By Takenori Inoki / Special to The Yomiuri ShimbunPolitical scientists and economists are often invited by the government to provide opinions about policy agendas. At the end of such a meeting, policymakers may typically say: “We got it. Certainly, we see your point.” Nevertheless, such responses do not always lead to serious consideration of the relevant expert opinions by the government. Even in the case of fair arguments based on accurate information, there is no guarantee that they will be judged as pertinent policy options and eventually incorporated into government policies.
A high-profile example of this is the fiscal predicament surrounding Japan’s pension system and public health insurance system due to the declining birth rate and the aging of the population in the country. The dismal state of these systems has been predicted by experts for quite some time, but no sufficient remedies have been implemented.
Kuniaki Makino, an associate professor at Setsunan University in Osaka Prefecture, has cast revealing light on a similar case dating back to the prewar period. In 2018, he published a book under the title “Keizai Gakusha Tachi no Nichibei Kaisen: Akimaru Kikan ‘Maboroshi no Hokokusho’ no Nazo o Toku” (translated by the author as “Japanese Economists in the Process Leading to the Pacific War: Solving the Mysteries of the ‘Phantom Reports’ of the Akimaru Unit in the Imperial Japanese Army”). He was awarded the Yomiuri Yoshino Sakuzo Prize of 2019 for the book.
The author offers a convincing answer to the question of why Japan dared to start the war while knowing that the chance of winning it was extremely low.
About two years prior to the outbreak of the Pacific War, the then Army Ministry organized a special wartime-economy study group — which became known as the Akimaru Unit, as it was headed by army paymaster Lt. Col. Jiro Akimaru. Many economists recruited by the unit carried out extensive and in-depth research on the levels of economic endurance for a full-blown war involving not only Britain and the United States but also Germany and Japan. They submitted a set of reports to the military in July 1941 — five months before the war began.
The reports were not necessarily based on classified information. Rather, what they contained was already widely known among journalists, politicians and military officers at large. In other words, the reports implied that the country’s leadership at the time was sufficiently aware of the immense disparity in economic power between Japan and the Allied Powers. Notwithstanding the disadvantage, Japan recklessly chose to embark on the war. This is proof that people cannot always make the right decision even with accurate information in hand.
To explain the psychological context in which the reckless decision to battle with the Allied Powers was made, Makino employed “prospect theory,” which was established by psychologists Daniel Kahneman and Amos Tversky as a way to analyze decision-making under risk. The theory is hailed as one of the greatest concepts developed in the discipline of psychology in the past half-century. Interested readers may refer to Makino’s book for the full details of his explanation.
Prospect theory deserves attention, as it clarifies that people’s ways of thinking in decision-making are systematically biased. When we make judgments about people or issues, we often do so by interpreting whether they are in line with our preconceptions. We have biases in our ways of thinking, as we tend to refer to past experiences that suit us. So, we convince ourselves with regard to one of them, for example: “It went that way at the time, so it will go that way this time, too.”
One of the key propositions of the Kahneman-Tversky theory, developed about 40 years ago, is an insight into people’s psychological vulnerabilities as expressed in their dictum that “losses loom larger than gains.” They implied that the psychological pain one experiences in losing a thing “appears to be greater than” the pain of never having had it.
As a simple example of prospect theory, which of the following would you prefer? A: The certainty of gaining ¥50,000, or B: A 50 percent chance of gaining ¥100,000. Most people would choose answer A. However, their attitude would change if they were asked whether they would prefer C: The certainty of losing ¥50,000, or D: A 50 percent chance of losing ¥100,000. In that case, the likeliest answer would be D.
In a nutshell, when selecting things to gain, people tend to be risk-averse by choosing what they are sure to gain, whereas, in the case of losses, people tend to be risk-accepting or gamble on a 50 percent chance.
Prospect theory thus explains people’s psychology in decision-making, and when it is applied to past events, it is possible to view Japan’s Dec. 8, 1941, declaration of war on the United States and Britain as a case of selection bias toward the lesser probability of success.
