The Sunk Cost Effect

Ahab hunting down Moby Dick. Wile E. Coyote chasing the Road Runner. Learning Latin. Walking over hot coals. Standing in a long line for boba tea or entrance to a small, overpriced clothing retail store. Forking up for luxury nonsense. What do these activities have in common? They’re all examples of the overvaluation of what economists call “sunk costs”: the price you’ve already irretrievably paid in time, money, effort, suffering, or any combination of them for an item, an experience, or a sense of self-esteem.

“We make fallacious decisions based on what we’ve invested in something, even if the probability of actually gaining an objective advantage from it is zero,” said Neir Eshel, MD, PhD, assistant professor of psychiatry and behavioral sciences. “And it’s not just us. This has been shown in animals across the animal kingdom.” Blame dopamine: the “do it again, do it some more” brain chemical that’s been much talked about in connection with pleasure, learning, and habit formation.