On the Sunk Costs Fallacy

If you have the time and patience to read it, I highly recommend The Sunk Cost Fallacy by David McRaney. He uses the memorable obsession on Facebook called “Farmville” to demonstrate a serious flaw that arises from Western materialism. This flaw is rooted in the deep pessimism and dread inherent in Anglo-American culture.

I’ve excerpted some critical parts here:

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[O]rganisms that placed more urgency on avoiding threats than they did on maximizing opportunities were more likely to pass on their genes. So, over time, the prospect of losses has become a more powerful motivator on your behavior than the promise of gains. Whenever possible, you try to avoid losses of any kind, and when comparing losses to gains you don’t treat them equally. The results of his experiments and the results of many others who’ve replicated and expanded on them have teased out a inborn loss aversion ratio. When offered a chance to accept or reject a gamble, most people refuse to make [or] take a bet unless the possible payoff is around double the potential loss….

Sunk costs are a favorite subject of economists. Simply put, they are payments or investments which can never be recovered. An android with fully functioning logic circuits would never make a decision which took sunk costs into account, but you would. As an emotional human, your aversion to loss often leads you right into the sunk cost fallacy….

That’s the fallacy at work, because the money is gone no matter what. You can’t get it back. The fallacy prevents you from realizing the best choice is to do whatever promises the better experience in the future, not which negates the feeling of loss in the past….

You continue to play Farmville not to have fun, but to avoid negative emotions. It isn’t the crop you are harvesting, but your fallacies. You return and click to patch cracks in a dam holding back something icky in your mind — the sense you wasted something you can never get back….

Sunk costs drive wars, push up prices in auctions and keep failed political policies alive. The fallacy makes you finish the meal when you are already full. It fills your home with things you no longer want or use. Every garage sale is a funeral for someone’s sunk costs.

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The one way we can begin to moderate this effect is to realize that it’s a fallacy, that God doesn’t operate this way. When you manage to shed materialism in favor of seeing the richness of God’s provision, and you hold a preference for intangible values, then you find the world a far less fearful place to live. You will be able to recognize that what you hold today is just a tool for His glory. When the job changes, you leave behind the tools that belong to it because of His divine promise to provide new tools for a new job.

I run into the sunk costs fallacy all the time when I try to help people switch to a better software package that requires learning a few different habits. It’s the same kind of dread that keeps people from leaving behind the confining prison walls of bad intellectual assumptions on faith.

About Ed Hurst

Disabled Veteran, prophet of God's Laws, Bible History teacher, wannabe writer, volunteer computer technician, cyclist, Social Science researcher
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One Response to On the Sunk Costs Fallacy

  1. Jay DiNitto says:

    I had forgotten about this fallacy. “But so many lives were already spent. We don’t want them to have died in vain,” etc. It’s a fallacious argument, to be sure, but in some contexts, with other variables, it could be “rational” to have this kind of sentiment.

    Like

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