Ex-marine killed at 92 created ‘Ellsberg paradox’ – 06/17/2023 – Market

US military analyst Daniel Ellsberg died this Friday (16), aged 92, known for leaking the “Pentagon Papers”, confidential documents, revealing the US government’s lies about the Vietnam War .

As a young man, Ellsberg received a fellowship to attend Harvard in 1948. He earned three degrees, served in the Marine Corps, and worked for the Pentagon and the Rand Corporation, an influential policy research think tank.

He devised an experiment that became known as the “Ellsberg paradox”. In short, in one of the scenarios, one hundred balls are placed in two urns (A and B). In urn A, 50 red balls and 50 black balls are placed. In B, there are also 100 units, but in an unknown proportion.

The participant is offered options such as winning a reward of US$ 100 (R$ 482) if the red ball is drawn from urn A, if a black ball is withdrawn from urn A, if a red ball is withdrawn from urn B or if a black ball is drawn from urn B.

Usually, participants opted for bets involving the ballot box in which they knew the number of red and black balls, regardless of the color of the chosen balls.

The interpretation was that the choice was made by an aversion to ambiguity or uncertainty. People tend to avoid situations where they cannot measure the probability of achieving a certain outcome.

Published in 1961 in the economic research journal The Quarterly Journal of Economics, Ellsberg’s article proposes that people so passionately prefer definite information to ambiguity that they make choices that are not consistent with the laws of probability.