Kevin Murphy The Pennsylvania State University, International Center for the Study of Terrorism. June 2008

Transcription

1 Evaluation of Methods for Drawing Inferences about Non-State Actors Perceptions of the Risks and Benefits of Seeking and Acquiring Weapons of Mass Destruction Kevin Murphy The Pennsylvania State University, International Center for the Study of Terrorism June 2008 The views expressed herein are those of the authors and do not necessarily reflect the official policy or position of the Defense Threat Reduction Agency, the Department of Defense, or the United States Government. This report is approved for public release; distribution is unlimited. Defense Threat Reduction Agency Advanced Systems and Concepts Office Report Number ASCO

2 Table of Contents EXECUTIVE SUMMARY... 2 OBJECTIVE... 3 IDENTIFYING POTENTIAL CONTRIBUTIONS OF MOTIVATION AND DECISION RESEARCH AND THEORY... 5 EVALUATING THE APPLICABILITY OF MOTIVATION AND DECISION THEORIES TO ASSESSMENTS OF NSA PURSUIT OF WMD WHAT CAN WE LEARN FROM MOTIVATION AND DECISION THEORIES? METHODS FOR OBTAINING THE INFORMATION NEEDED BY ANALYSTS RECOMMENDATIONS REFERENCES APPENDIX CONTENT ANALYSES METHODS... 54

3 Page 2 Executive Summary Three theories of motivation (instrumentality theory, image theory, feedback loop theories) and four theories of decision making (decision theory, behavioral decision theory, psychological decision theory, prospect theory) were reviewed to assess their potential contribution to the analysis of non-state actors choices to pursue or forego weapons of mass destruction (WMD). While several of the theories share core assumptions about the role of values and perceptions of the likelihood of different outcomes determining choices among alternatives, virtually every theory makes a useful contribution to the identification of valuable and relevant questions. In particular, six emergent questions appear most useful to pursue: What are the perceived outcomes of acquiring WMD? How are these outcomes valued, and why? What is the perceived probability of each outcome, and how is this probability determined? How can the framing of choices be assessed and changed? How does the structure and culture of groups affect decision processes and outcomes What are the best methods for inferring preferences among choices or prospects? Four research methods were evaluated as potential sources for the development and analysis of information in answering these questions: Case studies Analyses of written material and verbal statements Simulations Natural field experiments Our review suggests that while no single method is in itself sufficiently adequate for the purposes described in this report, a more useful approach is to combine the strengths of the four methods. This will entail the use of case studies and content analyses to generate hypotheses about the perceptions of risks and benefits involved in the pursuit of WMD and using simulations and field experiments to assess and test these hypotheses.

4 Page 3 Research in the social and behavioral sciences has demonstrated significant potential to contribute to our understanding of terrorism and in the development of programs that may help to reduce threats to international security posed by other nonstate actors (NSA). One particular scenario that has attracted considerable attention is the possibility that terrorist groups or other NSA (e.g., private armies or militias, organized criminal groups) might attempt to acquire weapons of mass destruction (WMD), particularly nuclear weapons. One of the significant goals of security systems throughout the world over the last 70 years has been to limit the spread of nuclear weapons to a relatively small number of states and to deter their use by these states. The possibility that NSA might acquire such weapons is a particularly worrisome one given that the standard tools of state-based dissuasion and deterrence (e.g., trade sanctions, international oversight, and counterstrike capabilities) might not be applicable to NSA. This suggests a need to identify and explore new and innovative approaches to the analysis of the capabilities and intentions of these groups. If successful, such approaches may support the development of activities aimed at deterring the pursuit of WMD. Objective This study will examine a number of theories and methods in the social and behavioral sciences to determine which approaches have the best potential to help analysts in drawing valid inferences about the motivation to and decisions to pursue or forego the pursuit of WMD on the part of NSA. In particular, we focus on theories of motivation and of decision making that appear to have potential for: (1) directing the attention of analysts to particular questions that may not have yet figured largely in assessments of the likelihood that NSA will seek or acquire WMD, (2) suggesting different ways of integrating information that has already been considered in these assessments, and (3) providing analytic approaches for articulating and comparing perceived risks and benefits. A number of specific theories of motivation and decision making will be considered, and each will be assessed in terms of its assumptions, data requirements and outputs. We will examine a number of methods in the social and behavioral sciences that might be used to gather, make inferences about, and test hypotheses about the variables identified as important in our review of research on motivation and decision making. Our assessment will consider ways in which various methods deal with or illuminate the tradeoff between risks and benefits (in particular, their ability to determine or define conditions under which perceived risks exceed benefits), perspectives of each method on uncertainty and on influencing non-state actors perception of risks and benefits. The guiding assumption in this report is that the perceived risks and benefits of seeking and acquiring WMD affect the choices of NSA and that changes in the balance of perceived risks and benefits could either increase or decrease the likelihood that concrete steps will be taken to acquire WMD. It is also assumed that the actions of states can

