The Sunk-Cost Fallacy

slate.com/news-and-politics/2005/09/bush-is-a-sucker-for-the-sunk-cost-fallacy.html

Barry Schwartz September 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?

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And the sunk-cost fallacy appears in the most consequential of contexts, where injury
and death, and not just money or effort, are at stake. Which brings us back to Iraq. How
do we honor the sacrifices of those who have died or suffered serious injury in an
American conflict? The best way to show how much we respect and value their lives is by
refraining from sacrificing other lives in their name unless future prospects fully justify
putting more people in harm’s way. The lives of those who died are a sunk cost—one
that is much higher than any of our treasure. But their lives can not be reclaimed. Their
injuries can not be undone. If our assessment of a military situation is that we are
unlikely to be successful, or that the likely price of success in lost lives is too high, then
we must change course. What we owe those who have already suffered is enough
reverence for life that we won’t send others to suffer after them in order to justify their
own suffering.

To acknowledge sunk costs and change course need not be an admission of foolishness
or even failure. One can think through a problem in the right way, and formulate a wise
course of action, only to discover that it doesn’t work out. The world is an uncertain
place, and good decisions do not guarantee good results (just as bad decisions don’t
guarantee bad results). But a reason people are seduced by the sunk-cost fallacy is that
investments of time, money, or lives on ventures that do not work out feel like failures.
They feel like a waste. And people seem willing to waste even more (time, money, or lives)
to justify what has already been spent and avoid that sick feeling of failure.

I am not suggesting here that we should “declare victory and leave” Iraq. I am not
suggesting that the only justification currently being offered for continued involvement in
Iraq is the “sunk cost” in American lives. I am not suggesting that obligations from the
past should never enter into one’s consideration about the future.

My suggestion here is modest: You may justify the Iraq occupation in many ways—
perhaps you think it will prevent further terror, democratize the Middle East, or restrain
Iran—but it is unacceptable to justify it on the grounds that we “owe” it to those who
have already fallen. That is a justification that no one should be allowed to get away with.
But it is a justification that is coming increasingly to the fore, usually implicitly but
sometimes explicitly, as other arguments about staying the course in Iraq become less
and less compelling. Whatever the differences may be between Iraq in 2005 and Vietnam
in 1968, if we allow policy makers to use our “sunk costs”—our dead soldiers—to justify
further conflict, we will have turned Iraq into another Vietnam. And if we do, we will be
shamed by Iraq just as we were shamed by Vietnam.

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