Friday, November 05, 2010

Prospect Theory and the Taxpayer Receipt | Mother Jones

Cool use of prospect theory to looking US politics: both sides are afraid of losing what they now "have".

Prospect Theory and the Taxpayer Receipt | Mother Jones:
"Budget allocations are a relatively zero-sum game in the short term, and both sides would have to believe that the odds of getting the other guy's goodies is overwhelmingly in their favor before they'd agree to anything that puts their existing goodies at risk. So it's not just a matter of both sides mistakenly thinking the taxpayer receipt is more likely to benefit the other side and therefore shying away. Even if both sides are modestly optimistic about their chances of outgunning the other side, the prospect of a loss is still too daunting. So they won't do it."

BTW there is a nice (easy) description of prospect theory in the article.

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