5 Page 4 influence these risk/benefit perceptions, and that the task of dissuasion is at least in part one of influencing non-state adversaries beliefs that the risks actively pursuing WMD outweigh the benefits of pursuing these weapons. It is important to note that we do not differentiate between different classes of WMD (e.g., nuclear vs. non-nuclear) in this report. One of the key barriers to the application of any of the theories discussed in this report is the lack of reliable information about the perceptions, values, expectations, and beliefs of NSA. We believe that our current state of knowledge regarding the pursuit of WMD by NSA does not allow us to conduct the sort of fine-grained analysis needed to differentiate, for example, the perceived risks and benefits associated with the pursuit of nuclear weapons from the perceived risks and benefits associates with the pursuit of biological weapons. There will almost certainly be cases where reliable inferences can be made about distinctions among classes of WMD (e.g., NSA that are pursuing well-defined political ends may be less willing to use weapons that have wide-ranging effects), but in general, the theories outlined here would be applied in similar ways regardless of the specific weapons being considered. Organization of Report The first section of this report reviews theories of motivation and decision making that appear relevant to the task of assessing NSA perceptions of the risks and benefits of pursuing WMD. We focus on identifying the unique questions or perspectives each theory suggests, and highlight the ways in which a consideration of the structure and content of these theories may help to identify specific questions that might be pursued by analysts. The second section of this report examines the robustness, relevance, and information requirements of each theory when applied to the specific context of drawing valid inferences about the perceptions of NSA regarding the risks and benefits of pursuing WMD. The final section of this report examines research methods that can be used to address these questions, and makes recommendations about the best combinations of methods for pursuing the major questions identified in our review of theories and their applicability to this specific context.

6 Page 5 Identifying Potential Contributions of Motivation and Decision Research and Theory Theories of motivation and decision making are useful for identifying both content and process variables likely to be relevant understanding perceptions of the risks and benefits of WMD acquisition the part of non-state actors. A review of theories judged to be at least potentially relevant to this task in turn requires an assessment of the methods that are used to study and apply these various theories. Theories of motivation seek to explain why people expend time, effort and resources and why they take actions. In their most general sense, theories of motivation attempt to answer the why question when explaining peoples behavior. Theories of decision making address a more narrowly defined question i.e., how people make choices among alternative courses of action. Decision theories are formal representations of the how choice behavior unfolds, whereas motivation theories attempt to address the broader question of why people behave in particular ways. In this report, we focus on rational choice-based theories of these types i.e., theories that describe behavior in terms of perceptions of costs and benefits associated with various choices, the likelihood of achieving specific outcomes, and the nature of the links between choices the individual makes and these outcomes. Rational choice-based theories are not the only option for understanding the potential determinants of NSA decisions regarding the acquisition of WMD; psychoanalytic theories, need theories, and personality theories have all been applied to similar problems. However, rational choice theories offer two unique advantages. First, empirical support is considerably stronger for rational choice theories than for their alternatives. It is important to note that there is a relatively sparse empirical literature applying theories from the social and behavioral sciences to the specific topic of the pursuit of WMD by NSA. Empirical support for rational choice-based theories is general rather than being specific to the context of this report, and these theories are not specifically tailored to the actions of NSA, although some of the specific considerations in applying these theories (e.g., how are decisions made, how much power and influence do leaders have) may be different for states vs. NSA. The second advantage of rational choice-based theories is that the structure and assumptions of these theories is highly consistent with the goals of this report. The key assumption common to all rational choice-based theories is that choices made by any particular actor or sets of actors are consistently related to perceptions of the costs and benefits associated with alternative courses of action. Choices are not necessarily rational in any normative sense, but they are likely to appear to be rational from the perspective of the decision maker. Because the overarching goal of this report is to identify ways that theories and methods from the social and behavioral sciences might contribute to our understanding of the perceived risks and benefits of acquiring WMD, theories that focus specifically on these perceptions are particularly useful.

