy was abolished. In an alternative path of history, the clergy could have developed into scientists and scholars, and the revolution avoided, and then nowadays we would have a Chamber for Science and Learning.

If we want to improve the world and democracy then these are the two structural positions to consider.

Forum Theory

Forum theory is the approach by the Dutch cognitive psychologist, student-achievement tester, methodologist and philosopher of science Adriaan de Groot (1914-2006), also famous for his study of chess grandmasters. Forum theory provides us with the diagnosis that science and learning operate as a forum, i.e. a market subject to particular conditions. The approach investigates processes that enhance quality of science and learning, and formulates ways to protect and encourage those. Forum theory suggests that science and learning will be improved by a National Assembly. This contrasts with the current dominance by the National Academies of Science and Scholarship.

Such Academies tend to consists of mainly elderly researchers who have made their mark years ago and who are selected by co-optation. This leaves the mass of researchers out of the picture, currently at the front of research and making their mark. The common researchers on the work floor, e.g. in the laboratory or at the computer terminal, are locked up between a stone wall and a firy pit, and tend to be quite frustrated that the existing knowledge is neglected or misrepresented by politics, while the elevated colleagues at the Academy tend to focus on their next conference. Jonathan Swift (1667-1745) in his Gulliver’s Travels already made fun of the Royal Society.

This situation can be changed by the creation of a National Assembly of Science and Learning, with a Floor for the mass of researchers, while the National Academy forms the Senate of the Assembly. The Assembly improves governance of the forum, the forum itself, and research integrity. Researchers in science and learning can create their National Assembly actually quite simply. They can set up a foundation, give rules of operation, recruit members, organise elections and have a constitutional meeting. With sufficiently large membership the operating costs can be covered. The next step is to show results.

The difference between the current Academy and the sketched Assembly is that the latter has the full weight of the collected research body in a country, with the legitimacy of having been elected by them. The Assembly can do investigations and support conclusions, and speak for science and learning with an authority that now is lacking for the Academy. Over time Parliament could accept the National Assembly of Science and Learning as its third chamber, e.g. called The Study.

Greek national accounting and statistics in 2010

My book with above analysis and proposal also looks at the example of 2010, when Statistics Greece (El.Stat) director Andreas Georgiou sent figures on the 2009 Greek national debt and budget deficit to Eurostat without first seeking approval by his board. The Greek court system judged that he was in violation of duty, irrevocably by the Greek Supreme Court in 2018. Today there is an international uproar in national accounting and statistics that Georgiou’s conviction is a miscarriage of justice and an attack on the independence of Official Statistics.

However, these protesting statistical societies and associations have failed to check the Greek law of March 2010 that created El.Stat, and they also refer to the European Statistics Code of Practice of 2011 or 2017 while the code in force in 2010 was from 2005. Georgiou is guilty as charged.

By all looks of it, he also – advised by Eurostat – added the Simitis swaps of 2001 to the deficits, thus increasing the deficit of 2009 by about 2% points, instead of using the proper stock-flow adjustment. The deficit figure has the purpose to show the operating difference between income and expenditure, and is not the place to record hidden debts that fall from the closet. It is remarkable that these sobering points have not been recognised in all comments and protests. Also the Financial Times and the Wall Street Journal supported Georgiou while overlooking these facts.

People can bet their reputation on false information though. Georgiou and the leadership of Eurostat knew about the Greek law of March 2010 and the Code of Practice of 2005, because it was their job to know this at the time. In 2010 they even undertook a change of those very regulations. They however did not say so to the courts and their international colleagues.

Instead, board member and professor of econometrics Zoe Georganta, while lacking full information because of Georgiou’s obstruction, still pointed to crucial questions on content, and those were considered by the Greek courts but inadequately treated by those protesting statisticians and media.

Impact on the EU statistical system

Cause for worry is that the European Union has now restructured its statistical system so that each national statistical office has a single head with full authority, while we know that a single person is much more sensitive to political or commercial pressure or own illusions than a multiperson board.

Warranting the quality of scientific and learned information

This is one of more information scandals that my book deconstructs. The Greek case is peanuts compared to the discussion about climate change. Overall, the world is served not only by a better position of science and learning in our system of democracy, but also by a better internal functioning of the forum of science and learning itself. There is a clear need for a National Assembly of Science and Learning that can investigate such issues without interference by political interests and mistaken hierarchies that exist now.

