Abstract
Prospect theory, first described in a 1979 paper by Daniel Kahneman and Amos Tversky, proves to be an effective tool to explain how people evaluate risk and make decisions in experimental settings. Due to remarkable insights for social sciences, prospect theory has gone beyond economics and provided insights for international relations. This paper aims at using prospect theory to illuminate the nature of Australia’s engagement in the South China Sea (SCS) and thereby clarify the essence of Australia-Vietnam cooperation. In terms of prospect theory approach, the author argues that there are three factors specifying Australia’s involvement in the SCS, including: (i) the rise of China in the SCS, (ii) Australia’s significant interests in the SCS, and (iii) Australia's proactive middle-power status. In light of certain common interests in the SCS, Australia and Vietnam have been sharing serious concerns about security and the risk of conflict in the SCS. From the year 2009 until now, both countries have actively enhanced diplomatic, political and military ties. Regarding Australia’s status and strategic interests in the SCS, the author asserts that Australia should make the SCS more secure by promoting contributions to accommodate its status in the Asia-Pacific region. The findings of this paper would provide helpful guidance for policymakers and leaders from Australia and Vietnam for a better understanding of the increasingly complicated security environment and how to (re-) create a more stable environment in this region.
Highlights
Prospect theory is a behavioral economic theory focusing on the analysis of decision-making
Attending the 8th East Asia Summit (EAS) in Brunei Darussalam which was held on 10 October 2013, the Australian Prime Minister Tony Abbott affirmed: “Almost 60 per cent of our trade goes through the South China Sea, so strategic stability is very important” (Kenny, 2013)
The prospect theory approach provides a theoretical framework to explain the engagement of country in international disputes, which has a focus on regional “flashpoints”
Summary
Prospect theory is a behavioral economic theory focusing on the analysis of decision-making. The comprehensive examination of those case studies has proved to be effective in providing helpful guidance for the understanding of decision-making under risk or uncertainty, the benefits and pitfalls from prospect theory offer useful dimensions for the analysis of political behavior in terms of both reasoning and practicing. Great powers tend to be risk-acceptant with respect to losses when they perceive that their vital interests and political legitimacy are under threat In this respect, concerns about the prospective loss motivate great powers to adopt risk-acceptant strategies to pursue risky intervention in peripheral conflicts (Levy, 1992). In terms of prospect theory approach, this paper responds by producing three factors that specify Australia’s involvement instead of staying out of SCS conflicts, which include: (i) China’s rise in the SCS, (ii) Australia’s significant interests in the SCS, and (iii) Australia's proactive middle-power status in the 21st century. Australia’s refusal to advance presence in the disputed SCS can result in severe setbacks in which political and economic settings along with its international status are included
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