7 Page 6 Motivation Theories Theories of motivation are usually concerned with predicting the direction, intensity or persistence of actions and behaviors over time [1]. There is substantial diversity in theories of motivation ranging from approaches that focus on conscious choices to those that focus on the roles of basic needs and values as drivers of behavior. Expectancy-Valence Theories Several motivation theories are built around the assumption that choices among alternative courses of action are a function of both the value of the outcomes associated with that action and the certainty (expectancy) that these outcomes will be achieved if the action is carried out. In its strictest form, expectancy-valence theories (and related expected utility theories in decision making) focus on conscious, rational choices among courses of action (e.g., choosing among several competing health care plans on the basis of detailed descriptions of the features of each plan), but several variants of expectancyvalue theories have been developed explicitly to explain intuitive decisions and nondeliberative choices (e.g., choosing whether or not to believe what a stranger tells you). Two variations of expectancy-valence theories appear to be most relevant to the present task; instrumentality theory [2] and image theory [3]. Instrumentality theory is a theory of rational choice, whereas image theory was developed to help explain less deliberative choices among alternate courses of action. Expectancy-valence theories of motivation share a common assumption with all of the decision theories discussed in the next section i.e., that the actions of NSA members and leaders are influenced by the values that are attached to each of the expected outcomes of choosing to pursue or to forego the pursuit of WMD. It is useful, in illustrating the structure of these various theories to start with a concrete example of what these theories mean by the term valued outcomes. Table 1 illustrates a hypothetical set of outcomes that might be considered by the leader of a NSA when considering whether to pursue or to forego the pursuit of WMD. As this table indicates, risks are linked to negatively valued outcomes, while benefits are linked to negatively valued outcomes. It is important to emphasize that different individuals or groups might value very different sets of outcomes. One of the critical issues in applying theories of motivation and decision making to develop a better understanding of how and why groups choose to pursue or to forego the pursuit of WMD will be to identify the relevant outcomes and their values for each decision maker.

8 Page 7 Table 1 - Possible Outcomes of Pursuing or Foregoing the Pursuit of WMD Option A: Pursue WMD Positively Valued Outcomes Credibility and status in your community Credibility and status among other NSA Unsurpassed publicity Unsurpassed ability to terrorize Ability to deter your adversaries Ability to successfully undermine your opponents Negatively Valued Outcomes Potential isolation from community that opposes WMD Potential isolation from other similar NSA Provoke substantially stepped-up reactions from governments and adversaries Sunk costs waste of time and resources Option B: Forego Pursuit of WMD Positively Valued Outcomes Will not provoke extraordinary efforts by adversaries Lower risk of losing community support Ability to attract a broader and more diverse membership Can devote resources to other more lucrative or productive strategies Negatively Valued Outcomes Loss of status and credibility Loss of ability to potentially achieve key goals quickly in one massive strike Loss of potential publicity Lower ability to threaten or terrorize adversaries Instrumentality Theory Instrumentality theory [4, 5] suggests that three variables must be considered in predicting choices among alternative courses of action; the structure of this theory can be illustrated by applying it to the problem of choosing to seek or to forego seeking WMD. These three parameters include: Beliefs about the value (positive and negative) of each of the potential outcomes of acquiring WMD (Valence V). For example, WMD might bring risks (i.e., negatively valued outcomes, such as increased efforts on the part of multiple governments to hunt down a group) and benefits (e.g., increased status and influence for groups or for leaders of groups). In this theory, these risks and benefits are thought of as representing a set of valued outcomes

9 Page 8 Beliefs about the link between efforts on the part of NSA to acquire WMD and the likelihood that these efforts will succeed (Expectancy E) Beliefs about the likelihood that successful acquisition of WMD will in fact yield each of the valued outcomes (Instrumentality I) This theory is often referred to as VIE theory. It suggests that motivation to pursue WMD will be a multiplicative function of the V, I and E values that characterize each of the perceived outcomes associated with acquiring these weapons. That is: Motivation to pursue WMD = Σ(V i * I i * E i ) The theory assumes that there are likely to be several outcomes associated with each possible choice a decision maker is considering (e.g., to pursue WMD or to forego this pursuit), and that the combined effects of valence, instrumentality and expectancy of these outcomes. Motivation to pursue the choice of attempting to acquire WMD is highest when: (1) positively valued outcomes are seen as very likely to occur if WMD are acquired, (2) efforts to acquire WMD are seen as likely to succeed, and (3) the risks of seeking to acquire WMD are seen as having being less weighty than the benefits and/or as being less likely to occur than the benefits. Image Theory Like VIE theory, image theory is concerned with choice among a set of possible options, each of which is associated with some range of valued outcomes. This theory focuses largely on the way anticipated outcomes of those choices affect decisions. Image theory suggests that the evaluation of alternatives depends in large part on the degree to which they are consistent with three types of images, or mental representations of desired end states. First, there are value images i.e., the decision is a reflection of the decisionmaker s principles, values and guiding beliefs. Next, there are trajectory images i.e., a reflection of the decision maker s proximal goals and agenda. Finally, there are strategic image i.e., a reflection of the decision-maker s plans and tactics for achieving goals. Overall, this theory suggests that individuals create or choose plans for accomplishing goals that are most consistent with their core principles. Image theory straddles the boundary between motivation theory and decision theory, in the sense that it is concerned with both content and process factors. Like VIE theory, it focuses on outcomes that have positive and negative value and the way these outcomes affect choices. Image theory assumes that decision-makers go through sequential rather than simultaneous assessments of choices [6-9]. In particular, it suggests that decision makers first go through a screening phase, in which they reject unacceptable options, followed by a choice phase, in which the choice among acceptable options is made [10]. For example, in the current context, the screening phase of decisions might involve an