Humans’ cognitive bias does not always result in stupidity. It should be noted that prospect theory is a concept developed just to depict biases associated with judgment and decision-making — it is not aimed at predicting whether the outcome is fortunate or unfortunate.
In fact, many past wars can be thought to have been actually triggered by rough empirical ways of thinking on the part of leaders with no attention paid to probability calculations or statistical data. On June 25, 1950, North Korean leader Kim Il Sung sent his troops south across the 38th parallel, starting the Korean War. The real reason why Chinese leader Mao Zedong decided to have his troops fight shoulder to shoulder with Kim’s troops in the war remains mysterious. The Korean War began only about nine months after the proclamation of the People’s Republic of China. At the time, China had yet to cement not only its unity as a state but also its military structure. Why did Mao decide to take part in the Korean War even in such an obviously immature state of nation-building?
Political scientists and historians have come up with a number of hypotheses on the Chinese involvement in the Korean War. Here again, prospect theory, too, seems to be applicable.
The United States, for its part, perceived that Kim’s invasion of South Korea was a collusive offensive by China, North Korea and the Soviet Union. Therefore, it dispatched warships of the U.S. 7th Fleet to the Taiwan Strait. This naval deployment seems to have made Mao afraid of an imminent U.S. incursion into China itself. In other words, Mao is thought to have judged that the security of China would have been at risk if the United States defeated a North Korea fighting on its own, without the participation of the Chinese military in the war. There are scholars who think that Mao thus gambled for the lower probability of success — the deployment of Chinese troops to fight together with North Korea — as in the case of the Imperial Japanese Army betting on the lower chance of success, causing the Pacific War to break out.
However, we need to question if prospect theory alone can tell us everything about history. In fact, there is another hypothesis about what Mao had in his mind when the Korean War broke out. According to this hypothesis, China dispatched troops to the Korean Peninsula to simultaneously achieve two goals — the protection of the strong fortress of international communism on the basis of the Sino-Soviet Treaty of Friendship, Alliance and Mutual Assistance and the consolidation of the communist regime of the newly proclaimed People’s Republic of China. Mao might have been confident that the Chinese military would be able to overwhelm the U.S. military and the United Nations Forces on the Korean Peninsula.
It is difficult to identify what we should learn from the Korean War. The United States undoubtedly became self-confident of its military strength, which it thought prevented the whole of the Korean Peninsula from falling into the hands of communists. As experts have pointed out, that kind of self-assertiveness on the part of the United States led to the bombing of North Vietnam during the Vietnam War. When we look at history, there are occasions in which citing similar historical events tends to make one argument or another about a particular event of the past look or sound more credible.
However, it must be cautioned that too much dependence on historical analogism may turn out to be dangerous. I mean to say that history never truly repeats itself, even though similar events may occur.
We need to learn from history not merely because we know we cannot correctly understand what is now happening without knowing the past background. Rather, sufficiently understanding history and discerning factors lying behind each important event can help us reach states of wisdom, courage and reflection as well as resignation on some occasions.
History is not something that either progresses according to any law or is completely predictable. In its historical views, Marxism advocates the law of history and historical inevitability or necessity. Herbert Spencer’s social Darwinism applies the law of natural selection for plants and animals to humans. Those theories are dangerous, in part because it is so easy for people to believe in historical determinism.
All human beings are born free to make efforts to expand their range of choice — we are not moving on any predetermined course in this world. At the same time, we need to recognize that civilization does not constantly progress and that the human race has not broken completely with barbarism.
People are susceptible to erring in their judgments of history if they stick to just one theory. Even if one of the factors that impede progress is human cognitive bias as explained by prospect theory, that does not mean studying this theory will bring us closer to finding a concrete solution to averting wars. We have no choice but to think the best possible way for human beings to devise strategies and policies may be by combing through materials and statistical data to sufficiently analyze similar cases, while keeping in mind biases in humans’ ways of thinking as demonstrated in prospect theory.
Inoki is a professor emeritus at Osaka University, where he also served as dean of the economics department. Until recently, he was a special professor at Aoyama Gakuin University. Prior to that, he served as director general of the International Research Center for Japanese Studies from 2008 to 2012.