Stiglitz vs. Krugman on Scotland; Polls Diverge; New Fearmongering Tactics in Waning Moments of Campaign

New Fearmongering Tactics

In the waning moments UK prime Minister David Cameron warns Scots "Leave and You Go Forever".

Actually, the warning probably should be "Stay and you stay forever" because the UK will never allow such a vote again.

Regardless, no country should want to be under the thumb of another.

Polls Diverge

The vote for Scottish independence is now too close to call. In a Scottish Poll Roundup one new poll over the weekend shows the "Yes" vote with a substantial 54-46 lead, but most polls show the "No" vote with a tiny lead.

• ICM (online) 54%
• Panelbase (online) 49%
• ICM (phone) 49%
• TNS (face to face) 49%
• YouGov (online) 48%
• Opinium (online) 47%
• Survation (online) 47%
• Survation (phone) 46%

If we ignore undecided voters, then judging from the last US presidential election when Nate Silver proved preponderance and clustering more important than margins-of-error which purportedly showed the election "too close to call", one might assume the "No" vote will carry the day.

I sided with Silver and called for an easy electoral college blowout, and that is precisely what happened.

But this is Scotland not the US, the undecided voters are many, and this is an overall vote not a state-by-state electoral college total.

Which way the undecideds break will determine the outcome.

Stiglitz vs. Krugman on Scotland

Bloomberg reports Scots Independence Campaign Nears Climax as Polls Diverge.

Activists were out in force across Scotland during the final weekend before the Sept. 18 ballot that might trigger the breakup of the union after more than three centuries. With opinion polls showing contradictory findings, both the “yes” and “no” campaigns said they were poised to win, introducing further uncertainty to financial markets fixed on Scotland.

Scottish First Minister Alex Salmond, the head of the pro-independence campaign, and Alistair Darling, the former U.K. chancellor of the exchequer who fronts the Better Together group, reprised arguments today over the economy, the pound and state-funded health care if Scots back independence. With the debate increasingly polarized, the focus now is on appealing to undecided voters in the final three days of the campaign.

“Independence may have its costs, although these have yet to be demonstrated convincingly; but it will also have its benefits,” Joseph Stiglitz, the Nobel laureate economist who was part of a panel that advised Salmond, said in an op-ed published in the Glasgow-based Sunday Herald newspaper.

Stiglitz, in his op-ed, cast doubt on the assertions made about Scotland post-independence, singling out fellow Nobel laureate Paul Krugman’s comments about economies of scale.

“By an order of magnitude, far more important than size is the pursuit of the right policies,” said Stiglitz. “There is, in fact, little basis for any of the forms of fear-mongering that have been advanced.”

Stiglitz or Krugman?

Both Stiglitz and Krugman are Nobel Prize winning economists. I seldom side with either of them. In this case they take opposite views, so one of them must have the better argument.

Stiglitsz is the clear winner. Economies of scale don't matter if the underlying policies are inefficient.

Scotland would have the chance to come up with its own corporate tax policies that would eventually attract far more businesses and jobs than the alleged financial jobs it would lose if it votes for independence.

That said, given the Labour party dominates Scotland, it is highly debatable whether Scotland would make the right corporate tax policies (but at least they would have a chance). And over time, voting preference can change.

Cameron Scared, UKIP Delighted

Moreover, and what probably has Cameron and Labour scared half to death, is that a "Yes" vote strongly increases the odds the UK leaves the EU.

Why?

This has not been widely discussed in mainstream media, but those Labour votes vanish from UK parliament and from UK in general. As a result UKIP and the anti-EU vote would get a big boost. That would be a good thing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com