10 Page 9 assessment of whether WMD are seen as incompatible with the broader goals or image of a NSA, regardless of their potential value as weapons or as deterrents. In the screening or editing phase of decisions, options are evaluated and potentially rejected on the basis of their compatibility with value, trajectory or strategic images that are seen as central to the identity and the image of the NSA. It is assumed that rejection thresholds vary across individuals, groups, and perhaps over time, and that the screening phase focuses solely on negative outcomes (e.g., that the pursuit of WMD would undermine the image of a group whose overarching values are religious). This theory differs from many theories of rational choice in that the initial phase of a decision does not involve or require a comparison of alternatives in terms of some overall value or valence. Rather, the theory assumes that some alternatives that have potentially large overall positive value might be rejected during this screening phase (i.e., even if the perceived benefits of WMD are seen as large, the conflict between pursuing WMD and core images of the group may rule out their pursuit), and that the eventual choice among remaining alternatives may lead the decision maker to pick one that has a lower overall utility than some of the rejected alternatives. In the choice phase, the set of remaining acceptable options is evaluated in the basis of a balance between perceived benefits and perceived risks. Here, the full range of outcomes is likely to be considered, not merely those that are incompatible with important images. There is empirical support for this two step process [10], which could have important implications (discussed below) for the application of this theory to NSA perceptions regarding the acquisition of WMD. This theory has been applied with some success to predict decisions about the use of military force [11] and about reactions to terrorism [12]. Feedback Loop Theories There is a class of theories usually applied to the problem of self-regulation that might have relevance for the problem of identifying motivational factors that influence choices regarding the acquisition of WMD i.e., cybernetic control system theories. These theories [13-15] analyze motivation as conceptualized in terms of a control system similar to a thermostat. That is, these theories explain behavior in terms of efforts on the part of an individual to minimize and respond to differences between present behavior and performance and some standard or goal. If the discrepancy is small, that goal or standard has little relevance for explaining motivation, but when the discrepancy becomes large, individuals are motivated to take action to reduce the discrepancy. Feedback loop theories assume that multiple goals or standards might be relevant at any given time, and that goals are often arranged in hierarchical fashion [15]. Higherorder goals might represent principles or values, while lower-level goals can refer to

11 Page 10 strategies and agendas, as in image theory. According to hierarchically-organized feedback loop theories, a discrepancy between a higher-order goal or standard and the present state of affairs is likely to focus the decision-maker s attention on lower-order goals that must be satisfied before the higher-order goal can be dealt with. For example, if you decide that your current set of weapons and techniques for attacking an enemy no longer meet your standard for minimally acceptable methods of attack, you will begin to focus on the steps and activities (e.g., determine what other means might be available, initiate the pursuit of those means) that must be completed to replace it. The key difference between expectancy-valence theories and feedback loop theories lies in their assumptions about goals or desired outcomes. Expectancy-valence theories assume that actors strive toward reaching particular goals and that is it the expectation that these goals might be attained that drives their behavior. Feedback loop theories do not rely on expectations about the future, or the assumption that individuals are striving toward some specific goal to explain behavior. Rather, these theories assume that it is only when there is a discrepancy between the present state and the goal state that goals have any effect whatsoever on performance, and that behavior is aimed at reducing this discrepancy, not at attaining future valued states. Theories of Decision Making A number of normative and descriptive theories of decision making (i.e., formal statements of how people should make decisions vs. descriptions of actual decisionmaking behavior) have been developed [16, 17]. It is clear that none of the available normative theories adequately captures human decision making; individuals and groups do not consistently make decisions that correspond to any of the well-developed normative rules for optimal decisions [18]. It is also clear that none of the descriptive theories have yet reached a level of precision and comprehensiveness to the formal normative theories [19]. As a result, decision-making research is characterized by a mixture of: (1) well-developed formal theories that are known to fall short in particular circumstances, and (2) insightful psychological theories of decision behavior that are difficult to characterize in any consistent and rigorous way. Decision making research is dominated by theories that focus on the role of information about the likelihood of various outcomes and the values associated with these outcomes in explaining decisions most theories of this sort fall under the general heading of expected utility theories [17-20]. Hammond, McClelland and Mumpower [17] describe six general theories of decision making. Three of these (decision theory, behavioral decision theory, and psychological decision theory) appear potential relevant to the current report and are considered below. Although related to psychological decision theory, prospect theory [21-23] is sufficiently distinct and important to warrant separate treatment.

