I had intended this article to be about the concept of sunk cost and how it seems to be driving this entire, endless COVID-19 insanity.
“Sunk cost” simply means expenses one has already incurred that cannot be recovered. When we talk of sunk cost, it doesn’t have to mean only money; it can also be time or any other resource, including reputation.
Yet just because one has already spent resources on something doesn’t mean one should continue spending on it.
This is often easier said than done, as generally the more you have invested in something, the less you’re willing to let it go.
Once the money or other resource is spent, it’s gone or “sunk.” It should have no relevance to today’s decisions. Today’s decisions should be based on future costs and benefits, not past ones. This is not just an abstract theory but rather a physical reality.
One shouldn’t act today in a way intended only to justify a previous decision, yet we see governmental leaders jumping through all sorts of hoops in crazed efforts to do exactly that. They are forcing us all to live the sunk cost fallacy because they don’t want to admit past mistakes—and risk a good tar-and-feathering for their gross incompetence and for the damage their actions have done to small business owners and those on the lowest economic rungs.
It would be best for the country if politicians openly accepted when their choices bring about adverse consequences. But such transparency is not necessarily in the politicians’ best interests. They shouldn’t think about the money, time, emotion, and reputation that have already been spent when assessing what should be done here and now, yet it is often too tempting to recast past decisions in a more favorable light via current policy
One year into COVID lockdowns, it is time to focus on the future when deciding what course to set. Instead, we see governors across the country repeating many of the same actions and strategies that haven’t generated the desired results, leading to even more draconian actions and demands in their ever more frantic chase of the elusive sunk cost.
Desperate, they change the supposed goals to fit their predetermined actions, letting sunk cost completely drive their thinking. Matters are made even worse by the fact that none of these politicians are financially injured by their COVID sunk-cost fallacy.
The Nigerian prince scam is a good example of the extreme lengths people will go while chasing sunk-costs. These scams are a type of advance-payment racket where the victim sends money in the vain hope of a big payday down the road. It and similar scams have been around for hundreds of years.
Even when all evidence clearly shows the big payday isn’t ever going to come, people still often send more and more money to the scammers. Trusted loved ones and financial advisors can beg them to see the light and stop, but often they don’t.
They are chasing the sunk cost fallacy to their own ruin.
There are a number of personality features that drive these foolish actions. First of course is greed. The scammers promise a huge financial windfall for very little effort.
The scammers also prey on people’s desire to be a hero—you can feel good about yourself by helping another person in need.
The scammers are also quite good at involving their target in a relationship—building a sense of trust—which then pushes the victim to feel almost a sense of obligation to help.
Combined, these tactics drive the victims to chase their personal sunk cost to disaster—much like governors and bureaucrats are doing with COVID-19 lockdowns, masks, and all the rest.
But at least the Nigerian prince victims pay for their own stupidity. In this COVID-19 disaster, innocent people pay for the bureaucrats’ blunders.
Government at all levels has been playing a Nigerian prince scam on us for a hundred years. No matter what your age you have seen the regular, almost annual calls to raise taxes for schools, roads and transportation, infrastructure, defense, and other expenditures.
As sure as the sun rises in the east, these issues are never fixed with the additional funds but arise again and again and again—“do it for the children!” they implore. “Do it for the environment!” “Do it to save the polar bears!” “Do it to feel good about yourself!”—or my favorite, “Do it to show you care.”
It’s the freakin’ Nigerian prince scam! They prey on people’s greed—let’s get something for nothing by forcing someone else to pay for it. They prey on people’s desire to be a hero and they work hard to create a supposed relationship—almost tribal—where the victim, er… the voter feels almost an obligation to help them.
All of this is fueled by the psychological behaviors sunk cost drives in people’s decision-making.
Yet just like the Nigerian prince scam, the big payday—or, in politics, an actual solution and end of the problem—never comes about. Of course, it never will. That’s not how the scam works.
Like the prince scam, politics is just a numbers game. They don’t need to fool or win over everyone, just enough of the people who actually vote.
And just like the Nigerian prince scam, politicians will keep asking for money as long someone is willing to give it—it will never end. The scammers will keep at it until the victim is bled dry or wakes up and stops sending the money. Either way, only the end of the cash flow stops the thing.
Do we have the strength to stop chasing our sunk cost and finally turn off the spigot?