Prospect Theory and the Russo-Ukraine Conflict

Plato stated that “necessity is the mother of invention.” Similarly, numerous prospect theory scholars assert that perceptions of gains versus losses will influence the amount of risk an individual (or state) will accept. Essentially, those with more to lose will assume more risks, and those with relative stability or upward trajectory will take on less (McDermott, Fowler, and Smirnov 2008). However, Vis and Kuijpers (2018) argue that acceptance of risk, loss aversion, and outcome expectations are relative to the individual perception of losses and gains.

For example, Vladimir Putin gambled on the invasion of Ukraine, citing threats to Russia by a NATO ally on its border. This assertion ignores the likely economic and territorial expansionist agendas behind the incursion but similarly plays a role in his decision-making. He also has doubled down on that bet with his recent proclamation of mobilizing three hundred thousand more troops and the willingness to deploy more destructive weapons (i.e., potentially WMDs) to that end. As Anderson (1981) argues, the justifications for such actions may defy the “fundamental element of rationality” or expectations by the collective but are rational and pragmatic to the individual (Levy 1997).

Finally, Mercer (2005) states that the loss-gain domain is almost impossible to gauge related to political science because, like in the Russo-Ukraine example, there are too many factors to consider in determining individual risk assessments toward positive-sum expectations. Putin’s decision-making process estimated that the invasion and escalation of Ukraine would produce relative gains (economic, territorial, and security) despite anticipated losses (sanctions, casualties, public/international condemnation).

Tetlock (1999) argues that despite the inherent flaws in and dynamic nature of prospect theory, there can be a certain level of predictability in irrational actors’ decisions. Tetlock supports his position using hypothetical counterfactual case study analyses – “What if…?” in intelligence and national security terminology – to conclude that unexpected events or behaviors can create a predictable outcome, even when it challenges the status quo. McDermott (2004) similarly contends that utilizing prospect theory to examine dynamic influences and variables provides a polyheuristic approach to creating estimates or predicting possible outcomes. Prospect theory additionally allows for more “Red Team” analysis of what constitutes an irrational actor’s perception of loss versus gains based on the responding decision-maker’s interpretations of data and bias assimilation (Gerber and Green 1999; Vis 2018).

Applying this understanding to the Russo-Ukraine example above, Putin making these decisions was more predictable and made more sense. This predictability is because Putin runs an authoritarian regime where domestic and legislative disagreement is mainly irrelevant. Similarly, he presented justifications for the invasion to the international community that they have accepted from other states in the past.

Finally, Putin’s largely unopposed annexation of Crimea in 2014 led him to believe that the invasion would meet limited resistance and that any losses or consequences would be acceptable in the long run – the status quo triggering these heuristics (Mercer 2005). However, now he is fully committed to this conflict, and the escalation is also a calculated investment in a positive gain trade-off. Still, he is also influenced by “threat rigidity” (Renshon and Renshon 2008). It is also important to note that the U.S.’s perceived weakness, especially regarding President Biden’s cognitive health and capability, may have also factored into his decision-making and the anticipated NATO/U.S. response (McDermott 2007).

In closing, the foundation of many of the supporting arguments of prospect theory is in controlled studies or laboratory environments. Therefore, it cannot support the magnitude of dynamic variables involved in political science. However, decision-makers can use it to weigh their options in a given set of circumstances regarding loss versus gain or to assess the behaviors or potential actions of another actor. Prospect theory, when used in conjunction with other models such as game theory and rational choice, can provide a clearer picture to anticipate the behaviors of another actor and reduce uncertainty (McDermott 2004).

References:

Anderson, Paul A. 1981. “Justifications and Precedents as Constraints in Foreign Policy Decision-Making.” American Journal of Political Science 25 (4): 738–61. https://doi.org/10.2307/2110761.

Gerber, Alan, and Donald Green. 1999. “Misperceptions about Perceptual Bias.” Annual Review of Political Science 2 (1): 189. doi:10.1146/annurev.polisci.2.1.189.

Levy, Jack S. 1997. “Prospect Theory, Rational Choice, and International Relations.” International Studies Quarterly 41 (1): 87. doi:10.1111/0020-8833.00034.

McDermott, Rose. 2004. “Prospect Theory in Political Science: Gains and Losses From the First Decade.” Political Psychology 25 (2): 289–312. doi:10.1111/j.1467-9221.2004.00372.x.

McDermott, Rose. 2007. Presidential Leadership, Illness, and Decision Making. Cambridge: Cambridge University Press.

McDermott, Rose, James H. Fowler, and Oleg Smirnov. 2008. “On the Evolutionary Origin of Prospect Theory Preferences.” Journal of Politics 70 (2): 335–50. doi:10.1017/S0022381608080341.

Mercer, Jonathan. 2005. “Prospect Theory and Political Science.” Annual Review of Political Science 8 (1): 1–21. doi:10.1146/annurev.polisci.8.082103.104911.

Renshon, Jonathan, and Stanley A. Renshon. 2008. “The Theory and Practice of Foreign Policy Decision Making.” Political Psychology 29 (4): 509–36. doi:10.1111/j.1467-9221.2008.00647.x.

Tetlock, Philip E. 1999. “Theory-Driven Reasoning About Plausible Pasts and Probable Futures in World Politics: Are We Prisoners of Our Preconceptions?” American Journal of Political Science 43 (2): 335–66. https://doi.org/10.2307/2991798.

Vis, Barbara. 2019. “Heuristics and Political Elites’ Judgment and Decision-Making.” Political Studies Review, 17 (1): 41–52. https://doi-org.ezproxy2.apus.edu/10.1177/1478929917750311

Vis, Barbara, and Dieuwertje Kuijpers. 2018. “Prospect Theory and Foreign Policy Decision-Making: Underexposed Issues, Advancements, and Ways Forward.” Contemporary Security Policy 39, (4): 575-589. doi:10.1080/13523260.2018.1499695.

Ben Varlese is a former U.S. Army Mountain Infantry Platoon Sergeant and served in domestic and overseas roles from 2001-2018, including, from 2003-2005, as a sniper section leader. Besides his military service, Ben worked on the U.S. Ambassador to Iraq’s protective security detail in various roles, and since 2018, he has also provided security consulting services for public and private sectors, including tactical training, physical and information security, executive protection, protective intelligence, risk management, insider threat mitigation, and anti-terrorism. He earned a B.A. and an M.A. in Intelligence Studies from American Military University, a graduate certificate in Cyber Security from Colorado State University and is currently in his second year of AMU’s Doctorate of Global Security program.

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