PROSPECT THEORY AND POLITICAL SCIENCE Jonathan Mercer

2 MERCER
created an elegant and generalizable theory that has become the leading alternative
to subjective expected utility arguments.
If the findings from the lab extend to the field, then the political implications are
profound. We should expect policy makers in a domain of loss to take risks they
would be unlikely to take if they were in a domain of gain. They might escalate a
military intervention that is going poorly, gamble on a risky rescue mission, choose
war over peace, or embrace radical economic reform because they are in a domain
of loss. More generally, risk aversion might account for the relative stability of
the international system, explain how one might solve collective action problems,
and help identify the best way to influence an adversary. Kahneman & Tversky’s
research has had an enormous influence on decision theory (Read 2002) and in
economics. As acknowledged by the Nobel Prize committee when it awarded
Kahneman (Tversky died in 1996) the 2002 Nobel in economics, their research
is largely responsible for the creation of behavioral economics. Of the 2000 most
recent citations to Kahneman & Tversky’s 1979 article, about half are in economics,
business, management, or finance journals; more than a third are in psychology;
and the rest are distributed among various fields, such as law, mathematics, health,
sociology, statistics, and engineering. Political scientists are responsible for about a
twentieth of the citations. Between 1985 and 2003, Kahneman & Tversky’s article
was cited eight times in the American Political Science Review. 1 What explains
prospect theory’s limited influence in political science?
Prospect theory is influential in political science only among international relations
(IR) theorists who study international security (for reviews, see Levy 1992,
1997, 2000; McDermott 2001, 2004). Prospect theory has received little attention
in the fields of American politics and comparative politics, with a few exceptions
(e.g., Hansen 1985, Pierson 1994, Weyland 2002). Most surprising, political
economists have shown no interest in prospect theory. Psychological (or behavioral)
economics has become a “hot” topic for graduate students in economics,
as centers devoted to it have opened at universities in the United States, Europe,
Israel, and Japan (Altman 2002, Hilsenrath 2002). Kahneman’s Nobel Prize in economics
confirmed Richard Thaler’s observation that psychological economics “is
no longer considered radical” (Uchitelle 2001)—at least not in economics. Some
political scientists still view approaches that rely on psychological assumptions
rather than rationalist assumptions as “radical” (Treisman 2004, p. 348). Although
political economists were among the first political scientists to use prospect theory
(Mastanduno 1993, Pauly 1993, Spar 1993), they are now among the least likely
to use it (Elms 2004).
Prospect theory’s influence in IR/security, but neglect in the rest of political
science, is puzzling. Part of the explanation is institutional. Jervis (1988) was one
of the first political scientists to use prospect theory concepts, and his students
at Columbia University knew a good idea when they saw one (Cha 2002, Davis
1Citation data extracted from the Social Sciences Index Database of the Institute for Scientific
Information.