General Election Prediction

Current Prediction: Conservative majority 100

Party2015 Votes2015 SeatsPred VotesPred Seats
CON 37.8%331 42.1%375
LAB 31.2%232 27.5%188
LIB 8.1%8 8.6%7
UKIP 12.9%1 11.4%1
Green 3.8%1 4.3%1
SNP 4.9%56 4.9%56
PlaidC 0.6%3 0.6%4
Minor 0.8%0 0.7%0
N.Ire 18 18

Prediction based on opinion polls from 05 Aug 2016 to 28 Aug 2016, sampling 5,916 people.

Probability of possible outcomes

Conservative majority
72%
Con choice of Lib/Nat
7%
Con/Nat coalition
6%
Labour majority
6%
Lab/Nat coalition
4%
Nat choice of Con/Lab
3%
No overall control
1%
Lab choice of Lib/Nat
1%
Con/Lib coalition
1%

The future is never certain. But using our advanced modelling techniques, we can estimate the probability of the various possible outcomes at the next general election. ('Nat' means SNP+PlaidC)

New Boundaries : England and Wales

The Boundary Commissions for England and Wales published their initial proposals on 13 September 2016 for the new seat boundaries.

Electoral Calculus has performed a full analysis of the impact of the changes on the UK political make-up, as well as calculating which seats disappear, which change hands, and which fresh seats are newly created.

Visit the Boundaries 2018 page for full details and links to all regions and seats.

Also region-by-region breakdowns are available:

The user-defined predictor can now make predictions on the basis of the new boundaries (with 599 seats rather than 600, until the Scottish Commission reports).

A write-up of the Electoral Calculus' research is also available from the Daily Telegraph as both a news story and a full analysis.

Posted 15-Sep-2016

Liberal Leaver : Making the Best of Brexit

The most important Brexit negotiator is a spiv MP from two hundred years ago

He was only in parliament for four years in the 1820s, and for a rotten Irish borough. He had a record of dodgy stock-market dealing around the time of Waterloo. His name is not very well known, and he has been dead for nearly two centuries. But David Ricardo had one big great idea which has lasted through the years. It has been described as one of the few propositions in the social sciences which are both true and non-obvious.

And this idea will affect almost all aspects of our Brexit negotiations both with the EU itself and with other countries around the world.

The idea is simple, though paradoxical at first glance, and everyone who is interested in politics and Brexit should take a few minutes to get to know it.

The idea demonstrates how trade between two countries will help both of them. In can be (and often has been) expressed in economics jargon, but let's skip that and start with a specific simple example.

Imagine a hypothetical world with two countries. Let's call them Rexland and Scanzia. And, in this world, there are only two products – automobiles and blankets. Both countries make each product. The countries happen to be at different stages of development and Rexland is better at making both products than Scanzia.

We can represent the productivity of workers in the two countries with this quick table:

RexlandScanzia
Automobiles42
Blankets9660
Producitivity: annual output per worker in each country and industry

So Rexland workers are more productive than Scanzia workers in each industry. A Rexland car worker can make four cars a year, compared with only two cars from a Scanzian worker. And in blankets, Rexland workers are 60pc more productive than their Scanzian peers.

It looks like trade between these two countries would be pointless or dangerous. You might expect that Rexland would export both cars and blankets to Scanzia, damaging that economy and receiving nothing in return. But that would be wrong.

Both sides will benefit and flourish from trade. Here's how it works.

Suppose just one Rexland worker switches job from blankets to cars. The initial impact on the Rexland economy (annually) is that they have four more cars and 96 fewer blankets. But now let trade enter the picture. Let's suppose that the two countries trade together and the market "exchange rate" is 27 blankets per car. Then Rexland can export its four extra cars, and receive 108 blankets (108 = 4 × 27) in exchange. This more than makes up for the "lost" 96 blankets, and Rexland ends up as gaining by 12 blankets overall.

But have they just exploited the naive Scanzians with unfair trade terms? Not at all – Scanzia wins too. In Scanzia they need to retrain two car workers to be blanket makers. Initially they lose four cars (annually), but gain 120 extra blankets. When they trade with Rexland they pay 108 of those blankets to import the replacement four cars. They are also gainers to the tune of 12 blankets.

Both parties have benefitted and both are better off in terms of goods consumed.

Comparative Advantage graphic
Comparative advantage: As if by magic, both sides gain. But there are no tricks.©2016 Martin Baxter

In economic terms, Rexland has a competitive advantage in both industries because its workers are more productive. But Ricardo's idea is to look at a different concept of comparative advantage which basically means comparing the ratios of advantage to find the best, or least worst for each country.

