About a decade or so ago, my wife and I went out on a date. Because our daughter was a toddler back then, this didn’t happen all that often. But that day was a rare ol’ oasis: a meal (lunch) followed by a movie. What a treat!
And so lunch was had, and off we went to watch the movie. It is at this point, dear reader, that our little tale of love turns into one of horror.
For the movie that we had chosen to see on that fateful afternoon was a movie called Happy New Year.
There are no words in any known language that can describe how bad the movie was. Vogon poetry makes more sense than did the plot of that movie, and I wouldn’t blame the Vogons if they destroyed the planet all over again because of what I said.
But here, I tell my students when I narrate this horrible tale of horror in class, is where this turns into a teachable moment.
Within five minutes, I tell them, I and my wife knew that this movie was going to be crap. Actually, I’m lying, I tell ’em, because the other four minutes and fifty five seconds weren’t needed. I and my wife, I remind them – both of us with PhD degrees in economics. And even though we knew how bad the movie was, and even though we knew that sitting through it would be a complete, utter waste of our time – even then, dear friends, we sat and watched the whole damn thing.
I could have helped out at the popcorn stand outside, and that would have been a better use of my time. I could have stood on one leg in the men’s washroom for three hours, I say, and that would have been a better use of my time. I could have slapped myself for three hours – and I should have too, for having chosen this movie – and that would have been a better use of my time.
But because we had gotten the chance to go out after so long, I tell ’em, we stayed here and saw the whole damn thing.
And that, my friends, is the sunk cost fallacy. I’ve told this story before in these parts, but why let that get in the way or a good story, no?
But is it possible to use the sunk cost fallacy to one’s advantage?
Perhaps, and Aaron Nicholas tells us how in a blogpost:
A second, less obvious benefit is actively using the fallacy to your advantage. For example, many gym memberships require upfront payments regardless of how much you use the facilities. If you find it hard to ignore sunk costs, choosing gym memberships that have large upfront fees and minimal pay-per-usage fees may be a way to commit yourself to a regular gym habit.
This can also apply to other activities that involve short-term pain for long-term gain – for example, paying for an online course will make you more likely to stick with it than if you found a free course.
But be warned, this doesn’t work for everything: it seems that spending wildly on a wedding ceremony or engagement ring doesn’t have a “sunk cost” effect – it fails to increase the likelihood of staying married.https://theconversation.com/what-is-the-sunk-cost-fallacy-is-it-ever-a-good-thing-217798
Oh and by the way, while it is true that spending wildly on a wedding ceremony or an engagement ring doesn’t (always) have a sunk cost effect, skimping on these things ain’t a good idea either.
It’s hard is what it is, this econ business!