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Previews begin October 2007. Premieres January 2008.

The Ellsberg Paradox

Recognized today primarily as the man who in 1971 leaked the Pentagon Papers to the NEW YORK TIMES, Daniel Ellsberg had an early career as an economic theorist specializing in decision making. His major contribution to the field, the Ellsberg paradox in decision making, illustrates people’s aversion to ambiguity when they have to make choices. The paradox is presented as a game, and it exists in a number of different versions.

In the version presented on CURIOUS, participants were presented with two fists full of marbles. The right fist contained five red marbles and five blue marbles. The left fist contained an unknown quantity of red marbles and an unknown quantity of blue marbles. Invariably, when given a choice of which fist they wanted to pick either a red or a blue marble out of, they chose the right fist. On the surface, making the choice that offers a 50/50 chance seems obvious. In reality, one is just as likely to pick the correct-colored marble from the left fist, with an unknown mix of marbles.

In a more complicated version of the paradox, a total of 90 red, blue, and yellow marbles are mixed up in a bag. There are 30 red marbles. The remaining 60 marbles are an unspecified mix of blue and yellow.

Here, participants are given the choice between two gambles:

  • A win $100 if they pick a red marble
  • B win $100 if they pick a blue marble

In this instance, participants overwhelmingly have chosen gamble A. As demonstrated earlier, when making choices, people have an aversion to ambiguity. They go with a known quantity even though the odds of winning are only one out of three.

Then, drawing from the same bag with the same marbles, participants may choose between

  • C win $100 if they pick a red or blue marble
  • D win $100 if they pick a blue or yellow marble

Since only choice C allows them to stick with their trusted red marbles, one might expect participants to gamble on picking a red or blue marble. But by a wide margin, most people prefer choice D. They abandon the red marbles entirely, even though it is only with the red marbles that they can define their risk. Does this mean that ambiguity aversion has gone out the window? No.

Choice D offers participants a hitherto irrelevant known quantity. Although the individual quantities of blue and yellow marbles are unknown, participants DO know that the combined total is 60. Thus choice C represents an unknown quantity, while choice D not only is a known quantity but also, with odds of two out of three (60/90), is the only one of the four choices where winning is clearly probable.

Daniel Ellsberg became a strategic analyst for the Rand Corporation, the military think tank, in 1959. Specializing in command and control of nuclear weapons and crisis decision making, Ellsberg also served as a consultant for the defense department and the White House. Starting in 1965 he worked for the state department, serving at the U.S. embassy in Saigon for two years. His position as a civilian analyst took him all over Vietnam, often to the front lines.

Upon returning to the Rand Corporation in 1967, Ellsberg joined the cadre of writers working on a classified document for the defense department: HISTORY OF U.S. DECISION-MAKING PROCESS ON VIET NAM POLICY, 1945-1968. This 47-volume secret history, which ultimately became known as the Pentagon Papers, documented decades of failed policy and deceit. Most damning was the revelation that President Lyndon Johnson planned and implemented a vast expansion of the war while publicly vowing not to do so.

Already disillusioned by the White House policy of using domestic politics as a rationale for foreign policy decisions — a practice he witnessed in three administrations — Ellsberg realized that the Nixon administration would continue to escalate the unwinnable war rather than admit defeat. Having tried unsuccessfully to have the Pentagon Papers presented in Congress and to arrange to testify, in June 1971, Ellsberg sent a copy of the papers to the NEW YORK TIMES.

In taking this action, Ellsberg knew he would not only destroy his career but in all probability spend the rest of his life in prison. The White House did not take the situation lightly. By the time Ellsberg was put on trial in 1973, President Nixon’s aides had illegally wiretapped Ellsberg’s telephone, burglarized his psychiatrist’s office, plotted to physically attack him, and attempted to bribe the presiding judge in his case.

On the grounds of governmental criminal misconduct in the case of Daniel Ellsberg, 12 felony counts against him, with a possible sentence of 115 years, were dropped. Two of the three counts listed in the impeachment proceedings against Richard Nixon pertained to his campaign against Daniel Ellsberg.

Perhaps the true Ellsberg paradox is that an economist specializing in principles of uncertainty aversion and avoiding risk made a clear choice to risk everything out of moral conviction.

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CURIOUS is made possible through the generous support of TIAA-CREF.

Additional funding for CURIOUS is provided by:
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Stan and Barbara Rawn
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