Evaluating Propect Theory as a Model to Predict Risk-taking in International Relations

Abstract

Causes of risk-taking behavior have been studied extensively in the social sciences. Research in psychology and economics in particular has contributed to a re-evaluation of how actors approach the topic of risk in international relations. Presented here is an evaluation of both the current literature base on risk in global politics and new findings and analysis. Specifically, this paper focuses on the potential of prospect theory to explain risky actions. The current literature is very strong in providing case studies that examine specific instances of risk-taking, but contains few attempts that address the entire system. Therefore, a logistical regression model was used to test the ability of prospect theory and more traditional theories to predict risky actions. The data indicates that the causes of risky actions depend upon how risk those actions are. Fairly risky military mobilizations appear to be caused by the loss of relative military power, while extremely risky mobilizations appear to be caused by the loss of domestic prosperity. This paper examines why this might be the case, and concludes that while difficult to quantify properly, prospect theory has great potential to explain behavior in international politics.