April 15th, 2007


Sunk costs and regret

The book, The Paradox of Choice: Why More Is Less, which I have mentioned in here before, has invaded my brain. In a good way. The discussion of regret and of "sunk costs" in particular are concepts that are well worth thinking about.

"Sunk costs" are those costs you have already paid for an item or service. People in this country have a tendency to pay too much attention to sunk costs as a determinant for future actions. For example, if you bought a ticket to a concert you will likely feel compelled to go to the concert because you paid for it. The better way is to make the decision to go or not go based on what you actually want to do. The money is gone either way.

Yesterday I paid for new lenses for my current eyeglass frames. I paid a lot for these lenses and as soon as I left the store I started to regret it. But it is done. Regret serves no purpose, unless it is to use it to decide how I will approach such purchases in the future.

I have a rule about not buying an item from someone over the phone or at the door the first time that person calls or comes by. That rule has served me well. It gets me out of having to make a decision until I have given it more thought. I simply tell the person, "I have a rule...". That person usually says, "Yes, but if you buy now you'll get this deal. If you put it off you lose the deal." I shrug and say, "Well, that's too bad but that's my rule."

I can now make a rule about such things as these glasses that when the purchase is some amount over what I expect that I will delay the purchase. I may still buy them, but I'll feel better about it. As for this time, I refuse to dwell now on the negative aspects. I have simply created a new rule that will help me in the future and I will enjoy those new lenses.

More on those sunk costs

hey, wait a minute
The Sunk-Cost Fallacy
Bush falls victim to a bad new argument for the Iraq war.
By Barry Schwartz
Posted Friday, Sept. 9, 2005, at 6:24 AM ET

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?

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.

Barry Schwartz is a professor of psychology at Swarthmore College and the author of The Paradox of Choice: Why More Is Less.

Article URL: http://www.slate.com/id/2125910/
Copyright 2007 Washingtonpost.Newsweek Interactive Co. LLC

How we read

I have been reading a book, Blaming the Brain: The Truth About Drugs and Mental Health, about the development of "biopsychiatry" and of drugs to combat mental illness.

While writing for a lay audience, the author does use the names of the drugs involved. I find myself pronouncing them carefully, sounding them out, often several times for one drug name. I am very good at phonics as well as phonemics and even so I have to work through some of the longer names again and again before I'm comfortable with them.

It occurred to me that this is why it is harder for me to remember names written in a different language - like Russian names, for example, or Polish - because I don't have the pronunciation guide in my head. It is much more a struggle and sometimes I simplify the names just so I can read them quickly, knowing my pronunciation is nowhere near right.

It occurred to me, too, that those who did not learn to spell and read the way I did, those who suffered through that "see and say" technique to the exclusion of all else, must almost necessarily find it much more difficult to read, regardless of their intelligence. Or perhaps they do as I do and simply mispronounce when it's impossible, when they don't recognize the word.

My brother loved to read, at least when he was younger. As he got older he tended to read the same lighter stuff over and over. Perhaps it got to be too much. He didn't spell well and I believe he did not learn how to read phonetically.

All of which reminds me of various experiences with schools, but perhaps another time.