12 Page 11 Decision Theory The term decision theory refers to a family of formal, mathematical models for analysis of rational choice - i.e., a choice made after systematically weighing the relative costs and benefits of alternate courses of action. The term rational choice has a specific meaning in decision theory and in economic theory i.e., that individuals will make the best choice possible, based on their stable preferences for outcomes, in all situations where they have sufficient information to evaluate the possible costs and benefits of each of the options available to them. In decision theory, the choice of one alternative over another is assumed to be based on: (1) the probability of the occurrence of each of the possible outcomes of that choice and 2) the value of each outcome to the decider. In the context of this report, decision theory states that if the possible outcomes of choosing to pursue vs. to forego the pursuit of WMD, the values of these outcomes, and the likelihood each outcome will occur are know, it is possible to determine which course of action a truly rational decision maker with choose. Keeney and Raiffa [24] present an especially clear exposition of decision theory. Decision theory is a prescriptive approach to the analysis of decisions. That is, it specifies which choice is optimal defined in as the choice that maximizes utility (function of probability and value) for the decider. Drawn from expected utility theory, this approach is idiographic in nature (i.e., it assumes that decision makers may have unique values or perceptions of probability, and it focuses on the choices of an individual decision maker). Extensions of decision theory to decisions made by groups require the assumption that the perceived outcomes of different choices, the values attached to these outcomes and perceived probabilities of each possible outcome are identical across individuals. Research in decision theory is usually experimental in nature, and usually focuses on eliciting preferences among sets of choices. In a typical decision theory study, subjects are asked to state their preferences in a structured set of comparisons (e.g., would you rather pay $5 for a lottery ticket where the top prize is $1,000,000 or $2 for a lottery ticket where the top prize is $500,000). This theory allows one to derive subjective value functions on the basis of choices made by individuals when the probabilities of events are known. Decision theory been applied to develop tools for assessing and assisting decisions makers in making decisions that involve multiple valued attributes. For example, Edwards and his colleagues describe the application of decision theory to help a Police Department make a choice between different standard-issue firearms that differed in their cost, weight, stopping power and potential danger to the user and the public [25]. Multi-attribute decision technologies have proved especially useful for helping decision makers balance gains and losses that might be expressed in different units or scales, and provides a basis for identifying departures from the prescriptions of the normative expected utility theory.

13 Page 12 Behavioral Decision Theory The starting point for behavioral decision theory is the observation that human decision making does not always meet the demands of rationality, which suggests the need for theories that capture the less-than-optimal behavior of decision makers. Behavioral decision theory takes Bayesian models 1 as a starting point and attempts to determine when, whether and why actual decisions will diverge from the optimal decisions prescribed by Bayesian models. The early work of Edwards best exemplifies behavioral decision theory [26, 27]. In a typical behavioral decision theory study, subjects observe an event, attempt to articulate the beliefs they held prior to observing the event, the revision of these beliefs, and the difference between prior and posterior beliefs. For example, a study of the decisions of leaders of NSA might start with an analysis of their perceptions prior to some important event (e.g., the capture of key members of the groups) and compare them with assessments of perceptions of outcomes and their probabilities after the event. It is common to decompose complex decisions and attempt to model the simpler components of these decisions. Behavioral decision theory studies often include the use of feedback, together with an examination of revisions of decisions and beliefs after receiving feedback. This approach uses value curves (i.e., graphical representations of the value attached to different possible states or levels of each outcome) to describe each subject s preference structure for each dimension of value used in evaluating the relative desirability or utility of competing alternatives. In the early years of behavioral decision theory, it was often assumed that decision makers were inefficient Bayesians, in the sense that they were inconsistent in following the optimality rules prescribed by Bayes Theorem. It now seems clear that human decision making is not Bayesian in its structure [28], and the question of whether and when decision makers will depart from Bayesian optimality is no longer a central one in decision research. Because of its reliance on Bayesian theory as a standard for evaluating human decisions, the demonstration that human decision makers did not follow or even approximate Bayesian rules of inference led to the virtual abandonment of this particular approach to analyzing decision making. Psychological Decision Theory The goal of psychological decision theory is to examine departures from the criteria of rationality laid out in normative theories. This theory examines ways in which memory, perception, and specific varieties of experience lead decision makers to develop systematic errors in their estimates of probabilities and utilities that are the key 1 Bayes Theorem specifies that statistically optimal manner for integrating information about probabilities. For example, if it is known that 5% of all job applicants use illicit drugs, that 80% of users will fail a drug test, and that 10% of all applicants fail the test, Bayes Theorem shows that the probability that an applicant who fails such a test is actually a drug user is.40

