Saturday, December 16, 2017

In his 1960 book The Strategy of Conflict the late Thomas Schelling made a significant contribution to the field of game theory by showing that recklessness can work. Schelling, who won the Nobel economics prize in 2005, argued that in a confrontation one side can maximise its chances of getting the outcome it desires by adopting an irrationally inflexible position.

His theoretical modelling suggested that brinkmanship, or deliberately running the risk of an accidental outcome that would inflict damage on both parties, could pay dividends if one side can demonstrate that it is credibly reckless.

“If you get a reputation for being reckless, demanding, or unreliable…you may find concessions made to you,” Schelling wrote, citing the example of how sensible road users often give way to kids driving hot rods.

Reckless, demanding, unreliable. Did someone mention Brexiteers? Their latest demand is that Britain must actively prepare for a “no deal” Brexit to demonstrate to the Europeans that we’re deadly serious about walking away unless we get what we want. We’re told that such preparations will demonstrate that we can’t be bullied, or rolled over. Ignore, or downplay, the threat to us from a collapse in the talks, and emphasise the cost to them.

This kamikaze-like strategy will, apparently, force the other side to negotiate in earnest. “One sure way to focus EU minds on making a deal is being fully ready to walk away without one,” says The Sun.

So are Brexiteers following the logic of Schelling’s theory of rational recklessness? Sadly not. Or, if they think they are, they are misapplying it. Schelling was thinking of the nuclear standoff between the US and the Soviet Union when he developed his theory.

But Brexit isn’t the Cold War. There are no British nuclear weapons aimed at Europe or vice versa. There would unquestionably be damage from a no deal Brexit for the EU. There would be a large hole in the EU Budget, as UK payments suddenly stop. Their firms would suffer through the sudden imposition of tariffs and broken supply chains. EU nationals in the UK would face horrendous uncertainty.

Yet the damage would be much worse for the UK. Chaos at ports, grounded flights, massive damage to domestic industry, job losses, would all follow. A hard border would descend between Northern Ireland and the Republic, potentially jeopardising the peace agreement. There is not a single credible study which suggests a cliff-edge Brexit would be anything but a total disaster for the UK economy – and an event many times more destructive for us than the EU.

An extreme no deal scenario could even mean us walking away from our EU treaty obligations. The reputational damage would be immense. It’s hard to see other countries falling over themselves to do major new trade deals with a nation that has shown itself willing to behave in such a way.

In short, there’s no “mutually assured destruction” to concentrate the minds of the other side. Most of the UK’s no deal “missiles” are pointed at the UK itself. And that’s perfectly obvious to the EU side.

On the other hand you could choose to ignore the experts and put your faith in Boris Johnson who has said a no deal Brexit for the UK would be “perfectly OK”. Or the manufacturer James Dyson who thinks this scenario would “hurt the Europeans more than the British”.

But bear in mind the Brexiteers’ track record. David Davis famously claimed before the referendum that “within minutes” of a Leave vote the German car industry would be “knocking down Chancellor Merkel’s door demanding that there be no barriers to German access to the British market”.

But sixteen months on from the Brexit vote and that salutary knock still hasn’t come. And it now seems it never will. The main German employers’ federation, the BDI, last week made its position perfectly clear: “German industry aspires to a very close future relationship with the UK. But we have to be clear: we will prioritise the future development of the EU,” it said.

The reality is that Brexiteers grossly misjudged the post-Brexit balance of negotiating power between the UK and the EU before the vote. And they continue to misread the situation now if they believe waving a no deal scenario in the face of the EU will prove an effective strategy.

If the Brexit negotiations are a game of chicken, it is a contest between a juggernaut and a mini. The Brexiteers are not rationally reckless. They’re just reckless.