[NetBehaviour] The Sunk-Cost Fallacy

[marc]

*The Sunk-Cost Fallacy*

Bush falls victim to a bad new argument for the Iraq war.
By Barry Schwartz
Posted Friday, Sept. 9, 2005

In recent speeches, President Bush has offered several reasons for 
staying the course in Iraq. One of them is the almost 2,000 Americans 
who have already died in the war. "We owe them something," the president 
said on Aug. 22. "We will finish the task that they gave their lives for."

Psychologists, decision scientists, and economists have a name for this 
type of argument: the "sunk-cost fallacy." It has gotten the United 
States into trouble once before. As casualties mounted in Vietnam in the 
1960s, it became more and more difficult to withdraw, because war 
supporters insisted that withdrawal would cheapen the lives of those who 
had already sacrificed. We "owed" it to the dead and wounded to "stay 
the course." We could not let them "die in vain." What staying the 
course produced was perhaps 250,000 more dead and wounded.

Here are a few more trivial examples of the sunk-cost fallacy:

*
You have good tickets to a basketball game an hour drive away. There's a 
blizzard raging outside, and the game is being televised. You can sit 
warm and safe at home by a roaring fire and watch it on TV, or you can 
bundle up, dig out your car, and go to the game. What do you do?
*
You've ordered too much food at the restaurant and there you are, 
completely stuffed, with a pile of pasta sitting on your plate. Do you 
clean your plate or not?

In each of these cases, the money is gone. Do you "waste" it, or do you 
go to the game, and finish your pasta? It is claimed by economists and 
psychologists that the right way to approach questions like these is 
only by looking to the future. Since the money is spent no matter what 
you do, the only real question you should be asking is what will give 
you more satisfaction--watching the game by a roaring fire or sliding to 
it in a blizzard; leaving the restaurant feeling content or leaving it 
feeling stuffed. The "sunk costs" are sunk whatever your decision; only 
the future matters. The fallacy in thinking about sunk costs is 
precisely that people feel compelled to get their "money's worth," even 
if it makes them suffer.

The sunk-cost fallacy appears in contexts less mundane than wasted food 
or basketball tickets. You've invested several million dollars to 
develop a new product only to be scooped by your competitor, whose 
version is cheaper and better than yours will be. Do you go on with the 
development nonetheless? You are two-thirds through a research project 
when a report of an almost identical project appears in the relevant 
journal. Do you finish your study or abandon it?

more...

http://www.slate.com/id/2125910/
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