Thomas Colignatus is the scientific name of Thomas Cool (1954), econometrician (Groningen 1982) and teacher of mathematics (Leiden 2008). See the book “Forum Theory & A National Assembly of Science and Learning” (2020) at https://mpra.ub.uni-muenchen.de/98568 and on his website http://thomascool.eu

Today, January 31 2020, at midnight Central European Time, Brexit will happen, even though it is unclear what the British voters think about it. Brexit is neither “by the will of the people” nor “against the will of the people” but merely “without the will of the people“.

A proto-democracy generates uncertainty

The UK is only a proto-democracy and no proper democracy, see this evaluation in the APS Newsletter Physics and Society, January 2020, p18-24, which looks at the USA but the argument for the UK is quite similar.

On Brexit, uncertainty abounds:

  • The Brexit Referendum Question of 2016 was a political manipulation and unacceptable for a decent statistical questionnaire, see here p14. The situation was “garbage in, garbage out”, with ample opportunity for populism.
  • The UK preferences were rather dispersed about the options for Leave or Remain, see here p6.
  • See my summary about Brexit’s deep roots in confusion on democracy and statistics p18.
  • The UK election of December 12 was for the House of Parliament and not about Brexit. Boris Johnson had all candidates for the Conservative Party pledge to support Brexit, which runs against the principle that members of the House must represent their district. These elections thus violate the very principle of the UK proto-democracy.

The UK proto-democracy has “district representation” with “first past the post“, which means that a party may get a majority in the House of Parliament without a majority in the electorate. In the UK 44% voted for the conservatives but they still got 56% of the seats. Thus 56% of the UK voters do not want a government by the Conservatives.

Thus we still do not know what voters think about Brexit too. While Brexit was much discussed, and caused voters to switch to the Conservative Party, it still was not the only issue on the table, and it still is unclear what voters think about Brexit on balance.

The UK has the curious phenomenon of the “Re-Leavers”. These voters chose Remain in 2016 but now switch to Leave merely because this was the majority outcome in the referendum, and they “want to respect the outcome”. However, this is not how democracy works. A vote is about what you think yourself and not about what the former outcome was. Obviously these Re-Leavers are free to exercise their democratic right to think whatever they want, but this kind of thinking destroys the possibility to determine what people actually want.

YouGov tracker

The YouGov tracker is the best summary information about the general sentiment on the issue, but it is a poll and no electoral statement. Let me quote the tracking at this moment, because it always changes:

Between party dynamics

Adam McDonnell and Chris Curtis of YouGov discuss a post-election survey of December 17 2019, and here are their underlying data (for us page 3). The dynamics between the UK parties are remarkably large. Their key graph for our purposes is the following. For example 27% (figure not printed) of the Conservatives voted Remain in 2016: 22% (shown) of those switch to the LibDem, likely because LibDem are Remain. However, 65% of the Remain Conservatives stick to their party, perhaps because they regard the issue less relevant than other issue of the Conservatives, or perhaps they are ReLeavers. Of the LibDem who voted Leave in 2016 still 46% voted LibDem though it had become a Remain party, perhaps because they thought that LibDem would not gain power anyway.

Labour and LibDem could have made a deal to oppose the Conservative candidates with only one candidate from Labour / LibDem, in proportion to the forecasted vote shares. In that case, the LibDem could have assured a referendum on Brexit. During the elections, Jeremy Corbyn was criticised that he did not take a stand on Brexit, but his party was clearly divided, and his offer of a referendum was a fair option. At most five years from now there will be new elections. These are the Conservative “battlegrounds“, where this party could lose a seat by small number of voters.

Beware of John Curtice

John Curtice’s diagnosis on Channel 4, November 27, was:

“This is pretty much a binary election. Hung parliament, then we’re almost undoubtedly heading towards an extension and a second referendum, and lord knows what the outcome of that will be. Or we get a majority and we go out on January 31 and Boris is charged with the task of negotiating an alternative outcome. Ironically at the end of the day we’ve kind of stumbled into this election, but as the way it’s turning out, it’s actually providing us with a fairly clear binary choice.”

The latter is clearly nonsense, already before the election outcome. Above dynamics of UK voters shows that voters did not see a binary vote on Brexit and clearly had various considerations other than Brexit.

John Curtice is a renowned professor who on Election nights predicts the district outcomes with amazing accuracy. The problem however is that Curtice doesn’t see or explain that the true problem for the UK lies in the lack of equal proportionality in the general election. Curtice is locked in his electoral worldview like a hamster in a running wheel. Whatever he thinks and says here is in service of the current disproportionate electoral system in the UK, and then still produces nonsense.

