The principle of sunk costs is the economic rule of thumb which states that only future costs and benefits, and not past commitments, should be considered when making a decision (and thus that previously incurred, or “sunk” costs, should be ignored). This principle is often ignored by gamblers and investors, as well as ordinary people. Have you ever been sitting at a poker table and, having lost the money you started out with, been determined to risk more money in order to make up for what you have already lost? Have you ever stubbornly clung to a losing investment because you’ve already invested so much of your time and money into it? In both of these cases, many of us would choose to not “waste” the money we’ve already spent, but according to the sunk cost principle, the logical thing to do would be to abandon ship, whether it be the poker table or the investment.
A situation in which my friend Athena recently found herself can help illustrate that the sunk cost principle isn’t only useful to economists, investors, and gamblers but can also help us make sense of love and sex. Athena is on a sports team and had a formal this past weekend. She doesn’t have a boyfriend and didn’t want to go with a friend, so after much deliberation, she decided to ask a boy from her Italian class whom she thought was cute. She was nervous, and we debated the wording of her Facebook message to him for a good half hour. He agreed to go, and everything was going well…until we had to buy the dress. Then it was picture messages, crash diets, accessory swapping, and whining. When the night of the formal finally came around, Athena spent hours doing her hair and makeup and finally left her room looking like a celebrity. The party was a blast, and Athena and her date spent the entire three hours in a drunken bliss, oblivious to the rest of the party as they enthusiastically made out all over the dance floor, the bar, the bus, and all the way back to her room.
Athena was understandably excited for what was to come (she also really wanted to use her new handcuffs). Unfortunately for Athena, when things started to get hot and heavy, she was less than impressed with his performance (or lack thereof). Despite this, and despite the fact that he is unlikely to be handcuffing her anytime soon, she continues to insist that he is cute and fun and wants to hang out with him again.
Being fully aware of Athena’s intentions (purely sexual) and her lack of genuine interest in this boy, I was skeptical of her desire to see him again. Why was she so determined to give him another shot? She felt an obligation to “make it work” in order to justify the considerable time and effort that she had already invested in this boy.
Athena was ignoring the sunk cost principle. Have you ever started writing a paper and realized after a page of typing that you can think of a different topic you’d much rather write about but don’t start from scratch, even though it would make a better paper? Have you ever dragged yourself out to spend time with an old friend even though you’d rather be drinking spiked hot cocoa and stalking the Facebook page of the freshman you want to do it with? Situations like these are what the sunk cost principle addresses and tries to prevent. Athena refused to let all the time and effort she put into her formal date go to “waste,” which we now know is irrational because her time and effort are already “sunk” and thus irrelevant.
Unfortunately for Athena, things haven’t been looking up. She should have ignored the previous investment that she made in this boy and only taken future costs and benefits into consideration. She didn’t, and the chances of her using her handcuffs have resultantly (ahem) gone limp.