Therapeutic Insight #26

Decision making is tough and the bigger the decision, usually the tougher it gets. The good news is, there are people who have been rigorously evaluating human decision making and have some helpful insights for the rest of us. It’s a newer discipline that essentially combines the study of psychology and economics called Behavioural Economics.

One of the many helpful insights from this discipline is the Sunk Cost Fallacy, which describes the tendency for people to remain committed to a bad decision simply because they already invested resources into it. A good example is driving through a snow storm to attend an event, even if you don’t want to, simply because it is paid for and cannot be refunded; or renovating a decrepit building, even if it would be cheaper to build a new one, simply because the old one was expensive and already built. In both cases, the cost is sunk and cannot be recovered. Yet, it plays a significant role in our decision making, even though it should no longer be a rational consideration. As David McRaney put it:

“The best choice is to do whatever promises the better experience in the future, not which negates the feeling of loss in the past.”

Image result for sunk boat

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