In sum, it is the current electoral system that created the mess on Brexit and its misleading referendum question in 2016. If the UK had had equal proportional representation (EPR) like in Holland to start with, then Nigel Farage could have gotten his 12,5% of the seats in the House, and then the political discussion would have had greater restraint on the truth of the matter.

Brexit is still a mess, and now the eggs are scrambled

The solution for the present mess lies not in a new referendum on Brexit, as Curtice accepts, but in equal proportional representation (EPR). Referendum questions are manipulative, and voters cannot negotiate in polling stations. With EPR, representatives in the House can deconstruct manipulation and can negotiate. The current UK system gives only district winners, and they may be locked to a party line and cannot represent the diversity of views within their districts. The latter was already a fairy tale in 1900 and even more in 2020. Again, see my evaluation in the APS Newsletter Physics and Society.

Let the UK reboot itself. A big problem for UK voters now is: if the UK would rejoin the EU then it would have to accept the euro.

A Brexit moratorium of two years is the best advice today that econometrics can offer the UK and EU. Two years are only a short period with respect to the long future ahead. After two years of misinformation the UK and EU better make room for two years of proper information.

The difference between a flat Earth and a sphere

My background is in econometrics, Political Economy and Public Choice, and the latter is “the use of economic tools to deal with traditional problems of political science” (Gordon Tullock 1987). The Brexit referendum outcome in 2016 caused me to look deeper into its causes. In August 2017 I discovered that “political science on electoral systems” (including referenda) still is locked in the humanities and thus pseudo-science. For its claims on reality this branch is comparable to astrology, alchemy and homeopathy. This branch has been misinforming the world for a good part of last century.

The Great Depression in the 1930s came about because economists had confusions about the gold standard and such. Now we have a similar situation with respect to this branch of political science. This discovery on “political science on electoral systems” compares to the distinction between a flat Earth and a sphere. It means that all evidence must be re-evaluated.

If you wonder where failing government in the USA, UK or France comes from, then include this misinformation and miseducation as a fundamental factor. Brexit is an example of a democracy running astray because of this misinformation. The deeper cause of Brexit is that the House of Commons and the electorate are misinformed by the academia. There is a grand scale of misinformation by famous UK scholars like Iain McLean, John Curtice, Simon Hix, younger Alan Renwick, and (other) members of the UK Political Studies Association and lack of critique by the UK Royal Statistical Society.

For the National Academia of Sciences and Humanities of the world I propose that they set up their own national buddy systems, consisting of both scientists and scholars on democracy and electoral systems. Scientists tend to be less interested in democracy and scholars are at a distance from empirics, so that buddies can support each other in commitment to study and in bridging gaps of understanding.

The evidence is in my paper “One woman, one vote. Though not in the USA, UK and France” (MPRA 84482, 2018). The buddies perhaps better start with the novel statistics on the USA midterm 2018 and the SDID measure on disproportionality.

Cold Civil War in the UK

Many Britons are dead-tired of the Brexit discussion and want a clean break of it. The term Cold Civil War has been used. Rather than force a decision down each other’s throat on the three available options, it is better to kick the can down the road, and have a time-out to reconsider how the UK got where it is now. The UK better changes the discussion to another topic, away from Brexit, on which the three options are rather clear, and instead onto the foundations, structure and workings of UK democracy itself. The UK appears to be horribly confused on both democracy and statistics, and the people in the UK will gain new energy when they finally would get proper information.

All three options have the risk of a Stab-in-the-Back Myth

Both the EU and prime minister Theresa May have emphasized that there will be no more negotiation. There are three options on the table. Firstly the EU-May deal, secondly the Crash out of the EU, and thirdly a Bregret and return to the Status Quo Ex Ante. All three options come with the risk of a Stab-in-the-Back Myth.

Many UK voters have been dreaming and have been misinformed by all sides. It will be easy for many Britons to blame the EU as the villain who abused virgin Britannia. It will be hard for them to admit that they themselves have been dreaming.

  • A stagnation or even a drop in income can be portrayed as punishment by the EU.
  • The May-EU deal would fail on the sovereignty a promised by many Brexiteers.
  • Bregret would be seen as a betrayal of the referendum outcome.

Cognitive dissonance can be resolved by finding scapegoats, and butchering them in cleansing rituals. The Stab-in-the-Back Myth would not only affect the UK and future EU-UK relations, but Pied Pipers of Hamelin within the EU would also use UK resentment as ‘proof’ that the EU is devious indeed.

