Monthly Archives: July 2018

Jaguar Land Rover and the potential consequences of a “bad Brexit”

Yesterday, the CEO of Jaguar Land Rover took the unusual step of issuing a public statement about the potential consequences of Brexit, the UK’s departure from the EU, if no satisfactory deal is reached.

In his statement, he claims that “A bad Brexit deal would cost Jaguar Land Rover more than £1.2bn profit each year” …jeopardizing 80 billion pounds of potential future investment into the carmaker’s UK factories.

This prompted a response from pro-Brexit Member of Parliament Owen Paterson in interview this morning (hear it in full here, from 1:32:55 ).In his response, Paterson argues that, in contrast to the CEO’s statement, Jaguar Land Rover will actually be better off:

“What is really vital is that they will be better off if the Government delivers on what the Prime Minister promised me in the Commons yesterday if we really do leave the customs union.”
“It’s really important this, Jaguar Land Rover will have access to cheaper parts and components all around the world. And the European suppliers currently will be forced to compete or they will lose Jaguar Land Rover’s business. All the studies show the car trade is very robust at the moment, it is profitable and that will continue.”

Today’s Found Argument is a counter-argument to Paterson’s claim:

In order to believe that Paterson is right, one has to assume that Jaguar Land Rover, and its CEO, failed to factor in these potential price reductions, even though they realistically should have.

In other words, they must have either a) made an error, or, alternatively, b) their overly negative assessment is intentionally misleading and motivated by other considerations. Paterson in no way claims that Jaguar Land Rover are doing anything like this, and, in fact, he stresses in his interview only how valuable and important the firm. So he gives no grounds to assume b), leaving just a) for the moment.

In that context, one has to ask the following: how plausible it is that a potential fact could be so accessible that an MP like Paterson with little specialist knowledge of car manufacturing would know of it but be overlooked by those working for Jaguar. Is it not much more likely that this ‘fact’ is not a fact, or, if true, is far outweighed by other factors?

This in effect is the counter-argument being made in more concise (and more sarcastic) form by multiple commentators on Twitter today:

The tone may not help make friends or change minds but the counter-argument itself seems strong, at least to anyone who thinks it likely that the people who make profit projections for Jaguar Land Rover possess more in depth knowledge than Owen Paterson. It doesn’t rule out that Paterson could be right, or that the reason he has given is correct; but the counter-argument does make this seem less likely.

At the same time, the counter-argument is effective in the sense that it can be understand and evaluated without in-depth knowledge of the other more technical issues (e.g., trade tariffs etc.) that figured in the Paterson interview.

On a final note, sceptics might argue that our reconstruction of what commentators like Freedland are tweeting is too generous. We agree that the interpretation of exactly what argument is being made is often tricky, and we pursue these issues in more detail in other projects.   For present purposes, we urge those sceptics to view this post as being about our own version in bold above.

We have a finite environment—the planet

“We have a finite environment—the planet. Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist.”

The slogan “you can’t have infinite growth on a finite planet” or “with finite resources” is a catchy one that sums up a concern about the planet’s limited resources very neatly; it is popular and Sir David Attenborough is only one of many to voice it. As a rallying cry it seems great. As an actual argument it is less good, though.

First, the pedant’s point: infinite growth would require that the Earth itself literally exist forever. It seems doubtful that Sir David Attenborough believes that; our best science presently suggests the sun itself will eventually ‘die’, taking Earth with it in the process. It also seems likely that economists tend to know this. This makes “infinite growth” seem like a bit of a straw man.

So, really, the argument needs to be re-phrased as something more like: “we can’t have much more growth, given the finite resources of the planet”.

This, more accurate, rendition of the argument makes clear that there is not some kind of logical argument here (something ‘infinite is impossible given finite’), but just an empirical claim. In contrast to a logical truth (which is necessarily true), an empirical claim is a claim about the world that could be true or false, and we need evidence from the world to know which it is. We can’t just determine its truth or falsity through reason alone.

So, when the straw man aspect is taken away, there isn’t really an argument here at all, just a claim.

And whether that claim is true, is far from clear: Economic growth can, in principle, be driven by new technologies that reduce consumption and save resources, so it all depends on the details.