Loss Aversion and Risk Taking in North Korea’s Militant Strategy, 1967–1968

Studies of North Korean foreign policy are increasingly turning to the thesis advanced by prospect theory of loss aversion and reference dependence to explain its risk taking. Most of these studies focus on the post-1990s as the genesis of North Korea’s risk-prone behavior. I show that Pyongyang has operated from a frame of losses since the late 1960s, due to the parallel decline of ideological unity in Soviet-North Korean and Sino-North Korean relations. In particular, from 1967 to 1968, North Korea perceived both allies to be more focused on countering each other than on jointly opposing the United States. Consequently, Pyongyang for the first time saw both Moscow and Beijing as doubtful assets in its bid for hegemonic unification. North Korea therefore stressed the role of small countries in the revolutionary struggle and launched the most violent phase of its militant strategy, emphasizing the US threat as the common enemy. The strategy was therefore in part a function of fear rather than a desire for expansion.