I just finished the first draft of my essay, "Are Sunk Costs Fallacies?"; there is still material I need to go through, but the bulk of the material is now there. The formatting is too gnarly to post here, so I ask everyone's forgiveness in clicking through.
To summarize:
- sunk costs are probably issues in big organizations
- but maybe not ones that can be helped
- sunk costs are not issues in animals
- they appear to be in children & adults
- but many apparent problems can be explained as part of a learning strategy
- there are few clear indications sunk costs are genuine problems
- much of what we call 'sunk cost' looks like simple carelessness & thoughtlessness
(If any of that seems unlikely or absurd to you, click through. I've worked very hard to provide multiple citations where possible, and fulltext for practically everything.)
I started this a while ago; but Luke/SIAI paid for much of the work, and that motivation plus academic library access made this essay more comprehensive than it would have been and finished months in advance.
Two remarks :
Be careful with the Concorde example. As a French citizen, I was told that the goal of the Concorde never was to be profitable as a passenger service, but it served two goals : public relation/advertising to demonstrate the world the technical ability of french engineering and therefore sell french-made technology (civilian and military planes for example, but also through halo effect, trains or cars or nuclear power plants), and stimulating research and development that could then lead to other benefits (a bit like military research or space program does lead to civilian technology later on). Maybe it was just rationalization and not admitting they felt to the sunk cost fallacy, but as long as I remember, that was the official stance on the Concorde - and on that side, I don't really think it was sunk cost.
I agree with your analysis that sunk cost is useful to counter other biases. I didn't think about the part of young children not committing it, but now that you pointed to studies showing it, it makes perfect sense (and is compatible with my own personal observation of young relatives). So, yes, sunk cost fallacy is useful because it helps us lower the damages done by the planning fallacy and our tendency to be too optimist. But I wouldn't go as far as saying it's not a bias. It's a bias, a "perfect rationalist" shouldn't have it. A bug that partially negates the effects of another bug, but sometimes create problems of its own, is still a bug. So I wouldn't say "sunk cost is not a fallacy" but "sunk cost is a fallacy but it does help us overcome other fallacies, so be careful".
IMO, the Concorde justifications are transparent rationalizations - if you want research, buy research. It'd be pretty odd if you could buy more research by not buying research but commercial products... In any case, I mention Concorde because it's such a famous example and because a bunch of papers call it the Concorde effect.
I'm not terribly confident in that claim; it might be that one suffers them both simultaneously. I had to resort to anecdotes and speculation for that s... (read more)