The Sunk Cost Fallacy

Slate has an unusually good, non-technical article dealing with the SCF.


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.


There are fewer things more politically charged than the SCF, and it's very common on both the left and right to use it to, on one hand, validate their flavor of the day and, on the other, villify their opponents. This article applies it to Iraq, but it's pretty easy to find articles using the same flawed logic around welfare, social security and affermative action.

Not that there aren't VALID arguements for all these points, it just that valid arguements are so... hard to think about and all. Sunk Cost is easier.

FTR, I often leave food on my plates at restaurants. I didn't size the portions and feel no responsibility to finish them.