UnRisk Omega

How I Successfully Forecast The Result Of The EU Referendum

Gosh, this is embarrassing. I seem to have done the double.

This is a sequel to my blog from last year How I Successfully Forecast The Results Of The UK General Election.

A few days ago I had a try at forecasting the result of the EU Referendum. My analysis predicted 51.4% for Leave and 48.6% for Remain, although I had a few caveats about the fear factor and the role of bad weather. The final result was 51.9% and 48.1%. This forecasting business is a piece of cake.

Details: A Proper Analysis Of The EU Referendum Polls.

Essentially the polls were noisy because the samples were too small. Not exactly rocket science. And the averaging that some newspapers etc. were doing just didn't make any statistical sense.

My impression of the result is that the common man was sick of all the bullying from the politicians (World War III, The end of Western Civilization), the CEOs (spouting rubbish from the comfort of their private islands), the manipulative bankers (Goldman Sachs being the prime example, behind so many bad things that have happened lately), and the luvvies (in their pink berets, I mean is Eddie Izzard really going to lose ticket sales to a comedian from Germany?). None of those has to worry about state education, the NHS, being undercut by Eastern Europeans. It was quite beautiful to watch. As dramatic as the Eurovision Song Contest but the UK won. I am proud of the voters. For a while there I confess to being worried that the British character had been lost.

As we now enter the stage of negotiating with the EU I'd like to also mention something I wrote after the 2010 General Election in this blog: Politics, Panic and Poker.

I wrote "If this is the quality of horse trading we can expect from the current crop of British politicians then Lord help us when we have to haggle with the wider world." This was in reference to negotiations leading to the coalition. It was prescient of Cameron's feeble negotiation with the EU earlier this year. So please, for the sake of the UK, can Cameron's replacement be someone with better negotiating skills? Put a businessman in charge of haggling, not another PR person.

A Proper Analysis Of The EU Referendum Polls

I've been following the polling with obsessive interest. And finding the analysis somewhat feeble. I'm going to very quickly address the topic of polls of polls, then present my own analysis.

This referendum is significantly harder to predict than the General Election, the quant has no advantage over vanilla pollsters. But at least I don't have to be quite as daft as some of the reporters of polls.

Wikipedia is very helpful in collating poll data (see here). It also collates polls of polls performed by various parties, especially newspapers.

These polls of polls typically take the "five most recent polls" (Financial Times). Why five? Or the "six most recent polls" (Telegraph). Again why six? Or "excludes polls with fewer than 900 participants." (Economist) Ok, I know that the Financial Times and the Economist are pretty dumb, but I'd expect better from the Telegraph.

Obviously they take polls of polls in order to reduce statistical error. But why five polls, for example?

I'm going to do something slightly different but far more intelligent.

I'm also going to ignore online polls. Why? Well, we are told that telephone polls are more accurate. I'm not totally convinced, but I'm in a hurry here.

All I do is to group telephone polls so that they add up to approximately 10,000 respondents. This puts an order of magnitude of 1% on the errors. This obviously makes some assumptions, the key one being that people change their minds relatively slowly compared to the timescale between polls.

Anyway this is what I get:

 Polls to: 25 Feb 18 Apr 25 May 20 Jun
Remain 50.7% 48.3% 49.0% 46.1%
Leave 36.9% 39.9% 40.1% 46.3%
Don't Know 12.3% 11.3% 10.4% 7.3%

In many ways this is not vastly different from other polls of polls, except that it is statistically more accurate, and also shows a fairly obvious trend. (Part of which will be because there are fewer data points!)

It doesn’t get any closer than that.

A little bit of ad hoc extrapolation results in 48.6% for remain and 51.4% for leave, assuming DKs don't vote.

Unfortunately, there are several external factors which will affect the final result.

In favour of remain: Fear of change, risk aversion; Graduates more likely to vote; Older voters being persuaded by grandchildren; Even football fans in France who probably haven’t sent their votes in!

In favour of leave: Apathy, especially among the young; Bad weather

Referenda are funny things. They suffer from a timing problem. They are only called when a sufficiently large part of the electorate is sufficiently forceful. But that proportion is rarely over 50%. So by definition almost referenda are called too soon. In this respect Cameron was correct in making the referendum as early as possible. Waiting a year would have made this much harder for the remainers.

One of the key elements that will have an effect when one is in the voting booth is the fear of change. The status quo traditionally has a big advantage. Now usually the politicians spout nonsense about how “Every vote counts.” In this case, where fear is a factor, they would be better off telling the truth which is “Your vote doesn’t really matter very much at all.” That way people might feel braver.

Which way is it going to go? I think it will be remain. Some of the extra factors mentioned above could swing things by 5%. And I think the fear factor is top of the list of unknowns. Therefore I’m hoping for really bad weather, then only the passionate voters will turn out, and that means leavers.

I’m still debating whether to put on a bet. The odds on Brexit have lengthened quite a bit. So although I’d be likely to lose the bet that’s not the point.

Things That Haven't Been Said About The EU Referendum

Debate? Debate?? They don’t know the meaning of debate!

The two sides have both in their own ways been like broken records. The same old arguments with made-up stuff passed off as facts. Now obviously I believe the Remain campaign are far and away the bigger tellers of untruths. But, you know what? There actually aren’t any facts to be had. Not a single one. All you’ve got to help you make decisions is your common sense.