14 Page 13 parameters in decision theory. Psychological decision theory is exemplified by the work of Kahneman and Tversky [21, 29] on decision heuristics and biases. Although this approach has not been fully successful in describing why decision makers deviate from the optimal structure of expected utility theory, it has been quite successful in identifying the conditions under which large deviations are most likely [17]. Psychological decision theory focuses on three major aspects of judgment process: the way cues or pieces of information are perceived by decision makers, the weight attached to various cues and the cognitive processes that underlie judgment. This approach has been particularly useful for understanding how subjective perceptions of the probability and importance of different outcomes develop. The most fruitful area of research in psychological decision theory has been on how decision heuristics such as availability (i.e., an event is seen as probable if it is relatively easy to imaging its occurrence) and representativeness (i.e., the extend to which a particular event is seen as representative of the parent population of events) can affect perceptions of the probability of particular events. One of the key parameters in all of the variations of decision theory reviewed here is the perceived probability that various outcomes will follow choices made by NSA. For example, the choice to pursue WMD might lead to both risks (e.g., sunk costs waste of time and resources) and benefits (e.g., publicity, status and respect). Neither decision theory nor behavioral decision theory has much to say about how perceptions of the likelihood of these various outcomes develop; psychological decision theory has a great deal to say about perceived probabilities. In particular, the perceived probability of an event appears to be a function of whether it is easily explained and anticipated, not of whether this type of event actually occurs with high frequency. Prospect Theory Like psychological decision theory, prospect theory was developed to explain why decision makers often deviate from the assumptions and norms of expected utility theory. In this theory, a prospect is a potential choice or course of action, and the theory is concerned with predicting whether decisions makers will choose or reject particular prospects. This theory was developed by Tversky and Kahneman [21-23, 30-35] and has been elaborated by a number of their colleagues and other researchers [36-43]. Prospect theory become the dominant alternative to the normative theories subsumed under the expected utility framework that was introduced to psychologists by Edwards [26]. Like image theory, prospect theory includes the assumption that decision makers go through both editing and choice phases in evaluating prospects. In prospect theory, however, the emphasis of editing is on simplifying the comparison among prospects rather than on screening out unacceptable ones. According to prospect theory, any prospect that has the predicted outcome of leaving the decision maker better off in terms of total benefits is viewed as acceptable, and prospects are not eliminated from consideration solely on the basis of assessments of downsides or risks. For example,

15 Page 14 image theory predicts that a group that sees the pursuit of WMD as threatening core values the group holds dear will not consider the pursuit of these weapons. Prospect theory suggests that these weapons might still be pursued if the perceived benefits outweigh the perceived costs. One of the key insights of prospect theory is that decision makers do not treat gains and losses equivalently; most decision makers are adverse to both losses and to uncertainty. In particular: Decision makers weigh losses more heavily than gains the loss of $100 is usually viewed as a larger change than the gain of $100 (losses are often given twice the value of equivalent gains) Decision makers over-value certainty the certain gain of $100 is seen as equal in value as the risky gain of $100 + x, where x represents a premium paid to tolerate uncertainty Framing the same decision in terms of losses rather than gains (e.g., a $100 bet can be seen as a risky loss of $100 or as a risky gain of $100 + x) can lead to changes in the choices made by decision makers, even when positively and negatively framed decision have (according to standard decision theory) the same overall utility In the context of the current report, prospect theory suggests that decision makers in NSA are likely to pay more attention to the potential risks of pursuing WMD than to the potential benefits, and that they are unlikely to initiate the pursuit of WMD unless the perceived benefits substantially outweigh the perceived risks. In prospect theory, the value functions for describing the assessments of outcomes are always defined in terms of a reference point, which is usually the present state of the individual or group, and these functions are concave for gains and convex for losses, as well as being steeper for losses. That is, gains have a decreasing incremental value (i.e., a gain of $2000 is not worth twice a gain of $1000), whereas large losses are seen as extraordinary costs (i.e., a loss of $2000 is seen as costing more than twice a loss of $1000). As a result, as noted above, the theory predicts that decision makers will be riskaverse in a wide range of circumstances. Because of the general preference for certainty over risk (even when the expected values of two prospects are identical), losses that are probabilistic may not have as much influence on decision makers as smaller but certain gains. The evaluation of a prospect depends on the value associated with the outcomes of the prospect, the perceived probability that the outcome will occur and a weight (pi) that is a nonlinear function of the perceived probability that the outcomes will in fact occur. Very low probabilities are over-weighted, so that while decision makers tend to be

