Episode Details

The sunk cost fallacy is a mindset of continuing onward with an investment or project based on past information even though logic dictates that the outcome will not be favorable. Even when we are faced with flawed reasoning, human nature will not allow us to change course because of aversion to waste and the need to be right. The sunk cost fallacy can occur in both business and government. The sunk cost fallacy emanates from a sunk cost expense, which is a lost amount of time, money, or effect, that cannot be regained. Behavioral economics tells us that the foundation of sunk cost fallacy is psychological and tied to several biases which include loss aversion, commitment bias, and endowment effect. This episode reviewed articles from Investopedia and The Epoch Times (subscription required).