Recent investigations into the psychology of decision making have spar

Recent investigations into the psychology of
decision making have sparked interest among scholars
seeking to understand why governments sometimes
take gambles that appear theoretically unjustifiable on
(5) the basis of expected costs and benefits. Researchers
have demonstrated some significant discrepancies
between objective measurements of possible decision
outcomes and the ways in which people subjectively
value such possible results. Many of these
(10) discrepancies relate to the observation that a possible
outcome perceived as a loss typically motivates more
strongly than the prospect of an equivalent gain. Risk
taking is thus a more common strategy for those who
believe they will lose what they already possess than it
(15) is for those who wish to gain something they do not
have.

Previously, the notion that rational decision makers
prefer risk-avoiding choices was considered to apply
generally, epitomized by the assumption of many
(20) economists that entrepreneurs and consumers will
choose a risky venture over a sure thing only when the
expected measurable value of the outcome is
sufficiently high to compensate the decision maker for
taking the risk. What is the minimum prize that would
(25) be required to make a gamble involving a 50 percent
chance of losing $100 and a 50 percent chance of
winning the prize acceptable? It is commonplace that
the pleasure of winning a sum of money is much less
intense than the pain of losing the same amount;
(30) accordingly, such a gamble would typically be
accepted only when the possible gain greatly exceeds
the possible loss. Research subjects do, in fact,
commonly judge that a 50 percent chance to lose $100
is unacceptable unless it is combined with an equal
(35) chance to win more than $300. Nevertheless, the recent
studies indicate that risk-accepting strategies are
common when the alternative to a sure loss is a
substantial chance of losing an even larger amount,
coupled with some chance—even a small one—of
(40) losing nothing.

Such observations are quite salient to scholars of
international conflict and crisis. For example,
governments typically are cautious in foreign policy
initiatives that entail risk, especially the risk of armed
(45) conflict. But nations also often take huge gambles to
retrieve what they perceive to have been taken from
them by other nations. This type of motivation, then,
can lead states to take risks that far outweigh the
objectively measurable value of the lost assets. For
(50) example, when Britain and Argentina entered into
armed conflict in 1982 over possession of the Falkland
Islands—or Malvinas, as they are called in Spanish—
each viewed the islands as territory that had been taken
from them by the other; thus each was willing to
(55) commit enormous resources—and risks—to
recapturing them. In international affairs, it is vital that
each actor in such a situation understand the other’s
subjective view of what is at stake.

1. Suppose that a country seizes a piece of territory with great mineral wealth that is claimed by a neighboring country, with a concomitant risk of failure involving moderate but easily tolerable harm in the long run. Given the information in the passage, the author would most likely say that

(A) the country’s actions are consistent with previously accepted views of the psychology of risk-taking
(B) the new research findings indicate that the country from which the territory has been seized probably weighs the risk factors involved in the situation similarly to the way in which they are weighed by the aggressor nation
(C) in spite of surface appearances to the contrary, the new research findings suggest that the objective value of the potential gain is overridden by the risks
(D) the facts of the situation show that the government is motivated by factors other than objective calculation of the measurable risks and probable benefits
(E) the country’s leaders most likely subjectively perceive the territory as having been taken from their country in the past


2. The question in lines 24-27 functions primarily as

(A) the introduction to a thought experiment whose results the author expects will vary widely among different people
(B) a rhetorical question whose assumed answer is in conflict with the previously accepted view concerning risk-taking behavior
(C) the basis for an illustration of how the previously accepted view concerning risk taking behavior applies accurately to some types of situations
(D) a suggestion that the discrepancies between subjective and objective valuations of possible decision outcomes are more illusive than real
(E) a transitional device to smooth an otherwise abrupt switch from discussion of previous theories to discussion of some previously unaccepted research findings


3. It can most reasonably be inferred from the passage that the author would agree with which one of the following statements?

(A) When states try to regain losses through risky conflict, they generally are misled by inadequate or inaccurate information as to the risks that they run in doing so.
(B) Government decision makers subjectively evaluate the acceptability of risks involving national assets in much the same way that they would evaluate risks involving personal assets.
(C) A new method for predicting and mediating international conflict has emerged from a synthesis of the fields of economics and psychology.
(D) Truly rational decision making is a rare phenomenon in international crises and can, ironically, lead to severe consequences for those who engage in it.
(E) Contrary to previous assumptions, people are more likely to take substantial risks when their subjective assessments of expected benefits match or exceed the objectively measured costs.


4. The passage can be most accurately described as

(A) a psychological analysis of the motives involved in certain types of collective decision making in the presence of conflict
(B) a presentation of a psychological hypothesis which is then subjected to a political test case
(C) a suggestion that psychologists should incorporate the findings of political scientists into their research
(D) an examination of some new psychological considerations regarding risk and their application to another field of inquiry
(E) a summary of two possible avenues for understanding international crises and conflicts


5. The passage most clearly suggests that the author would agree with which one of the following statements?

(A) Researchers have previously been too willing to accept the claims that subjects make about their preferred choices in risk-related decision problems.
(B) There is inadequate research support for the hypothesis that except when a gamble is the only available means for averting an otherwise certain loss, people typically are averse to risk-taking.
(C) It can reasonably be argued that the risk that Britain accepted in its 1982 conflict with Argentina outweighed the potential objectively measurable benefit of that venture.
(D) The new findings suggest that because of the subjective elements involved, governmental strategies concerning risks of loss in international crises will remain incomprehensible to outside observers.
(E) Moderate risks in cases involving unavoidable losses are often taken on the basis of reasoning that diverges markedly from that which was studied in the recent investigations.