“Loss Frames” Discussion

In an article titled “How Lawyers Can Minimize Professional Mistakes During a Scandal Like That at Penn State” of August 10, 2012, John Dean discusses what he refers to as a “loss frame.”

Here is an excerpt:

Richard Painter has done some remarkable work in analyzing what he calls “the psychology of cover-ups.” Drawing on the work of Nobel Prize laureates Daniel Kahneman and Amos Tversky, and their now classic 1979 essay “Prospect Theory: An Analysis of Decision Under Risk,” Richard notes how persons who find themselves in “loss frames” (or losing situations) are inclined to take greater risks to avoid even more loss, even when the risks are irrational, than others. In addition, the loss frame creates a “cognitive bias toward concealment.”  Richard thought that this might have happened to Nixon and others with Watergate.  I can confirm without any doubt that he was correct: That was the case for us all.

When one looks at situations like that of Penn State (or Enron and countless other related situations) it is obvious that bad, if not irrational decision-making, is almost the norm in the loss frame.  But these insights, as Richard Painter has written, not only explain how lawyers (and others) make serious mistakes in these situations, but also provide a means to prevent this from occurring.

The article continues by discussing how to deal with such “loss-frame” situations, and uses the Penn State situation as a “classic loss-frame situation.”


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