Prospect theory, a psychological theory of decision making that has shed new light on foreign policy choices, maintains that people tend to take high risks when anticipating gains. This article introduces prospect theory to the study of comparative politics in order to account for the bold economic policy choices that presidents made in crisis-ridden Argentina, Brazil and Peru, and the surprising degree of popular support that such risky and costly measures commanded in these countries; and conversely, to explain the cautious course of reform recently pursued in Chile, a country with better economic prospects.