Known unknowns, known knowns, unknown knowns and unknown unknowns

The categorisation in the title- or at least part of it – is often attributed to Donald Rumsfeld when he was American Secretary of State for Defence (though he certainly was not the first to use it). The full quote goes

“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult one”

Of most concern to Rumsfeld therefore were unknown unknowns, which the British Columbia Royal Commission of Inquiry into Uranium Mining in 1979 distinguished from known unknowns as follows

“Known unknowns result from phenomena which are recognized, but poorly understood.”

So for instance, we don’t fully understand weather – will threatening clouds just pass over, or will it rain before I get back- so if I go out for a walk I might take an umbrella as “insurance”.

“On the other hand, unknown unknowns are phenomena which cannot be expected because there has been no prior experience or theoretical basis for expecting the phenomena.”

Many of the demands for information made by Better Together during the last referendum could often be categorised in either of these ways. Questions would continuously be posed so that if there was no answer then they could say “see, they don’t know” (the known unknown, or in some cases the unknown unknown). Or if there was an answer to use it as a platform to pose further questions. One instance of that strategy was the BBC’s well-worn style “warning about …….”, linked to independence. Craig Murray helpfully even provides an illustrative list (https://www.craigmurray.org.uk/archives/2013/04/bbc-the-new-hammer-of-the-scots/), though as Murray points out, these are only those where both “independence” and “warning” both appear in the same title.

  • ‘Scottish independence: Pension shortfall warning’
  • ‘Scottish independence: Warning over “weakened military”‘
  • ‘Scottish independence: “Havoc” warning from pensions firm’
  • ‘Scottish independence: Luxembourg warns against “going separate ways”‘
  • ‘Scottish independence: Barroso warning on EU membership’
  • ‘Scottish independence: Michael Moore issues warning over vote question’
  • ‘Scottish independence: “Border checks” warning from home secretary’

An interesting example is the last of these, “border checks”, since the Home Secretary in 2014 has now become our Prime Minister. The contemporary BBC report says that (http://www.bbc.co.uk/news/uk-scotland-scotland-politics-17505302)

  1. “Ms May claimed independence could lead to mass immigration problems.” – quite why this was the case was never explained. Perhaps if independence had been such a disaster there would have been widespread hunger so that Scots were fighting to get out? If the reaction of rUK in these circumstances was to erect border posts to keep starving people out, then even on the basis of that rather unlikely hypothetical, should we not be looking to become independent?
  2. “Afterwards, the home secretary said she envisaged “some sort of border check” if Scotland joined the European Schengen common travel area” – but at the very least there was no certainty that Scotland would have joined Schengen – indeed Better Together would tell us often as they could that we would not be able to join the EU for many years. In any event, how would the EU have benefited from forcing Scotland – which has no direct border with any country other than England – to join Schengen. A more intelligent proposition would have been that Scotland, like the Republic of Ireland, would have joined the Common Travel Area, which has operated to the satisfaction of most since 1922 as the Home Office were disinclined to patrol the porous and meandering border between Northern Ireland and the Republic. Just why Scotland would be treated differently was never made clear – a known unknown.
  3. “Ms May called for clarity on the issue as part of the independence debate.” – or put another way, May was calling on Yes to get the European Commission to opine on whether they would insist on Scotland being forced to join Schengen, even though the Commission would only reply if such a request came from the government of a member state, which in this case was the government at Westminster, of which May was a member. And there is a parallel here with Tom Peterkin this morning (http://www.scotsman.com/news/snp-seeks-a-way-to-avoid-border-checkpoints-after-independence-1-4208480) and May two years ago, in that the onus in both is placed on Scotland. Peterkin’s report appears with the headline, that “SNP seeks a way to avoid border checkpoints after independence”, but even he is eventually driven by the facts to quote Fabian Zuleeg, chief executive of the European Policy Centre and one of Sturgeon’s panel of EU advisers that all parties “would do whatever they can to avoid” a hard border

    In fact, clarity could have been provided in both cases if London had advised us just why the border between Scotland and England was so much more difficult than the border between the two parts of Ireland, that it would have to be managed much more rigorously. But that question has never been put. We know that London is anxious not even to be seen to do anything that might undermine the peace process in Northern Ireland, and making a “hard border” between the North and the Republic is the last thing they would want. Why, when illegal immigrants could just as easily get to Dublin, travel north to Belfast and thence into the UK, is Scotland different? Instead when in 2014 independence was put on the back foot on this matter the standard “scaremongering” response was made – when really it is London who should be answering the questions, particularly when on 24th June on Any Questions Chris Grayling (Secretary of State for Transport and leading Brexiteer) was quite certain – the day after the EU referendum – that the Common Travel Area would continue as before.

