To win, it’s important how the indyref2 choice is framed

If you read last week’s Alex Massie blog, you may well be aware that one of the biggest cheerleaders for the union in 2014, has since the EUREF, started to change his tune on indyref2.

This week, in the Times of London, he is even forecasting how independence might win over risk-averse No voters. It all boils down to the framing of the choice.

In his article, Massie bases his argument on the work of psychological researchers,

The concept of “framing” was a new and bold idea when Amos Tversky and Daniel Kahneman, the Israeli psychologists, discovered — or invented — the concept more than 40 years ago. As they put it: “What constitutes a gain or a loss depends on the representation of the problem and the context in which it arises.” Preferences and, thus, choices are dynamic, not static. They change depending on the circumstances — the “frame” — in which they are made. Consider this example: Kahneman and Tversky found that if you offered people a guaranteed $500 or a lottery ticket that promised a 50 per cent chance of winning $1,000 most people took the guaranteed $500. People tended to act in a risk-averse manner. So a bird in the hand was preferable to the possibility of two birds in the bush. This was consistent with the standard economist’s view of decision-making.

But Kahneman and Tversky had the idea of reversing the premise. They asked their subjects if they would prefer to have a lottery ticket that offered a 50 per cent chance of losing $1,000 or, instead, a certain loss of $500. Most people preferred to take their chances on the lottery ticket. Suddenly people embraced higher risk if doing so might insulate them from certain loss.

He goes on to argue that in 2014, many No voters thought independence too risky.

They thought they were doing fine in the UK and they thought independence could go either way, so they decided to stick with the situation they know. For them, that situation was pretty good anyway so why throw that away in the off chance of getting something better. If there were to be a second referendum to coincide with the UK leaving the EU, then Massie argues things would be different. Independence would still be seen as a risk, but it would be a risk that people would be comparing to what they might perceive as a sure and potentially significant loss. The psychology tells us that people are much more likely to take a risk if they think it may enable them to avoid a sure loss.

So, if Massie and the Psychologists are correct, an important part of winning indyref2 is the framing of the choice.

We need to frame Brexit as a sure and significant loss and we need to minimise the risk element of independence. If we get the timing correct, I don’t think the first part of that equation will be difficult. As Massie points out in his article, pretty much all predictions about Brexit from serious sources are bad. Our argument on that front will be bolstered by many organisations and businesses who don’t support independence. Around the time of indyref2, there should be a cacophony of voices warning about the imminent financial and societal losses.

The second part is the part we need to get right. Independence will always be seen as uncertain but everyone knows there are some questions we need to answer better next time. Not least questions surrounding currency, pensions and deficit reduction. Already, if rumours are to believed, the powers that be might be about to put their foot in it again with regards to currency options. We can’t afford to be making the same mistakes twice.

Still, I agree with Massie that the Psychology of risk has shifted in our favour.

If we get the message right, then a lot of No voters might just be willing to take what they see as a plunge in order to try and avoid a definite loss.

On a similar subject, we did a blog on the run-up to the indyref1, about how the uncertainty of independence was overblown. We argued that staying in the union was just as risky. Turns out we were not far wrong. You can read that blog here.

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R J Hainey: Joint founder of Autonomyscotland. In my spare time I enjoy Road Cycling, Munro bagging and beer.

View Comments (2)

  • “. . . questions surrounding currency, pensions and deficit reduction. Already, if rumours are to believed, the powers that be might be about to put their foot in it again with regards to currency options. We can’t afford to be making the same mistakes twice”.

    Correct, and already the discussion is framed incorrectly. For most of everyone’s life we have been taught that defects are bad, that money has to be earned, and that we have to balance our budgets. This is absolutely true for households, businesses and people in general.

    But totally untrue if you are a monetary sovereign, currency issuing country, with your own free-floating fiat currency. In that case you do not face any fiscal constraint. You do not have to balance your budget, you do not have to reduce or eliminate the deficit, and you do not need tax revenues to fund spending.

    The present debate is taking place in a neoliberal ‘frame’. Continue in that way and independence is lost. Neoliberalism gave us the household analogy for our country’s government and the ‘shopping basket’ economics of Thatcher. That analogy is false and always has been, since the gold standard was finally dropped in 1971.

