You Sunk My Cost Fallacy

The sunk-cost fallacy is committed when one factors costs previously spent (and therefore "sunk") into present-day decisions. People have a tendency to hang on to projects in which they've invested a lot of resources, even beyond the point at which the project has proven futile, simply so that their past efforts won't have been wasted. The rational human must always consider the best choice from here on out; to select a worse choice because of past decisions is to commit the sunk-cost fallacy.

A famous example (so famous, in fact, that the fallacy has been renamed after it) is the Concorde supersonic jet. The story goes that although it was obvious to the British and French governments that the Concorde would never be a profitable form of transportation, they kept investing money and work in it because of all the money and work they had put in it so far. This until the first Concorde crash in 2000 finally ended the dream. This crash was not due to any flaw of the Concorde, so although it was fallacious to end the project because of the crash, at least two fallacies met and destroyed one another. Along with 113 people.

I have never read an example of the sunk-cost fallacy wherein the committer irrationally "jumps ship" because of previous efforts, yet I have avoided the fallacy twice in my life in just that manner (and never in the classic Concorde manner). That is, the committer of the sunk-cost fallacy is commonly seen as putting a Herculean effort towards a lost cause, simply because he doesn't want his previous Herculean effort to have been wasted. However, the committer may well do the opposite and quit a cause because he adds the effort he has already put towards the cause to the effort he now realizes he will have to further put in, and deems the sum too Herculean. If he had known the entire effort required to begin with, he would not have thought it worthwhile, but already having put forth half the effort, he should weigh the cause against the remaining half of the total effort.

Here is my example: in 2004 I bought a ten year old Mazda for $1000. There was a motivated seller; the car was pretty much a steal. But $2300 would have likely been too much to ask. The car was stolen in 2005 and driven so carelessly for more than 200 miles that it cost $1300 to fix. (Well, theft of tires, battery, &c. contributed to the cost, also.) But I was left with the decision of whether I wanted to pay $1300 for the same car I considered a steal at $1000 just a year ago. The fact that I would have spent $2300 total on the car, though brought up to me by friends, is neither here nor there. It includes the costs of outrageous fortune, which, if added to this particular car, must be added to any alternative car I would consider. No, the cost of that car, at that point, was $1300, and it was well worth it. I still drive it today, and it has needed only a ~$300 tuneup since.

My other example is having to pay $80 for breaking a lawnmower A. just bought for $60. Maybe the lawnmower isn't worth $140, but at the point of my decision of whether to pay the $80, the $60 was a sunk cost.

Back to the Concorde fallacy: by all accounts, and a good account is available here, the Concorde could very well have turned a profit. I think it's sad that the fate of the plane is so verbally tied to a logically fallacy, when it was likely other fallacies of human judgment that are ultimately responsible for its demise. Of course, what I think could fill a warehouse.