    Yet this has barely scraped the surface of the debate about Scottish independence. Only those who argue for Scottish independence are expected to fill in the gaps of the known unknown. Only we are expected to know the unknowable. Professor Patrick Dunleavy (LSE) said during the last referendum debate that the Scottish Government would need the forecasting ability of the “Delphic Oracle” to be able to answer the questions from Better Together (and their allies in the media). Such requirements do not apply to London, and it is not as if their position brooks no uncertainties, particularly since 23rd June and the vote for leaving the EU.

A more contemporary example appeared in the Herald in the last seven days. It was started by a reply to a letter by the doyen of Herald letter writing Iain AD Mann who had questioned why it was that Scotland was being singled out for special attention because of the deficit GERS suggests we are running (http://www.heraldscotland.com/opinion/letters/14682154.Readers__39__Opinion__Why_should_Scotland_be_the_only_nation_berated_for_debt_/). This drew the following response from Peter Wylie of 26 New Street Paisley, who variously appears to be a consulting actuary and to work in insurance and pensions (coincidentally 26 New Street Paisley is given as the address of the local Conservative Club).

Mr Wylie wrote (http://www.heraldscotland.com/opinion/letters/14686248.Readers__39__Opinion__It_is_the_Union_that_has_helped_so_many_Scots_to_achieve_greatness/)

IAIN AD Mann (Letters, August 15) seems to think that because the United Kingdom has borrowing of £1.62 trillion, an independent Scotland should be able to cover the shortfall of £9 billion in its revenues identified in the recent report by Government Expenditure and Revenue (Scotland) – GERS -– quite easily by government borrowing.

He does not seem to understand, first of all, that the amount of UK national debt has no relevance to the question of whether or not an independent Scotland would be able to cover a shortfall in revenues by borrowing.

The UK national debt is funded by the issue of government securities that are mainly bought by UK-based financial institutions such as insurance companies, pension funds and investment funds. In an independent Scotland there would almost no market within Scotland for government debt. The financial institutions that are based in Scotland, Standard Life for example, could not invest in the debt issued by a Scottish government because the bulk of their liabilities would still be in sterling because about 90 per cent of their customers are in England.

An independent Scottish government would have to try to sell its debt abroad. It is unlikely that debt expressed in a Scottish currency would be attractive to foreign investors but taking on the liability to repay borrowing in other currencies would be very risky.

If the Scottish currency fell against the currency in which the borrowing had been made, the cost of servicing the debt, which would be a lot higher than the cost at which the UK government can borrow because of the fact that an independent Scotland would have no track record in borrowing and, more importantly, repaying borrowing, would increase sharply and the deficit the debt was supposed to cover would get worse.

Mr Mann says “it is perfectly feasible that if Scotland had the normal borrowing powers of a self-governing nation we could cover negative variations between income and expenditure”. The probability is that attempting to do exactly this would have disastrous consequences for us all.

Peter Wylie,

26 New Street, Paisley.

I have highlighted the most contentious points, which I addressed in a reply to Wylie (see below). These are

  1. His claim that there would be no market for Scottish government debt, which is clearly a known unknown – not impossible, but clearly a “worst case analysis” without further evidence
  2. Why would Standard Life not invest in Scotland when they are a global brand which must deal in a great many currencies – not even a known unknown. Just wrong.
  3. Some countries do indeed sell their debt in the currency of other countries, and it is indeed risky, and can become expensive if currencies move against you. But that point depends crucially on his first two points being correct when one of them is just wrong and the other much less than certain.
  4. It is probably right to say that initially an independent Scotland might have to pay a premium by virtue of being the new kid on the block. But how much more? For how long? Or looked at another way, for how long will the UK be able to get by with interest rates as near zero as makes no odds?

There is the possibility that Mr Wylie is correct, but as an actuary I am pretty sure that he knows its not a probability and in any event is well within the territory of the “known unknown”.

My own reply to him appeared in the Herald a couple of days later (http://www.heraldscotland.com/opinion/letters/14692096.No_evidence_that_Scotland_would_be_unable_to_address_challenges_all_small_countries_face/) – you might recognise the analysis?