This lose-lose outcome exposes the weak spots of international governance. Basically, though, the irresponsibility in the UK has infected the EU. EU policy makers should have known better. They treated Brexit as an issue between Member States but they rather should have cared for EU citizens too, also in the UK, even when this notion of EU citizenship has little legal status. This present discussion provides a solution approach.

Two past years of misinformation, two new years for information

The last two years were burdened by misinformation around the 2016 Brexit Referendum and then there were both secrecy and some open chaos in the subsequent UK-EU negotiations. Voters in the UK are only dimly aware about the logic of the Irish border and the Good Friday Agreement of 1998 in this balancing act on national sovereignty and international treaties. Yet the greatest problem lies at a more fundamental level on democracy itself.

Another two years of uncertainty might play into economic stagnation, yet there are many no-regret investments waiting to be done. It really is wisest to take a time-out. This armistice of two more years gives breathing space and appears crucial to clear the fog of war and prevent a Stab-in-the-Back Myth that would play into rancuous backlash in both UK and EU and that could wreak havoc in the future.

How this moratorium can be achieved

The current House of Commons was elected in 2017 and thus after the referendum of 2016, and it would have a mandate to reconsider the situation, even if it would mean breaking promises to voters, which promises clearly cannot be kept with only the present three options on the table. Potentially the EU27 would allow the UK time for such a reconsideration of it is democratic foundations. The recent advice by the ECJ Advocate General provides scope to unilaterally revoke the withdrawal notification (ECJ press release 187/18). However, the EU27 would tend to regard this correct unilateral act with suspicion, and fear for instability in the UK. If the UK would revoke and clarify that it would use a moratorium of two years for a reconsiderations of its democratic foundations, then fears in the EU27 about UK instability and risk about a Stab-in-the-Back Myth against the EU would be assuaged.

After this moratorium of two years, the UK may still leave the EU perhaps in 2021 but at least then this decision would be based upon a clearer understanding in the UK about democracy and statistics.

Not “populism” but kindergarten politics

The 2016 Brexit Referendum Question itself was simplistic and doesn’t fit the requirements for a decent statistical questionnaire. It was political manipulation pure and simple. The Leave vs Remain outcome was 52-48%, but some 17% of voters had Remain between different options of Leave, and thus had to gamble what would be the likely outcome. (RES Newsletter 2018-10) Referenda are mostly dumb and risky, and an instrument of populism instead of deliberative democracy. With this lesson learned, the UK better avoids a second referendum.

Let me quote Cas Mudde who “defined populism as an ideology that considers society to be separated into two homogeneous and antagonistic groups, “the pure people” versus “the corrupt elite”, and which argues that politics should be an expression of the volonté générale (general will) of the people.” (Guardian 2018-11-22) The term “populism” is distractive though, as if there would be a core of truth in going back to the people, as “ideal democracy”. Cas Mudde struggles with the dictionary and is less observant of what is really happening here, namely kindergarten politics. A division between Us and Them is what kids in kindergarten understand, with a saviour prince on a shiny horse, and it is a core element in blockbuster Hollywood movies. This is what Donald Trump is comfortable with and what his analysts are feeding him with.

The proper answer to this kind of politics is to explain that issues are more complex, and Cas Mudde suggests this too. Complexity however requires time. Both UK and EU can use a moratorium of two years to come to terms with the complexity that we now see on Brexit. The key point is to use this time in an educational manner beyond kindergarten, and thus in a fundamentally different manner than we have seen in the last two years. The misinformation about Brexit not only concerns mere mundane points like on the NHS but also concerns some fundamental aspects by professors from the academia as well.

Weimar and equal proportional representation

This discussion now meets with Godwin’s law. In 1941, Ferdinand Hermens (1906-1998) fled from nazi Germany, found refuge at Notre Dame, Indiana, and published his “Democracy or Anarchy” that argued that the Weimar Republic collapsed because of (equal) proportional representation (EPR). After winning WW2, the USA and UK assumed that their electoral system of district representation (DR) would be superior too. Later research by political scientists has essentially repeated the bias, introducing ever more fallacies.

Historians have debunked Hermens’s analysis. Hitler seized power by using the fire in the Reichstag to arrest communists, eleminating such parliamentarians from voting committees. (Lorraine Boissoneault, Smithsonian 2017) EPR was hindering the nazis, not helping them. Anyway, the choice of electoral system must be made for its own optimality, and other rules would be relevant for such stress tests. Above, I have mentioned the evidence.

