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Putin and his loss-averse psychology

21 March 2014

Theories of cognition offer a geopolitical lesson over Ukraine, says Paul Vallely

A PSYCHOLOGY professor, even one who has won the Nobel Prize, does not seem the obvious person to consult if you want to sort out a crisis in international affairs. But perhaps someone from the US State Department has been along to one of the lectures by Daniel Kahneman, the Emeritus Professor of Psychology at Princeton. That would explain why, after all the tough talk after Russia's annexation of the Crimea, the sanctions begun by Washington and Brussels this week proved to be fairly feeble - and a very good thing, too.

There is no Nobel Prize in psychology. Professor Kahneman got his for economics, after pretty much creating the idea of behavioural economics, which looks at the psychology of judgement and decision-making. His bestseller Thinking, Fast and Slow (Allen Lane, 2001) reveals the extent to which economics is not a science, but a dark art deeply rooted in our psyche.

Its central thesis is that we make choices in two ways: fast, intuitive thinking, which he calls System 1, and slow, rational thinking which he dubs System 2 (Comment, 14 March). We kid ourselves that we mainly do System 2 thinking, but all too often it is just a post-facto rationalisation - and often a fallacious and self-deluding one - for our System 1 instincts and prejudices.

On Start the Week on Radio 4 on Monday, under the expert coaxing of the presenter Tom Sutcliffe, Professor Kahneman explained how this affects the way we take risks. Our fear of losses is a much more powerful drive than our hope of gains. So we tend to be loss-averse and therefore risk-averse. But when we are put in positions where we seem certain to lose, then we gamble more. Faced with a small certain loss, we will often take the risk of an even bigger loss, so long as there is even a small chance that we might win.

The lesson for geopolitics is that if you box a man like Vladimir Putin into a corner, he may see his only choice as to come out fighting. The Russian president is a dangerous and unpleasant man, but he has been provoked into his present belligerence by Western attempts to woo Ukraine out of the Russian sphere of influence - the West's using a trade deal with the EU, and the prospect of the former Soviet satellite joining NATO.

The Kremlin has responded with a military occupation of Crimea. Hardly a shot has been fired in the process, but that has not prevented high-minded moralising about freedom and democracy from the people who brought you the invasion of Iraq.

Yet, for all the huffing and puffing, the United States and the EU, having talked themselves into a corner, in which they have been forced to impose sanctions, have come up with a package of travel bans and asset freezes which look fairly weak by comparison with the previous robust rhetoric.

What we must hope is that, with honour respectively satisfied, East and West can now sit down and come to a constructive agreement that reforms Ukraine's economy and opens it to the West, but maintains it as a buffer state between Russia and Europe, outside NATO. Eventually, the aim should be to turn the buffer into a bridge across which latter-day Cold Warriors from Washington and Moscow can one day engage in more amiable intercourse.

It is probably a fait accompli - after a 97-per-cent majority vote - that Crimea will once again be part of Russia, as it was until 1954. But attempts to reach a mutually beneficial deal over the rest of Ukraine are far more likely to prevent President Putin from moving his troops into Russian-speaking east Ukraine than will any amount of big stick-waving.

Paul Vallely is Visiting Professor in Public Ethics at the University of Chester.

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