Risk, Reward, and Ruin: A Prospect Theory Analysis of Putin’s Gamble in Ukraine

By Anthony Costanzo

Before 2022, Vladimir Putin was widely regarded as a “pragmatic risk-taker.” His calibrated use of hard power and hybrid warfare in Georgia, Syria, and Crimea mitigated undue risk, allowing him to overpower and outmaneuver adversaries whilst avoiding heavy losses. These tactics successfully stymied NATO’s further expansion, reinforced Russia’s regional primacy, and ultimately shifted the status quo without provoking undue risk. 

Putin’s invasion of Ukraine represents a puzzling deviation from his pragmatism. Its scale and aggression shocked the West, galvanized NATO, and even spurred a paradigm shift in Germany’s foreign policy. With Western support, Ukraine inflicted unexpectedly high losses on Russia’s overextended troops, negating any prospects of Putin’s “low risk, high reward” fait accompli. To compensate for exhausting rates of attrition, Putin recalled troops from overseas, authorized mobilizations, and relied heavily on the paramilitary Wagner Group as a stop-gap measure to support his flagging invasion. Yet, Putin’s singular focus on Ukraine has undermined Russia’s broader strategic objectives, accelerated its demographic decline, and exposed the limits of its national power. With Putin’s decision-making sharply in focus, an important question remains: what explains his high tolerance for risk?

Prospect Theory, a model of “decision under risk” developed by Daniel Kahneman and Amos Tversky, offers a compelling explanation. In essence, they argue that the fear of loss drives risk-seeking behavior. This phenomenon, known as “loss-aversion,” exists because losses are more painful than equivalent gains. (The irritation of losing ten dollars is greater than the joy of gaining ten dollars.) When facing potential gains or losses, people gauge the attractiveness of their options from a “reference point,” a mental benchmark representing their sentiments toward their current situation. Those disgruntled with the status quo will take significant risks to avoid further losses or restore their status quo ante, leading to behavior inconsistent with rationalist frameworks of decision-making.

A re-examination of Putin’s risk-calculus through the lens of Prospect Theory supports the hypothesis that loss-aversion, rather than rational strategy, motivates his war against Ukraine. Putin’s dissatisfaction with the status quo stems from the disintegration of the USSR, which effectively ended centuries of Russian regional hegemony. However, Putin’s status quo ante is not the Soviet Union. Instead, Putin aims to reconstitute “Novorossiya,” a Czarist-era territory that included the Donbas and Crimea. By reunifying it with the “core slavic territories” of Russia and Belarus, Putin intends to create an ethno-state steeped in Slavic nationalism. Ultimately, Putin seeks to redress the humiliation of the USSR’s collapse, thereby securing his legacy as the leader who restored Russia’s pride and rightful place as a global power.

This nationalist vision was inspired by Alexander Solzhenitsyn’s 1990 essay, Rebuilding Russia, which criticized the Soviets’ expansionism for diluting Russia’s “national essence” by incorporating non-Russian peoples into society. Putin’s personal relationship with Solzhenitsyn predates the 2008 Bucharest Summit, during which he warned: “If Ukraine joins NATO, it will do so without Crimea and the eastern regions.” Yet, Putin’s actions contradict his rhetoric about “NATO expansion.” Finland’s accession added 830 miles to NATO’s border with Russia, but Putin’s muted response and redeployment of elite troops from this region to Ukraine exposes the inconsistency of his logic. Rather, inaction vis-à-vis Ukraine—a core slavic territory, unlike Finland—would incur domestic audience costs for Putin, who tied his hands by stoking nationalist fears of NATO’s expansion. The specter of “losing” Ukraine, above all else, framed his invasion as a necessary action to avert unforgivable losses to Russian prestige and his legacy.

Putin’s skewed risk-calculus is also attributable to the related “certainty effect,” wherein the fear of suffering certain (albeit smaller) losses drives a preference for riskier alternatives which entail the possibility of completely averting losses. Rather than accepting Ukraine’s increasing autonomy (a relatively minor loss), Putin chose the riskier option of outright conquering Ukraine. However, Putin underestimated the severity and likelihood of assumed risks, such as stiff Ukrainian resistance and NATO’s political resolve. Additionally, Putin overestimated his military’s capacity to deliver a swift victory, presuming his reforms fixed the long-standing issues eroding its performance, such as systemic corruption, poor logistics, and low morale. Putin’s habit of self-isolation further exacerbated his flawed logic, as he neglected advisors and relied wholly upon himself.

Prospect Theory also explains Putin’s sunk-cost attitude toward the high attrition rate of his forces. When the absolute value of losses increases, people counterintuitively exhibit a diminishing sensitivity (or emotional response) to subsequent losses. Robert Jervis noted that horse race gamblers place heavy bets on the last race, as they are willing to risk more money to potentially recoup losses. Similarly, the lure of “gambling for resurrection” will continue to incentivize Putin, as his expenditure of Russian blood will require moral or strategic victories to justify his sunk-cost attitude to domestic audiences. 

In sum, Putin’s gambling has left him with a paucity of allies, off-ramps, and room to maneuver. Yet, he has one card left to play: dogged perseverance. Putin’s strategy, while Machiavellian, is straightforward: by evoking the image of a nationalist, existential struggle reminiscent of the “Great Patriotic War,” he can control Russia’s war-battered population and hold the line against Ukraine’s spirited counter-offensive, waiting for a decisive shift in Western support for Kyiv and a stronger negotiating position. Nonetheless, Putin’s position remains precarious. If he had known of the “hiding hand” from the outset, it surely would have tempered his impulsivity—the state of play underscores the fact that his appetite for risk has evolved into a greater liability than any perceived “threat” from Ukraine or NATO.


This article was peer-edited by Saltzman Student Scholar Luc Hillion

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