scholarly journals LOSS AVERSION AND RISK-SEEKING IN KOREA–JAPAN RELATIONS

2020 ◽  
Vol 20 (1) ◽  
pp. 53-74
Author(s):  
Chaekwang You ◽  
Wonjae Kim

AbstractSince Korea's transition to democracy in 1987, Korean leaders have become increasingly confrontational toward Japan, with such steps ranging from verbal threats filled with hawkish rhetoric to material threats, such as displays of military force and threats of actually using it. To explain South Korean leaders’ hawkish approach to Japan, we build a theory of “prospective diversion” by combining insights from the diversionary theory of international conflict and prospect theory. We argue that foreign policy leaders have a strong tendency to overvalue political losses relative to comparable gains in their approval ratings. As a result, they are inclined to take risk-seeking diplomatic actions toward foreign adversary to avoid further losses. By conducting statistical analyses and developing case studies of Korean leaders’ confrontational policy decisions regarding Japan, we present empirical findings consistent with our hypothesis that Korean leaders are inclined to engage in prospective diversion toward Japan when they suffer domestic losses. This article provides an enhanced understanding of the domestic political foundation of South Korean leaders’ increasingly contentious attitude toward Japan.

Author(s):  
Jeffrey W. Taliaferro

Prospect theory is one of the most influential behavioral theories in the international relations (IR) field, particularly among scholars of security studies, political psychology, and foreign policy analysis. Developed by Israeli psychologists Daniel Kahneman and Amos Tversky, prospect theory provides key insights into decision making under conditions of risk and uncertainty. For example, most individuals are risk averse to secure gains, but risk acceptant to avoid losses (loss aversion). In addition, most people value items they already posses more than they value items they want to acquire (endowment effect), and tend to be risk averse if they perceive themselves to be facing gains relative to their reference point (risk propensity). Prospect theory has generated an enormous volume of scholarship in IR, which can be divided into two “generations”. The first generation (1990–1999) sought to establish prospect theory’s plausibility in the “real world” by testing hypotheses derived from it against subjective expected-utility theory or rational choice models of foreign policy decision making. The second generation (2000–present) began to incorporate concepts associated with prospect theory and related experimental literature on group risk taking into existing mid-level theories of IR and foreign policy behavior. Two substantive areas covered by scholars during this period are coercive diplomacy and great power intervention in the periphery as they relate to loss aversion. Both generations of prospect theory literature suffer from conceptual and methodological difficulties, mainly around the issues of reference point selection, framing, and preference reversal outside laboratory settings.


2015 ◽  
Vol 5 (3) ◽  
pp. 81-87 ◽  
Author(s):  
Shahabeddin Shams ◽  
Fatemeh Rezvani

This study measures the portfolio performance of listed investment companies in Tehran Stock Exchange (TSE) based on prospect theory. The criterion is measured by the ratio of gain to loss, to reflect risk-aversion in gains and risk-seeking in losses. The sample consists of 15 listed investment companies registered in TSE during 2003-2013. Research variables consist of portfolio return, market return, risk-free return, systematic risk, Treynor and Loss Aversion index. Hypotheses have been tested with Spearman correlation coefficient. The results show that Loss Aversion can be used as a new index for measuring portfolio performance.


Author(s):  
Benjamin O. Fordham

In the three decades since Jack Levy published his seminal review essay on the topic, there has been a great deal of quantitative research on the proposition that state leaders can use international conflict to enhance their political prospects at home. The findings of this work are frequently described as “mixed” or “inconsistent.” This characterization is superficially correct, but it is also misleading in some important respects. Focusing on two of Levy’s most important concerns about previous research, there has been substantial progress in our understanding of this phenomenon. First, as Levy suggests in his essay, researchers have elaborated a range of different mechanisms linking domestic political trouble with international conflict rather than a single diversionary argument. Processes creating diversionary incentives bear a family resemblance to one another but can have different behavioral implications. Four of them are (1) in-group/out-group dynamics, (2) agenda setting, (3) leader efforts to demonstrate competence in foreign policy, and (4) efforts to blame foreign leaders or perhaps domestic minorities for problems. In addition, researchers have identified some countervailing mechanisms that may inhibit state leaders’ ability to pursue diversionary strategies, the most important of which is the possibility that potential targets may strategically avoid conflict with leaders likely to behave aggressively. Second, research has identified scope conditions that limit the applicability of diversionary arguments, another of Levy’s concerns about the research he reviewed. Above all, diversionary uses of military force (though not other diversionary strategies) may be possible for only a narrow range of states. Though very powerful states may pursue such a strategy against a wide range of targets, the leaders of less powerful states may have this option only during fairly serious episodes of interstate hostility, such as rivalries and territorial disputes. A substantial amount of research has focused exclusively on the United States, a country that clearly has the capacity to pursue this strategy. While the findings of this work cannot be generalized to many other states, they have revealed some important nuances in the processes that create diversionary incentives. The extent to which these incentives hinge on highly specific political and institutional characteristics point to the difficulty of applying realistic diversionary arguments to a large sample of states. Research on smaller, more homogenous samples or individual states is more promising, even though it will not produce an answer to the broad question of how prevalent diversionary behavior is. As with many broad questions about political phenomena, the only correct answer may be “it depends.” Diversionary foreign policy happens, but not in the same way in every instance and not in every state in the international system.