    At that point in time the £ was no longer tied to a commodity (gold) or another currency ($). It was free to float in value against other such currencies (apart from the brief period of the EMS).

    So if the value of the £ is no longer set by the amount of gold or US$ it can buy, what gives it its value? And what sets the limit to the amount of £ that can be “printed”? [93% of all money in circulation nowadays is actually electronic - only 3% is notes and coin].

    The value is given by the fact that the government levies all its tax bills, pays for all its purchases and conducts all its domestic business in the UK in £. If you don’t have some of these government issue ‘tokens’, you can’t pay your taxes and then you’re in trouble. That’s the bottom line. The second question: what’s the limit to the amount of £ that can be spent/ minted/ keystrokes into existence? The amount of everything out there that can be bought and paid for in £. That’s the limit. Not gold or $, but the total amount of all things - goods, services, human and material resources that are available for sale in the UK, priced in £.

    The government does not need your taxes to pay for anything. It can simply create as much money as it needs to fulfil its obligations to provide the housing, education, infrastructure, healthcare and welfare the country requires.

    At this point a couple of alarm bells ring in some people’s heads. “Doesn’t that mean we will then have a deficit of astronomical proportion?” Yes, but it doesn’t matter. We’re a monetary sovereign. We issue the money. We don’t borrow from anyone, we just spend it into existence as needed. A monetary sovereign state can never default on its sovereign debt, can never run out of money, and can never, ever be forced to go broke. The deficit has created and enabled the valuable assets in the country to be realised and put to good use. On the other side of the ledger to the deficit total is the sum of all goods and services purchased and realised for the benefit of the country. The ‘money’ itself is of no value whatsoever. The real stuff is where the value is. All that nonsense about saddling generations with debt is just that - rubbish. The Bank of England has been in deficit for nearly all of its entire existence. Has the UK gone bust yet? Or the Federal Reserve in the USA?

    “And inflation! What about inflation? You can’t just ‘print money’ Weimar, Zimbabwe, Venezuela...!” Firstly, it isn’t printed these days, it is keystroked into existence and credited to the government’s consolidated account and they then credit the account of someone when they buy something. Sounds too simple, but the BoE even says this is how it happens (BoE quarterly report). So inflation is only a risk when there is nothing much left to buy, and employment is close to 100%. And creating money, or printing it, does not cause inflation in itself. Inflation is only going to happen when the money is spent.

    So, what happens to all that money? It doesn’t just stay out there forever, because if it did, then there would be inflation, because the economy would be ‘full of money’, and there would be no ‘room’ for the government to spend more! Yes, but that is where taxes come into it. When the government spends it creates money. When the government taxes, it destroys money. Now you see why taxes do not and cannot fund government spending? First the money has to be spent. Only then can it be taxed. I hope at this point a light bulb comes on in your head. “Wait a minute... so all those times politicians say ‘we can’t afford it’... ‘where will the money come from?’, or ‘it will cost the taxpayer £££’, they are LYING?” Yep. To be fair some actually still believe the neoliberal “taxpayers’ money” idea, but some of them are acutely aware that it is not true. That is why companies ate so keen to win government contracts (Carillion and Capita), because they know the money supply is guaranteed, and it doesn’t matter if they don’t deliver. Ouch.

    I realise this is all a bit of shock, but it is very important to educate people to the reality of macroeconomics. Continuing to argue the case for independence using the orthodox neoliberal frame is a losing course of action. Paradigm shift time. Learn Modern Monetary Theory #MMT. There are plenty Facebook groups and websites, plenty of established economists out there to check out. The Labour Party has an MMT Group, Momentum has an MMT group, and there are numerous others. Maybe it’s time we had a “MMT for an Independent Scotland” group as well.

    I’m happy to take questions if people need help taking this further.

    Here a 6 minute video to get you fired up to want to know more.

    • I'm aware of MMT from reading Richard Murphy's blog occasionally. I have to admit I'm not economically literate enough to evaluate how good an idea it is. It seems logical though. I think it may be a bit radical as a way to persuade folk to vote for Scottish independence though. Although, if it was proven to be effective I would have no objection to practising it after a Yes vote. I'll look into it more in the future.