Scottish independence: A Nobel Prize-winning route to leaving UK offers nationalists some surprising advice – John McLaren

Kahneman, along with his erstwhile collaborator Amos Tversky, studied attitudes to risky options and found that people make judgments based on systematic biases and preconceived ideas. Individuals care about changes rather than absolute levels, about losses more than gains, and have a propensity to avoid risk and stick with the status quo. This is a pretty good description of the hurdles that the pro-independence movement has to overcome, especially in relation to the economy and personal income levels.

Kahneman and Tversky ended up creating “prospect theory”, which asserts that – contrary to rational ‘utility' theory – people value gains and losses differently, and that this differential is dependent on the ‘reference point’ that they find themselves in at the time. So, if offered to win or lose money on the toss of a coin, most individuals need the gain to be much more than the loss before they accept the challenge. The bigger the gamble, the bigger the differential and all bets are off if you feel that your current lifestyle is at risk.

Compromises to achieve ultimate goal

This makes sense as a win can be viewed as a windfall, and you can decide at some later date what to do with it, but a loss is immediate and will require cutbacks on your existing, reference, standard of living.

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What does this all say about the independence debate? First and foremost, it suggests minimising the perceived risk attached to taking the gamble of voting for independence. Which means accepting more of the status quo and rejecting things that voters might perceive as dicey and give a strong negative weight to. Such an approach implies a proposal for independence that retains the pound and a UK common market, as opposed to the euro and a return to the EU common market; nuclear weapons and the idea of a ‘British’ Army; and even the Royal family. If your ultimate goal is independence, then these are secondary issues and compromise improves the chances of achieving it.

Over time, perceptions may alter and there may be scope for policy changes, by Parliament or through a referendum. But to push for independence while at the same time actively supporting perceived high-risk strategies – in terms of the economy, security, social mores – simply undermines your case.

A delicate path may have to be trodden in order to explain the need for independence, at the same time as retaining significant elements of the UK. However, following devolution and a Scottish Parliament being in charge of most major public services, voters may be more amenable to recognising the advantages of such a revised Union.

Voters took Brexit risk

There will still be difficult questions to answer in order to reassure voters. Uppermost will be how to fill the public spending gap that results from UK tax revenues no longer being shared. There is no easy answer to this but there is more likely to be a less risky – and costly – outcome, based on a reshaped UK where considerable cooperation is retained.

After all this you may be wondering – why did the UK vote for Brexit? My feeling is that the electorate just didn’t feel there was much risk involved and it could be argued they were proved right. While some negatives did arise, the currency didn’t collapse and employment levels remain at near record highs. Scottish independence is different, the potential for economic improvements are largely long term while the downside risks – on currency, reaching a prudent fiscal balance position, wealthy resident flight – are much more immediate.

Kahneman’s work also found that large changes in preferences can be caused by variations in the wording or ‘framing’ of a choice problem. This too has implications for how the independence argument is put forward.

At present, the pro-independence narrative is often negative in character, vilifying all things Westminster and highlighting the need to be free from its control, even its tyranny. This, in turn, implies that things need to be radically different in an independent Scotland and radical implies risk.

Seeing UK as friend not foe

An alternative narrative would be that, like in the EU, neighbouring states have much in common and can secure mutual benefits in areas like currency, the economy and security. So it is natural and ‘safe’ for Scotland to be independent while still working in close cooperation with Westminster. Such a shift towards viewing the UK as a ‘friend’ – regardless of who is in power – rather than a ‘foe’, maximises the status quo and minimises the prospect of great change with its inherent uncertainty.

Will this happen? A lack of imagination and of big characters within the Parliament and across Scottish politics in general bodes ill for such a reset. Furthermore, and unfortunately, Scottish and UK politics is very much confrontational in nature and seems to abhor the practice of cooperation (traitor!) across parties that is more commonly seen on the Continent.

The alternative would be a much stronger role for a non-political body driving the Yes campaign, and one led by moderates not extremists – thereby hopefully draining some of the bile from the debate. But that would be a big change. At present, there seems more chance of Godot turning up.

John McLaren is a political economist who has worked in the Treasury, the Scottish Office and for a variety of economic think tanks