So I’m going to explain a few things that I don’t think have been discussed enough, and throw some common sense into the ring. And I’ll do a little bit of unspinning. At least those are my intentions.

Yesterday I heard Cameron say that by staying in the EU we would be able to promote British values in the EU. And this was supposed to be a good thing. Sounds like a typical Dave soundbite. And typically one that doesn’t hold up to scrutiny. Even if we wanted the rest of the EU to have our values there are still 27 countries trying to push their values on us. One against 27? We lose. Again. But, hey, why should we want France, Italy, Poland to have our values? Their values are none of our business. And if you recall, pushing unwanted values on people doesn’t tend to go down well. Compare and contrast the Middle East. Equally, I don’t want French,… values. All I care about is that the UK retains British values. Which leads on to…

I rather like the fact that different countries in the EU are…different. With different values, weather, customs, etc. Before you know it the megalomaniacs in Brussels will be trying to move mountains. Wouldn’t it be right and proper if Mont Blanc were divvied up across the whole of the EU? Maybe spread out the Spanish weather uniformly? (Ok, maybe that one.) I like Europe a lot. But I like variety. I don’t like the homogeneous mess that it is becoming.

I think the Brexit campaign are being unduly negative about Cameron’s pledge to reduce immigration to five figures instead of six. It can be done. His tame economics experts will be able to explain this, on the grounds of supply and demand. Once the UK becomes a disaster zone like Greece that will sort out immigration. No one will want to come here.

Finally, we are told that it could take ten years to negotiate a trade deal with the EU if we leave. I agree totally. However, it’s not the UK that would take the time. It’s not Canada that’s slow to negotiate. The common factor is the EU. The reason is that we would be negotiating with bureaucrats and lawyers. Some of you reading this will be business people. You’ve done deals, right? Many of them. And how much use were the lawyers? I know they plugged a few loopholes for you, but didn’t you get to a point where you just had to get the deal done, despite the lawyers, never thanks to the lawyers? Can you imagine dealing independently with the Chinese (population 1.4 billion)? Again, if you’ve worked with the Chinese you’ll know that they move at lightning speed. Or the Commonwealth (population 2.1 billion)? Or would you rather restrict yourself to the EU (population 0.5 billion) and have the lawyers negotiate all your business deals. I’ve said it before, but it's worth repeating, often, that if lawyers ran the world we’d still all be living in caves. But the lawyers would have the biggest caves.

I’d like to end this rant by suggesting something that’s again not politically correct. And that is, if you don’t know which way to vote then just don’t vote. All those people who suffered and died to get everyone the vote didn’t do so in order for you to toss a coin (as I’ve heard at least one person say).

Why I And All My Rich Pals Are Voting To Stay In The EU

I’m relatively rich.

I can afford private healthcare. I don’t have to worry about long waiting lists for operations or the impossibility of getting an appointment with my GP. If I or my rich friends need a doctor then there are plenty of wonderful chaps in Harley Street. I know they charge quite a bit. An hour with one of them could pay for a holiday in Ibiza for a family of poor people. But my friends charge even more. We’re all something in the City, or lawyers, in PR and advertising, academics, or high up in the BBC. Some of us are lucky in being ‘celebs,’ earning millions for speaking in funny accents and looking serious in front of a camera.

I can afford private education. I don’t have to worry about large class sizes in which English is rarely spoken. Some of us rich people send our children off to expensive boarding schools to prepare them for life. The life of a senior politician. Or we send them to independent schools in London. I know, I know, full of Russian oligarchs who we sneer at behind their backs. But those oligarchs do throw the most outrageous parties and their wives are simply gorgeous!

I know we’re all rich but there are some things for which we refuse to pay more than is necessary. That’s why I like all the EU immigrants, especially those from Eastern Europe. They make the most wonderful cleaners. A British cleaner is just too expensive. My friends who are CEOs of large corporations cannot praise the Eastern Europeans too much. Just do the sums, every pound in pay saved by employing an Eastern European in their company goes straight into the CEO’s pocket as part of their bonus. That’s one pound, per hour, per employee, it adds up to…the numbers are too big to do in my head, but put it this way, some of my CEO friends commute to work from their country shooting estates to London in their own helicopters. You’ve got to love free movement of labour!

My politician friends in the EU Remain campaign even have a clever way of spinning the advantages of immigrant labour. Get this, “the immigrants contribute more in taxes, and take less in benefits, than the native Brits.” That fools the proles almost every time. What they don’t say is that the real explanation for this is that the immigrants undercut the Brits and take their jobs. Net result…exactly what they say, “the immigrants contribute…” I’m not sure how the Brit who’s lost their job feels about this. Probably not too good. (Do poor people have an old boys’ network? I’m not sure, I don’t really talk to any.) And as that immigrant takes the job of the Brit it also increases the number of people who need healthcare, education and benefits (that poor unemployed Brit!). Well, as I said above, I can afford private healthcare, etc. etc.

Only two weeks to go now before the Referendum. Just got to keep pulling the wool over the eyes of the poor, and the young, for fourteen more days!

Why don’t you and the family pop over to our villa in Tuscany for a few days during the summer hols? We’d love to see you and Isabella.

Alicja, when you’ve finished cleaning the fridge and taken the dog for a walk, could you be a dear and make me a cup of tea?