Author(s):  
A. FREDDIE

The article examines the place and role of democracy and human rights in South Africas foreign policy. The author analyzes the process of South Africas foreign policy change after the fall of the apartheid regime and transition to democracy. He gives characteristics of the foreign policy under different presidents of South Africa from 1994 to 2018 and analyzes the political activities of South Africa in the area of peacekeeping and human rights on the African continent.


1995 ◽  
Vol 47 (4) ◽  
pp. 534-554 ◽  
Author(s):  
Kurt Taylor Gaubatz

This article argues that the problems identified in the literature on public choice should critically affect our research on public opinion and our understanding of the impact of public opinion on foreign policy. While a robust literature has emerged around social choice issues in political science, there has been remarkably little appreciation for these problems in the literature on public opinion in general and on public opinion and foreign policy in particular. The potential importance of social choice problems for understanding the nature and role of public opinion in foreign policy making is demonstrated through an examination of American public attitudes about military intervention abroad. In particular, drawing on several common descriptions of the underlying dimensionality of public attitudes on major foreign policy issues, it is shown that there may be important intransitivities in the ordering of public preferences at the aggregate level on policy choices such as those considered by American decision makers in the period leading up to the Gulf War. Without new approaches to public-opinion polling that take these problems into consideration, it will be difficult to make credible claims about the role of public opinion in theforeignpolicy process.


2019 ◽  
Vol 11 (3) ◽  
pp. 277-293 ◽  
Author(s):  
Anran Chen ◽  
Steven Haberman ◽  
Stephen Thomas

Purpose Although it has been proved theoretically that annuities can provide optimal consumption during one’s retirement period, retirees’ reluctance to purchase annuities is a long-standing puzzle. The purpose of this paper is to use behavioral model to analyze the low demand for immediate annuities. Design/methodology/approach The authors employ cumulative prospect theory (CPT), which contains both loss aversion and probability transformations, to analyze the annuity puzzle. Findings The authors show that CPT can explain the unattractiveness of immediate annuities. It also shows that retirees would be willing to buy a long-term deferred annuity at retirement. By considering each component from CPT in turn, the loss aversion is found to be the major reason that stops people from buying an annuity while the survival rate transformation is an important factor affecting the decision of when to receive annuity incomes. Originality/value This paper identifies CPT as one of the reasons for the low demand of immediate annuities. It further suggests that long-term deferred annuities could overcome behavioral obstacles and become popular among retirees.


2013 ◽  
Vol 18 (2) ◽  
pp. 219-244
Author(s):  
Peter Jones

Abstract This article explores the attitudes of Canadian officials towards international conflict mediation and towards the potential for greater official Canadian involvement in the field. The study is based on extensive interviews with Canadian officials who have been involved in mediation at various points over a 20-year period. It finds that Canada, and particularly the Department of Foreign Affairs and International Trade (DFAIT), has taken a largely ad hoc approach to its involvement in the field. Prior to the initiation of this study, there had been no attempt to develop an institutional capacity in this field within DFAIT or to keep track of the personnel involved in such experiences, much less to develop a trained cadre of such individuals. This stands in contrast to the efforts of countries that have prioritized mediation as a foreign policy activity, such as some Scandinavian countries and Switzerland. Many of those interviewed pointed to these countries as potential models for Canada in this field, but it became apparent in discussions that most of those interviewees were not necessarily well-informed as to what these countries have done; there was just a general sense that these countries do it well and that Canada could learn from them. Moreover, none of the interviewees demonstrated significant familiarity with the vast literature on mediation. Those interviewed made recommendations as to how Canada might develop its official mediation capacities so as to play a more active and focused role in this field.


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