Risk, reason, and referendum

Every day we make life-and-death decisions. Get it wrong when driving, or crossing the street, and your next destination could easily be the morgue. But this year, many of us are being called on to make a more momentous decision: either voting for the next President of the US, or to determine whether the UK should remain in the European Union or not. Together the two outcomes will determine the future for the whole world.

The Presidential Election is a political matter. It is the duty of its candidates to convince sufficient of the electorate that they are the fittest for the job. How they do that, provided that they remain within the law, is entirely up to them. Experience shows that political campaigns have relatively little to do with facts or even forecasts, and are much more strongly based on credibility and persona.

The UK’s referendum, though, is very different, and almost apolitical, although how we got here is a quirk of political history. When it took a decade of sometimes bitter struggle to gain entry to what was then the Common Market, and in 1975 we confirmed that in the previous referendum that we wished to remain in the EU by a two-thirds majority, this has hardly been a spur-of-the-moment decision. But the choice before us now is about national and international interests, and of course economics.

So the two camps have the duty of convincing the electorate either that the UK should remain in the EU, or that the government shall take steps leading to the UK’s withdrawal from the EU.

There is still plenty of room for emotion and gut feelings in such a decision: some of us feel strong affinity with those in other European states, and a few may even feel that a United States of Europe is an admirable goal. There are some who feel that anywhere south of the Isle of Wight is worryingly foreign, alien, and not to be trusted. This referendum is not about such fears, prejudices, or overt hatred, in the way that politics may be.

There is an overwhelming need for each of us to evaluate whether we – ourselves, families, the nation, Europe, and the whole of humanity – would be better off with the UK in or out of the EU. That is a decision based upon forecasts of the two likely outcomes.

So the most important task, I would argue duty, of the two opposing camps is to provide us with the best forecasts of the outcomes, so that we can make a predominantly rational decision in our vote.

Those campaigning for us to remain in the EU should find this fairly straightforward. There is no shortage of economic, social, and other forecasts available from the UK government, EU bodies, the IMF, and many independent organisations. After all, pretty well every forecast to date is based on the assumption that the UK will remain in the EU.

The better forecasts make clear the risks involved, confidence intervals of their predictions, and sometimes even sensitivity analysis to assess the effects of different assumptions, etc. Although the official campaign site does refer to some of those, and mention risk, it could and should have been considerably more informative and helpful in this respect.

Because withdrawal from the EU could have seriously damaging consequences, the onus on those campaigning to convince us to vote for withdrawal is considerably greater. The social and economic benefits could be greater, but the assessment of risk inherent in such a decision is critical. Let’s say, arbitrarily, that there was a 10% risk of a major economic downturn, and a 1% risk of complete collapse: even quite a good chance of strong economic improvement might not justify change. This is no more sophisticated than the thought-processes of a good poker or bridge player.

In fact, when most large organisations consider such a major decision, they have decision and risk analysts working hard to identify and quantify every last detail of the pros and cons before arriving at an evaluation. You can buy software tools, usually Excel extensions, which use well-established procedures to do this, albeit on a smaller scale. If you take your business plan to a bank, it is the sort of thing that they may well expect you to have performed.

So a visit to the official Vote Leave campaign site left me puzzled. There are ample woulds, coulds, and similar words, but risk and evidence of any risk-based forecasts seem completely absent. The same applies to sites such as Better Off Out.

This either means that those trying to persuade us to vote to leave the EU do not have such forecasts and information available, or they have, but choose not to make it available.

If thorough risk-based decision analysis and forecasting has not been performed on the option to leave the EU, then I cannot believe a word of the claims which are being made in its favour, as they have no underlying objective basis – even a high-risk one.

If such analysis and forecasting has been performed, but is being withheld from us, then I think that I can reasonably assume it is because the element of risk is much higher than they are prepared to admit to, or that the forecasts do not support their simplistic headline claims of what would or could happen after withdrawal.

Before I am prepared to vote for an option on the ballot paper, I need to have a clear understanding of what that would let us into – best case, worst case, and most likely case. I have that for the option to remain in the EU, and although we’d all like more growth, I can live with that. For the proposal to undo the last half century in the EU and go it alone, I have nothing of any substance, just the sort of vacuous slogans that I would expect of a guts-and-gizzards political punch-up.

There is now less than a fortnight to go before we vote in that referendum. I wonder if this incredible lack of evidence to support the case for withdrawal will continue.

The UK’s referendum is not a Presidential election. It is not a question of whether I like the candidate’s dress sense, or whether they will smile nicely on TV. This is about whether our economy could collapse in the next five years, and my house and pension become worthless. That is not political banter, it is serious.