A solution for the UK is to switch from DR to EPR

The two year moratorium then could have two phases. When the proposed buddy-system of the Royal Society and the British Science Association (science) and the British Academy (humanities) has generated results and has started informing the general public about their findings, in a first phase, then in a second phase the UK can consider switching from DR to EPR, and have proper elections so that all voices in the UK are duly represented, finally for the first time in history. Parties can split along their Brexit views in order to offer voters the full spectrum. The Stab-in-the-Back Myth has less risk of developing when all people can see the true proportions of the different views on Brexit. With new elections, the House of Commons can finally start from proper proportions to negotiate between parties for a compromise. Compromises would focus on internal UK affairs, since there are no more negotiations with the EU on Brexit.

With this advised solution approach provided by econometrics, it may still be, as said, that the UK leaves the EU perhaps in 2021 but at least then all UK voters have been treated properly, with prudence, justice, dignity and compassion, in equal proportion.

Disclaimer: I did not read “Democracy or Anarchy” and the EU-May Deal, but looked at abstracts. Parts of this text have been used earlier.

UK Parliament on the Boston Tea Party

Salah el Serafy (1927-2016) stated the following about GDP and NDP (Gross and Net Domestic Product):

  • “Selling natural assets and including the proceeds in the gross domestic product, GDP, is wrong on both economic and accounting grounds.”
  • Even though NDP is rarely estimated, depreciation of produced assets is fairly small and predictable. Declines in natural assets, on the other hand, may be large and volatile, and are not reflected at all in the estimates of GDP commonly used for macroeconomic analysis.”
  • “For economic purposes, a better approach would be to calculate the user cost component of resource declines, and either subtract this from GDP as capital consumption or (much better) exclude it from the gross product altogether.”

The term “user cost” merely indicates the investments that are required to maintain the resource level and quality.

Two flows

In the RES Newsletter El Serafy (2014) recalled:

“Exploiting finite natural resources without replenishment is akin to mining and Marshall had taken pains to explain that the surplus realized in mining, often miscalled rent, should be split into proper ‘rent’ which is income and ‘royalty’ which is capital.”

George Santopietro (1998) summarized El Serafy’s position as:

“El-Serafy (1989) argued that the surplus for a depletable resource represents two values: (1) a true income component which can be consumed; and (2) a separate depletion cost. The depletion cost is the amount that needs to be reinvested in order to sustain the economy’s ability to provide future generations with the ability to enjoy a non-declining level of consumption. In this line of thinking, the net price method overstates the true depletion cost. Von Amsberg took El-Serafy’s method and applied the strong sustainability criterion to it by calling for a depletion cost sufficiently large that when invested in the production of a substitute, future generations will be able to enjoy a non-declining flow of similar services.”

It was actually John Hicks who distinguished fundist and materialist capital in accounting. In both cases there is Hicks’s accounting principle of keeping capital intact for income estimation purposes. El Serafy puts emphasis on fundist capital, thus with monetary value. A depletion of a natural asset can be compensated by a gain in other capital. The alternative is to look at the physical stock of goods. El Serafy: “damaged or depleted natural capital cannot easily be replaced with manufactured capital.”

A small model

Wondering what to make of this, I came upon the following small model. When you sell your house then the proceeds are not your income, so much is obvious. You might rent out a room to pay for the maintenance costs. Farmers sell the proceeds from their crop but keep some seeds for next year.

Since Keynes, macro-economics has tended to link consumption to income but let us now relate it to the capital stock that might be depleted.

Assume that the price of a depletable resource is p = 1, and that the resource stock K is capital too: K ~ p K. The first is in physical units and the second would be in money, but let us take the resource as the numeraire, so that K = p K.

  • For investment: Let physical investment J = b K. Let g be the physical return factor on physical investment. Then economic (gross) investment I = r K = (dK with d depreciation and i a rate of interest. We also have I = g J = g b K so that r = g b.
  • For consumption: Let w L be services without use of capital. For consumption of the depletable resource we distinguish a fraction s that is sustainable and a fraction u that is unsustainable. Total consumption is C = (s + u) K + w L, and we have sustainability when u = 0. Below relations allow us to deduce that s = (g – 1) b, so that sustainable consumption is determined by the physical return factor of physical investments.
  • From these two: u K are the user costs or investment that are required to keep the resource intact. When consumption is sustainable = 0 then such costs are not incurred.

In accounting of expenditure flows, it may happen that u currently is not even included in D, so that also NDP is off-track.

If u is in D then we find: NDP gives substainable consumption s K + w L, while the figure of GDP will be polluted by unsustainable depletion u.

