Let's kill off the notion of EU federalisation once and for all. There's a very well-reasoned *mathematical* argument that says the EU will never federalise. To explain it, I have to explain the notion of a Pareto equilibrium.

A Pareto efficient outcome is where it is impossible to change things so as to make any one individual or state better off without making at least one individual or state worse off.

In other words, if a position isn't Pareto-efficient, a change can be made that makes one party better off without making others worse off.

Now, the veto that each EU member state has prevents federalisation. Here's the logic behind it.

For the EU to federalise, *every* member state would have to vote to give up its veto. One hold-out and federalisation can't happen.

The veto ensures that any constitutional change has to benefit every state. If it doesn't then the losing state would veto it.

If, for instance, a free trade agreement didn't benefit every state (and region within each state with a veto over the state's vote) then the FTA will not happen. This explains the control that a small region of one EU state had over the agreement on the Canadian FTA, CETA.

To federalise a way would have to be found to ensure that, in the unknowable future, no state would lose out from giving up its veto. This would have the effect of reimposing the veto as law instead, but states without a veto wouldn't be protected from future changes to the law.

The book Veto Players: How Political Institutions Work, written by political science professor George Tsebelis, explains how the current veto system is a Pareto-optimal equilibrium.

He argues that the status quo will only change if it is weakly preferred by all veto players (since otherwise one of the players would veto the choice). This is analogous to saying that the status quo will only change if the status quo is not Pareto efficient for veto players.

Tsebelis then suggests that where Pareto improvements are available, the social choice will be for a point which is Pareto efficient.

The Pareto-efficient outcome is therefore where each state retains its veto and the EU never federalises. It's the better form of democracy.

The UK, on the other hand, is not optimal. It's why break-up of the Union is currently inevitable. Regions can be badly disadvantaged by decisions taken at Westminster, but have no way in our two-party system of responding effectively. Leading to this.