Rexland
productivity
Scanzia
productivity
Rexland
advantage
Scanzia
advantage
Automobiles4220.5
Blankets96601.60.625
Relative advantage and comparative advantage

The "advantage" is just the ratio of productivity between the two countries. Rexland's advantage is bigger than one in each industry, because it is more productive in both of them, but is higher in automobiles. So Rexland has a comparative advantage in cars. Scanzia's advantage is less than one in each industry (because it is less productive overall), but is higher in blankets. So Scanzia has a comparative advantage in blankets. So Rexland should export cars to Scanzia and import blankets in return.

This always works, no matter what the productivity rates happen to be. There will always be some industry, even for a weak and unproductive country, at which it is least bad. That is the industry where it has a comparative advantage. This is Ricardo's great insight. Trade will always help, because everyone is (relatively) good at something.

The result can be rigorously proven to be true under more realistic assumptions than this simple example, such as having multiple countries, several industries, diminishing returns to scale and generalised utility (happiness) functions. In economic terms, we can show that:

There will be economic changes to each economy. These are summarised in this table:

Industry with
comparative advantage
Industry with
comparative disadvantage
PricesRiseFall
ProductionRisesFalls
EmploymentRisesFalls
Utility (happiness)Rises
Economic changes following trade

The detailed picture is mixed and does require some workers to change industry, either by re-training or generational change.

But any worker/consumer in both countries can be better off. They have more of whatever they desire (either cars or blankets). There are twelve extra blankets for each transferred worker in Rexland, and six extra blankets per retrained worker in Scanzia.

That is the genius of comparative advantage.

So with free trade between the two countries:

Politics gets involved

But the car workers in Scanzia complain about unfair overseas competition. The Scanzian Minister for Industry, whose cousin runs a large loss-making car plant, decides to take action. Protection is needed for the nascent Scanzia auto industry, he says in a speech at the factory. It can only grow to be strong if sheltered during its growth phase from harsh international competition. Plant workers give him sustained applause.

To begin with Scanzia imposes an import duty (tax) of a certain number of blankets on each imported auto. Effectively, economically the taxed blankets are destroyed (or at least lost to the traders). The import tax is set at the rate of 4 blankets per car.

At the current price, trading would be uneconomic. Let's suppose that the exchange-rate price increases to 29 blankets per car (pre-tax) or 25 blankets per car (post-tax). Rexland receives 100 blankets (post-tax) for its four cars, which leaves a net profit of only four blankets. Scanzia importers pay 116 blankets (116 = 4 × 29) for the cars, leaving them with a profit of four blankets too.

Trade is still worthwhile and productive but less than before. The key points are:

But it gets worse. Over in Rexland, a combination of green pressure groups and trade unions are arguing against cheap foreign imports ('dumping') from Scanzia, which are putting Rexland blanket-weavers out of work. There are also concerns about labour and environmental standards in Scanzia, which do not meet the high level of Rexland legislation in this area and lead to worker exploitation by unscrupulous importers. After a high-profile campaign by the Daily Rexlander supported by opposition politicians, the government imposes a 10pc import levy on blankets.

Now things are difficult. The most a Scanzian importer can pay for a car is 30 blankets (30 is the natural price of cars in Scanzia without trade, since workers make 30 times as many blankets as cars). But the car import tax is 4 blankets, and the blanket import tax is a further 2.6 blankets ( 2.6 = 10% × ( 30 − 4 ) ), leaving only 23.4 blankets for the car exporter. But the minimum price for cars in Rexland is 24 (natural price of cars there), so the trade would make a loss.

Trade now has stopped completely. Both countries and their consumers are worse off.

Back in the real world

In the real world, free trade is under attack from both left and right. Both US Presidential candidates have sounded doubtful about free trade, and in Europe opposition to the US-EU free trade TTIP deal is growing.

Countries can't expect to export in every industry. It's impossible to export everything and import nothing. But every country can export something and import something. And doing that leaves everybody better off. Trade is a swap, and a swap that benefits both sides.

That is the secret of Brexit negotiations. The UK should have as low tariffs as possible. If other countries put tariffs on British goods, they are hurting themselves as much as Britain. British trade negotiators don't need to look for special favours from the other side – just their own self-interest. If the other side can't see that, then we need to remember that even our own tariffs and trade barriers leave us worse off. So we shouldn't impose any of our own. David Ricardo is our negotiator.