Physical, sustainable if u = 0 Nominal, with p = 1
C = (s + u) K + w L C = (s + u) K + w L
J = b K I = r K = (i + d) K       (gross investment)
K[t+1] = (1 – sub) K + g J K[t+1] = (1 + r) KD
K[t+1] = (1 – u) K D = d K = (s + u + b) K = (r + u) K
s = (g – 1) b r = s + b = g b,     1 – u = 1 + i
d = s + u + b GDP = Y = C + S = C + I = (s + u + r) K + w L
0 ≤ s + u + b ≤ 1 NDP = YD = s K + w L = (g – 1) b K + w L

El Serafy rather wants to see that also GDP is income, which can be achieved by a separate deduction from the stock:

Physical, sustainable if u = 0 Nominal, with p = 1
C = (s + u) K + w L C = (s + u) K + w L
J = b K I = r K                                  (gross investment)
K[t+1] = (1 – sub) K + g J K[t+1] = (1 + r) KD* – Δ   with Δ = u K  as user cost
K[t+1] = (1 – u) K D* = d* K = (sb) K = r K     (without user cost)
s = (g – 1) b r = s + b = g b,   and r = i* + d* means i* = 0
d = s + u + b GDP* = Y* = C + S = C + I – Δ = (s + r) K + w L
0 ≤ s + u + b ≤ 1 NDP = Y*D* = s K + w L = (g – 1) b K + w L

An example is selling the natural resource, putting the proceeds into a bank, and live from the perpetuity. With i the money rate of interest, then sustainable income is s K = i K, so that s = i. Then b = 1 because all money is in the bank, and g = 1 + i = r. It follows that GDP = (1 + 2 iK + w L and NDP = i K + w L. Normally we do not regard the whole capital as the investment but for money it makes sense. In practice money in the bank is only a financial arrangement and the true return must still come from productive investments.

Environmental sustainability

Above model can be extended with environmental sustainability by replacing s + u with es + eu, with es ≤ s and eu ≥ u. For example, the home owner must put aside additional investments for an extension to the house to make room for solar panels or heat pumps, or to relocate it because of flooding. Sustainability and environmental sustainability have the same model here, and only different data. However, practical modeling can be different. Mere sustainability might rely on actually observed values of the going rate of depleting, while environmental sustainability with es and eu would require more involved modeling to come to grips with the current (conservative) expectations on future development.

Intermediate conclusion based upon this small model

I tended to favour GDP as based upon expenditure flows, since depreciation of produced capital tends to use accounting schemes that seem rather arbitrary. Now, however, it is clearer to me that depletion of natural resources may pollute these GDP data. Now I am starting to think that NDP would tend to be a better yardstick, provided that statisticians find adequate estimates of depletion of course. If those estimates are deficient then the use of NDP provides only the illusion of improvement though.

PM. This simple model seems quite tricky. A one time deviation from sustainability causes a one time GDP growth, but also forces to continue to deviate from sustainability for ever more, with K[t] = (1 – u)^t K[0] merely to maintain the income level without any growth. It is only a simple model to clarify a basic idea. Salah el Serafy has more sophistication with the user cost.

Salah el Serafy again

El Serafy (2014) however advises that resource depletion is removed from income altogether (with my comments):

“Any presumption that removing ‘royalty’ (the capital element) from GDP entries relating to natural resources might be taken care of at the level of estimating NDP cannot be accepted for more than one reason.
First, NDP is not often reckoned at all, and if reckoned there is no unanimity over the amount to be used for the capital consumption involved. (TC: But would there be unanimity for correction at the level of GDP ?)
Second, natural resource deterioration due to commercial exploitation is not ‘depreciation’ in the accepted sense; it does not conform to standard wear-and-tear allowances applied at year-end to asset categories, and may in fact amount to as much as 100 per cent of the asset. In the latter case proceeds of the asset sale will all be a User Cost and must be exiled altogether from GDP. (TC: This is a matter of definitions. If Gross is taken as expenditure flows, then Net can be taken as depletion and standard depreciation. However, expenditure flows are not income indeed.)
Third, if stock erosion is viewed correctly as Marshall advised as emanating from ‘Nature’s store’, accounting conventions dictate that using-up stocks must be dealt with at the gross income estimation stage. Clearly natural resources are not ‘fixed capital’ but inventories, and the User Cost implicit in using them up should be recognized for correct accounting. (TC: But the situation becomes blurred, when the stocks can be used for investments to maintain the stocks, see above small model. In that case it makes some sense to define Gross as the expenditure flows, and deduct depletion with depreciation. However, expenditure flows are not income indeed.)
Such economic reasoning appears to escape the concerns of the estimators who have taken charge of the accounts resisting the economic logic behind the ‘greening’ quest.”