16 Page 15 wary of uncertainty, they do not necessarily pay enough attention to base rates and probabilities, and can find prospects that couple large rewards with low probabilities of success more attractive than the normative theory would suggest. Similarly, very large probabilities are over-weighted, meaning that decision makers over-react to small amounts of risk. Suppose there are three outcomes (X, Y, and Z) that are associated with a particular prospect or course of action. The overall value of that prospect is given by: Overall value = p x * pi x * v x + p y * pi y * v y + p z * pi z * v z Where: p x = probability of outcome X pi x = decision weight for outcome X v x = value of outcome X (values are assigned to gains and losses in comparison with the present state, not in terms of absolute values) As noted earlier, prospect theory was developed in large part to help explain departures from the predictions of standard expected utility theory. These departures are typically larger when probabilities are unknown than when they are known [32]. Perhaps because of general risk aversion, decision makers tend to prefer the status quo more frequently than standard utility theory would predict [30]. Decision makers are also influenced by the time frame over which losses and gains are accrued [41], valuing positive outcomes less if they are delayed and viewing risks as more difficult to tolerate if they are immediate. Prospect theory uses loss aversion to account for a variety of violations of expected utility theory. For example, sunk cost effects (i.e., the tendency to continue in a failing course of action because of the resources that have been devoted to that course) can be explained in terms of a reluctance to take immediate and certain losses (stopping a course of action) and a preference to spread them over time [42]. This temporal aspect of loss and risk aversion also suggests that when a long time horizon in imposed on decisions, people are more willing to tolerate risk [42]. Finally, research on prospect theory suggests that decision makers tend to treat each decision as unique, ignoring past results and future opportunities [34]. Applications of prospect theory in organizational settings are particularly valuable, because they illustrate ways in which some group decision are made, and help to identify particular deviations from expected utility when high-stakes decisions are made in group settings. In particular, decision makers are more risk averse if they believe their decisions will be reviewed or evaluated by others. However, there is evidence that risk aversion is higher for decisions that have lower consequences than for high-consequence decisions, perhaps because individuals charged with making highconsequence decisions often have a longer and more successful history of similar gambles than would be true for their subordinates [34].

17 Page 16 Decision makers tend to overvalue certain benefits, and tend to be overly optimistic in estimating uncertain risks. Kahneman and Tversky [35] show how these principles lead to predictions about how leaders and nations will make important decisions during times of conflict. For example, loss aversion can lead to a lack of willingness to make concessions in negotiation, even when these might substantially reduce the likelihood of war Key Concepts and Insights from Motivation and Decision Theories The key concepts and potential insights provided by each of the theories and models reviewed in this section are presented in Table 2 below. Table 2 Key Concepts and Insights from Motivation and Decision Theories Theory Key Concepts Key Insight Instrumentality Theory Value of outcomes, probability of success and links of immediate outcomes to higherorder goals are all important It is important to understand the perceived links to ultimate goals of the decision maker Image Theory Feedback Loop Theories Decision Theory Behavioral Decision Theory Psychological Decision Theory Prospect Theory Value images, trajectory images, strategic images all play role in decisions Evaluation of current state, deviations from standard triggers change in behavior Choices based on probability that various outcomes will occur and perceived value of outcomes Bayesian analysis of preferences Decision heuristics such as representativeness (people think an event is probably if it is similar to previous events), availability (people think an event it probable if it is easy to envision) Risk aversion, nonlinear and asymmetric value functions (people pay more attention to risks than to gains) Choices are made using a two-stage screening process courses of action that are inconsistent with value image will not be seriously evaluated The threshold for determine whether present state deviates from standard is important for understanding decisions Optimal decision can be defined and deviations from optimality can be studied Human decision makers do not make decisions that are optimal in a statistical sense Events that are easily imagined or envisioned are seen as more likely by decision makers Losses are viewed as more meaningful than formally equivalent gains; as a result, decision makers are often reluctant to innovate or change