PETER Wylie (Letters, August 17) takes Iain AD Mann (Letters, August 15) to task for thinking that an independent Scotland could cover its £9 billion deficit “quite easily by government borrowing”. But in so doing he treats what really are “known unknowns” (to quote Donald Rumsfeld) – what we know we don’t know – as “known knowns” – what we know we know (or in Mr Wylie’s case, what we think we know).

One example is why Standard Life would not buy into Scottish government debt. Since it considers itself a global business, even if “90 percent of its customers are in England”, it must deal in a whole range of global currencies. Yet according to Mr Wylie they would be deterred from investing in Scottish debt for currency reasons. Surely if the return is reliable and competitive, then investors would be happy to invest? The issue is not the currency in which they are paid, but the reliability of return, and in this regard, for the UK, even with the fall in the value of the pound since June 24, and the prospect of Brexit is informative as the UK is still able to sell gilts to manage its debt.

How much Scottish debt would be owned domestically is certainly a “known unknown”, but how is it that other small countries – or even some large ones – which do not have a financial services sector on the same scale as the UK, get by? Or is Scotland uniquely disadvantaged in this regard?

His final “known unknown” is that the cost of servicing debt for an independent Scotland would be “a lot higher” than for the UK government. Leaving to one side what “a lot higher” actually means, and more importantly whether the UK will continue for much longer to be able to finance its debt at present rates of interest, the premium on Scottish debt would depend on the scale of deficit we face on independence. Let’s suppose that is not before 2020. What will the price of oil be then? What level of UK debt would Scotland actually have to take on? If “known unknowns” exist, then these are examples.

In short, Mr Wylie in sketching out his severe, if not apocalyptic, view of the future, really does ignore Mr Mann’s core point, that if arguments, such as Mr Wylie’s, are to be redeemed then they really do have to be obliged to present evidence why an independent Scotland would be unable to address the challenges that every other small country does. Certainly presenting “worst case analyses”, such as Mr Wylie’s, singularly fails to do this.

This form of challenge is, I would argue, more effective against the “scaremongering” response that seemed standard in Yes. To demand that they redeem their claim, and expose its own uncertainties is harder work, but has more substance than just asserting that it is scaremongering. A scaremonger is defined in the Cambridge English dictionary as “a person who spreads stories that cause public fear”. The problem often with Better Together, and increasingly with the Unionist case is that these are stories which either lack evidence, and/ or are contrived or made up.

Just today Derek Bateman has written in his blog about, in effect the scaremongering of elements of the Scottish media, trying to suggest that attempts are being made by indy supporters to silence them. Among the arguments that Bateman uses to nail this are that when you consider

“James Foley, beheaded by jihadists. John Cantlie still held by ISIS two years on. US reporter Alison Parker shot dead live on air. Gadzhimurat Kamalov hit six times in a drive-by shooting in Moscow. Of the 27 journalists known to have been murdered so far this year, 37 per cent were related to politics, according to the Committee to Protect Journalists.

……

I knew an editor in Kashmir who published what rebels told him or he would die, a female reporter from Chile who had been forced not to tell the story of abductions under Pinochet and a Yugoslavian journalist who feared he could not work under threats from Serbs and Croats as the Balkan conflict got under way. (All encountered in the US in 1991).

I’ve had my notes examined and my camera crew’s film vetted by Israeli security, been delayed at a Romanian airport while my director’s passport was held up (for a bribe) and recorded secretly in China after being denied a journalist’s visa. I had to go up a stair into a room full of unsmiling men to ask ‘Sinn Fein’ permission to record voices on the street in West Belfast.

Believe me, working as a hack at Holyrood is a doddle.” (my emphasis). http://derekbateman.scot/2016/08/21/can-i-quote-you/ strongly recommended

It is worthwhile remembering this when the next one flounces off Twitter or closes their Facebook account. Torrance has had his shot (for a few days), Neil Oliver has told of vile cybernats who have hounded him off a Twitter account it appears he didn’t use that much (and which didn’t give him the evidence to support his claim). One wonders who might be next? But the important point is that faced with this bleating, what is needed is a critique and Bateman offers this in spades. In addition to the above Bateman offers a reasoned denunciation of such as Torrance and Daisley, and this is where we have to go. When a claim is made by Unionists then it has to be challenged with a reasoned argument, pointing to its errors, exaggerations and fictions rather than whine “scaremongering”. It is almost certainly true that creating uncertainty, doubt and worry is their aim, and that the charge of “scaremongering” is both accurate and legitimate. But beneath all that lurks a Unionist argument (of sorts) which can be critically appraised and potentially be shown to have little force, being at the limits of what is likely or even possible.

 


 

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