Ardevora’s Monaco: Cognitive psychology and the Scottish referendum

Gianluca Monaco 700

In the run up to the Scottish referendum, both the Yes and No campaigns have been staging an arms race, trying to employ as much psychological weaponry as possible, in an effort to sway voters. We know from cognitive psychology that our decisions tend to be influenced greatly by the way information is presented to us and that we are likely to end up making completely different choices based just on how an alternative is packaged. In particular, there are three concepts from the psychology of decision-making which are particularly relevant here: loss aversion, narratives and framing.

The No campaign has been relying heavily on what is known in psychological terms as loss aversion: we tend to suffer more from losses than we take pleasure from gains, so that in general we tend to be rather risk averse and change averse.

It is not a surprise then that a lot of the unionist arguments highlight the risks and potential losses of jumping into the unknown, with the uncertainty about what currency Scotland would eventually have being one of the main suggested concerns. The spectre of a gloomy future is raised: what does it mean for your job, your savings, your pension, for any assets you have denominated in pound sterling? Wouldn’t companies want to move south of the border? Tread carefully here! You may end up broken and homeless!

In light of this, it isn’t a surprise neither that the Yes vote seems to be weaker among senior citizens, women and people in poorer areas – who all tend to be more risk averse – nor that Scotland’s First Minister Alex Salmond was very pleased when he got the UK government to agree to extend the vote to 16- and 17-year olds: teenagers do not tend to be that much risk averse!

The Yes campaign, on the contrary, has understandably decided to downplay any discussion of risks and focus instead on coming up with a fantastic narrative – essentially telling a great story. At a basic human level there are few things more inspiring than a compelling story. We like stories, they help us make sense of the world by simplifying issues and giving us at least the impression that we have control. And the story here is: we Scottish are up to it! We can take charge of our own destiny! So, why shouldn’t we?

This is a very powerful narrative, as it is based on a sense of identity, pride and optimism. It is also very effective in implying that those who decide to vote No do so because they think they are, and Scotland is, not up to it: not smart enough, not confident enough, not brave enough to go for independence. This campaign is tugging at the voters’ self worth.

Lastly, framing takes us back to the discussion about the wording of the referendum question. We react differently to the same question, if it is worded in different ways. That’s why the Scottish government had to change the question from the original “Do you agree that Scotland should be an independent country?” to “Should Scotland be an independent country?”. The first version was too loaded, as it implied an existing consensus to which it is psychologically easier to conform, rather than having to step out and actively disagree, thus gently suggesting the direction a person’s vote should take.

Nevertheless, the Yes campaign still has the edge here, as the question on the ballot paper retains the great advantage of being the ‘yes’ option, the positive one, rather than the grumpy-sounding ‘no’ answer, again adding to the good story effect.

So, in summary, loss aversion favours the No camp, whereas narratives and framing favour the Yes camp. The slight advantage the Yes campaign has enjoyed from a cognitive psychology point of view is not going to tell us what the outcome of the referendum will be, but helps explain how it has managed to close the gap with a No vote that, just a year ago, seemed the only conceivable outcome.

Gianluca Monaco is a fund manager at Ardevora Asset Management