Conclusion

El Serafy did his doctorate in economics at Oxford in 1957, supervised by John Hicks, one of the giants in economics, and also famous for his insistence on proper accounting. El Serafy laments that this heritage has gotten lost:

“However, as the economists’ interest in studying social accounting faded the accountants and statisticians have taken over, often disregarding the concerns of economics, and disclaiming any hint that the national accounts should be estimating income.”

“Their message in brief is that no adjustment for environmental losses can be expected within the mainframe of the national accounts. This in effect is a death sentence on ‘green accounting’.”

Salah el Serafy has a point. The point has also been made by Tinbergen & Hueting.

The EU-May Brexit agreement – between the EU27 and UK prime minister Theresa May of November 25 2018 – makes me think about the French quote: “C’est pire qu’un crime, c’est une faute.”

The EU treats Brexit as an issue between Member States, and thus neglects that Britons are citizens of the EU, perhaps not in a legal sense – see this campaign – but in terms of the ideals why the EU was created in the first place. The EU doesn’t protect these citizens from dysfunction in London. The UK irresponsibility has infected the EU too.

Many will regard the EU-May deal as practical. John Maynard Keynes stated:

“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

The Great Depression in the 1930s came about because economists had confusions about the gold standard and such. For this 2018 irresponsibility by UK and EU, who are the present academic scribblers ? Today the universities of the world show incompetence or gross negligence in particular on Brexit and in general on “political science on electoral systems” (including referenda). This latter branch at the Academia has been misguiding mankind for the greater part of last century.

The road to reason on Brexit is to observe and tackle this misguidance and mis-education on democracy. The partial rationality of working within EU conventions better is ended. The EU and UK better adopt an inclusive rationality and stop this nonsense and disaster.

UK democracy: Garbage In, Garbage Out

The 2016 Brexit Referendum Question itself did not fit the basic requirements of a statistical questionnaire. Thus we got “garbage in, garbage out” (GIGO). The 2017 UK General Election contest was with the UK system of district representation (DR) instead of equal proportional representation (EPR). The system of DR distorts voter views so that we again have GIGO.

Thus we do not know what UK voters want. It is rather damning for a claimed democracy like the UK that its main two instruments of democracy do not generate clarity on what the people want.

The UK political machinery runs its course but this machinery is proto-democracy based upon GIGO rather than proper democracy. The policy makers themselves have a role too but basically they only add colour to the canvas of history. The true culprits are the Academia that haven’t advised the UK at an early moment last century to switch from DR to EPR. Sweden switched in 1907 and Holland in 1917. Observe that a country with EPR doesn’t need a referendum. Now, what is wrong at the Academia ?

A time-out to investigate the role by the Academia

Let Brussels and London take a time-out on Brexit, and let the Parliaments within the European Union ask questions to their Academia, before decisions are implemented that will wreak havoc on generations to come, and that will undermine the ideals of the European Union. Let Parliaments investigate and expose the role of the Academia on Brexit, and let the Parliaments ask the questions that our collected scientists and scholars better answer, and on which they are dodging their responsibility of disinforming and mis-educating the world.

The evidence is available at MPRA 84482

As an econometrician (Groningen 1982) and teacher of mathematics (Leiden 2008) I may be a lone voice, but I adhere to the principles of science, and fellow scientists can check the evidence that I have collected and made accessible. The evidence is at the Munich Personal RePEc Archive (MPRA) paper 84482.

I have observed that the branch of “political science on electoral systems” (including referenda) is still locked in the humanities, and thus no science, and thus for its empirical claims comparable to astrology, alchemy and homeopathy. I invite the Academia to set up national buddy-systems of scientists and scholars to check the evidence. Scientists tend to know little about democracy. Scholars tend to know little about empirics. Thus buddies can complement each other. Parliaments may encourage the Academia to create such systems.

Readers are advised to start with this summary on the USA midterm 2018 that uses three novel statistical analyses that are missing in the “political science” literature, and that show that more than a third of US voters have taxation without representation, while the Boston Tea Party had the slogan “No taxation without representation”.