18 Page 17 Instrumentality theory involves three main concepts relevant to understand motivations to pursue WMD; the value of the outcomes (both positive and negative) associated with pursuing WMD, the beliefs of decision makers about the likely success of those efforts, and most important, the implications of the pursuit of WMD for the overall goals of the group in question. WMD are likely to be strongly linked to the ultimate outcomes sought by some groups (e.g., apocalyptic groups such as Aum Shinrikyo) and less relevant to the ultimate goals of other groups (e.g., regional militias). This theory suggests that are careful analysis of how the possession of WMD would be seen as advancing the core goals of various groups is an important first step in drawing inferences about the likelihood that particular groups will be willing to accept the risks such an endeavor is likely to involve. Image theory suggests that it is useful to break down the goals of decision makers into the principles that are most important to the decision maker (value image), the intermediate steps needed to make progress toward those goals (trajectory image) and the decision makers plans and tactics for accomplishing goals (strategic image). The critical insight suggested by this theory is that a when courses of action are seen as violating key principles, they are dropped from consideration, even if they might be seen as potentially successful. In the current context, the choice to pursue WMD will be ruled out without a full-blown analysis of risks and benefits if this choice is seen as threatening core values or images of the organization. Feedback loop theories involve a comparison between current and desired states, with the assumption that corrective actions occur only when the perceived gap between current and desired states is sufficiently significant to change the direction of the system. The critical insight implied by this theory is that different decision makers are likely to have different thresholds for evaluating this gap, and that as long as the gap between current and desired states can be kept below that threshold, decision makers will not change their behavior. In the current context, the pursuit of WMD will not be considered unless there is a significant gap between the NSA s evaluation of their current state and their vision of their desired state. Decision theory is based on the assumption that behavior is driven by a rational comparison of probability-weighted end states. According to this theory of rational choice, optimal decisions can be clearly defined. The theory s failure to adequately capture what decision makers do rather than what they should do was a major factor in the development of behavioral decision theory, psychological decision theory and prospect theory. That is, decision theory can be used to determine whether a rational actor should pursue WMD, but not necessarily whether that actor will make this choice. Behavioral decision theory was originally developed to analyze departures from optimality as defined by Bayes Theorem (a statistical theorem that depicts conditional probability in relation to the information available to decision makers). This theory has not produced useful insights that can be applied to the analysis of decision making, in

19 Page 18 large part because of compelling evidence that Bayes Theorem is not a good description of actual decision processes. Psychological decision theory focuses on decision-makers preferences for simple but robust methods of making decisions that are not statistically optimal but are nevertheless often highly effective. Research in this tradition has focused heavily on decision heuristics such as availability and representativeness. One critical insight suggested by this theory is that assessments of the likelihood of various events are not driven by the logic of standard probability theory, but rather by the decision maker s assessment that particular events are either easy or difficult to envision. In the current context, perceptions of the probability of different risks and benefits are likely to be influenced by the ease with which those outcomes are imagined or the extent to which similar outcomes have occurred in the past. Prospect theory focuses explicitly on the way decision makers evaluate and trade off risks and benefits. The key prediction of this theory is that decision makers over-value risks and under-value benefits in a variety of contexts, which can make them reluctant to pursue risky courses of action even when these have a reasonable probability of advancing important goals. This theory suggests that NSA will not be likely to pursue WMD unless the perceived benefits substantially outweigh the perceived risks.

20 Page 19 Evaluating the Applicability of Motivation and Decision Theories to Assessments of NSA Pursuit of WMD In evaluating the potential applicability of these theories to the particular context of decisions made by NSA regarding the pursuit of WMD, two questions should be considered: (1) which NSA should be considered as potential players in the pursuit of WMD?, and (2) what is known about the perceptions, values and decision making styles in these NSA? Which Actors? We start with the assumption that the desire and the capacity to acquire WMD is limited to a relatively small number of groups, and that these groups will be classified mainly as armed political action groups, non-state armies and militias and/or as groups involved in organized crime. There are three reasons for this assumption. First, serious efforts to acquire WMD are almost certainly beyond the means and capabilities of any single individual, and therefore will normally represent a group effort. Second, the acquisition of WMD is either irrelevant to or contrary to the goals and missions of most NSA (e.g., corporations, charitable organizations). This reduces the set of plausible actors considerably, focusing only on groups for whom the acquisition of WMD might provide benefits of sufficient size to offset the potential risks of pursuing WMD. Third, the acquisition of WMD requires a combination of financial resources, ability to maintain security and ability to obtain and work with materials and devices that are very tightly regulated and (in theory) protected with considerable security. These three considerations suggest that the population of NSA likely to be engaged in the serious pursuit of WMD is limited to: Terrorist groups and armed political action groups: A number of armed groups that use violence or the threat of violence to advance ideological and political goals appear to have the desire, and perhaps the eventual capability to acquire WMD. Various databases list information on up to 550 armed groups actively involved in conflicts between 1945 and 2000 [44], but these databases do not always distinguish between two types of groups that might have different reasons for pursuing WMD, terrorist groups and armed political action groups (APAG). APAGs are defined here as non-state groups that use violence or the threat of violence to help advance political causes, and that engage almost exclusively in asymmetric attacks carried out by nonuniformed members. Terrorist groups, in contrast, typically focus their attacks on civilian targets, again with the goal of advancing political or ideological goals. Non-state armies and militias: Non-state entities, ranging from private military companies and mercenary organizations to private militias led by warlords maintain armed forces that are essentially military in character, often fighting in uniform and in well-defined units and formations. Their aims may overlap with those of APAGs, or may