Precision of the kilogram versus vagueness of “representative”

Scientists redefined the kilogram recently to greater and perhaps universal precision but the scholars on democracy and politics still use everyday terms like “election” and “representative” of which the meanings depend upon national jurisdictions. A “Head of State” can be a President or a Queen but their roles are different empirically. A key example are (district) representation (DR) in the USA, UK and France and (equal proportional) representation (EPR) in Holland and Scandinavia. An introductory chapter or section of a politicological book tends to explain that these are “different forms of democracy” but when statistical analysis becomes a bit more complicated then the distinction between apples and oranges appears to be forgotten. Scientists know about “garbage in, garbage out”, but the politicological scholars take the everyday language garbage as the undisputed foundation for their treatises and their textbooks to indoctrinate their students. The American Political Science Association (APSA) was founded in 1903 with an aspiration and not with a verified tradition that it was a science. The British Political Studies Association (PSA) has an accurate name but its members may still claim positions as “professor in political science”. Renowned academics pontificate on electoral outcomes and referenda, while not knowing what they are speaking about, with a sprinkling of math, statistics and computers that only suggest science, but they are still scholars locked in the humanities that basically concentrate upon maintaining tradition.

A game-changing insight

This diagnosis may remind of familiar discussions about DR versus EPR. However, it is a game-changing discovery that this branch “political science on electoral systems” is pseudo-science. It is like the difference between a flat Earth and a globe. All claims need to be re-evaluated. This causes the proposal of the buddy-system.

Elephant in the room

Donald Tusk and Jean-Claude Juncker for the EU and Theresa May for the UK have clarified that the EU has made its final offer, and that the current UK executive branch agrees with it. A vote by the UK House of Commons is intended for December 10 to 12, with a European Council already scheduled for December 13 and 14. If the UK House of Commons doesn’t take the deal then the UK will crash out of the EU on March 29 2018. If the UK takes it then there still is a transition period with further negotiations. If the transition doesn’t result into a final agreement then the UK will remain in a customs union without a seat at the table. Potentially the UK takes the deal now and crashes out much later anyway, or perhaps re-applies again but then without its current perks.

The present situation creates economic uncertainty. This likely reduces investments and creates stagnation, and this may play into resentment in the UK that the EU sabotages it, even though the UK is itself responsible for the conundrum at the Irish border. There is a serious risk of a Stab-in-the-Back Myth, holding that the original “outcome” of the 2016 Referendum is not respected. This Myth doesn’t recognise that this “outcome” was GIGO, but can still be a myth. Illusions in the UK of “having your cake and eat it” now meet with reality, and rather than accept reality a frustrated people might find it easier to blame the EU.

The EU and UK are surprisingly vague on the option of Bregret, i.e. that the UK retracts the invoking of Article 50. Theresa May mentioned it briefly in the UK House of Commons, and Angela Merkel and Emmanuel Macron have not rejected it. The main reason for this vagueness must be political caution, namely not to spend attention to the elephant in the room. The EU and May (originally for Remain) might be depicted as targeting Bregret by designing a deal that the UK House of Commons would reject. This image would play into the Stab-in-the-Back Myth.

However, it is a Mission Impossible not to speak about Bregret. The topic would surface one way or another. To evade the topic is irresponsible, unless you really accept the prospect of a stagnating and ever more resentful UK, and unless you really believe in a EU of Member States only, without responsibility for Britons who are citizens of the EU too.

Addendum. Owen Jones in The Guardian 2018-11-28 warns about a Stab-in-the-Back Myth whether the UK takes the May-EU deal or rejects it. On December 9 there will be a Great Britain Betrayal protest in London and Jones calls for a counter-march. This again frames the issue as one of political preferences while the true problem is information.

Solution approach

When the proposed buddy-system has generated their findings, it is not unlikely that the UK switches to EPR and can have proper elections so that all voices in the UK are duly represented, finally for the first time. Parties can split along their Brexit views in order to offer voters the full spectrum. The Stab-in-the-Back Myth has less risk of developing when all people can see the true proportions of the different views on Brexit. With new elections, the House of Commons can finally start from proper proportions to negotiate between parties for a compromise. Compromises would focus on internal UK affairs, since there are no more negotiations with the EU. Options are the May-EU deal, Crash, and if possible return to the Status Quo Ex Ante if the EU allows. Potentially the EU would allow the UK time for such a fundamental reconsideration of its system of democracy and relation to the EU.

With this advised solution approach, it may still be that the UK leaves the EU perhaps in 2021 but at least then all votes have been treated properly, with prudence, justice, dignity and compassion, in equal proportion.

Disclaimer: I did not read the EU-May Deal but looked at abstracts.
Some parts of this text have been used earlier.

Angela Merkel throws a tear to Theresa May (Channel 4 screen shot)