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Decius comments on How To Have Things Correctly - Less Wrong
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It's not the sunk cost fallacy- The cloak IS the best thing in the wardrobe to wear. The cloak, minus $80, is a net positive; the question I am trying to answer is "Would the cloak and -$80 have been a net positive without the prior commitment?"
The point is whether it is the best thing to wear because of its price. If it is, then it's a sunk cost fallacy, if it isn't then there is no fallacy.
According to my interpretation of what the OP said, in particular:
the fallacy seems be present.
Anyway, for the purpose of this discussion, the actual OP thought processes aren't of particular interest: we are not here to decide whether to award Alicorn a rationality badge. What matters is whether the general form of the argument is correct or fallacious.
1) buy a new spatula and use it = positive utility 2) buy a new spatula, then forget it exists = negative utility 3) never buy the spatula = neutral
The ideal situation is #1. Alicorn is describing a fix to the common failure state, which is #2. Using this technique should result in either #3 (you won't use the item and therefor don't buy it) or #1 (you remember to use it)
The issue is that to get $80 worth of value from the cloak, you have to remember to use it. This will require changing habits that would previously have relied on other possessions (in Alicorn's case, sweaters). For some people and some purchases, people forget to evaluate this. Alicorn has developed a technique that makes her aware of this requirement, helps her evaluate whether she really will remember to use it, and then further helps her to actually use it.
I think you're confusing commitment with the sunk cost fallacy. Alicorn is committing to using a new wardrobe algorithm, which will properly value the cloak. Her old algorithm would undervalue it, because it wasn't designed to handle "I have a cloak". The sunk cost fallacy applies only if Alicorn continues wearing the cloak despite it being a reduction in utility; everything she has said here seems to indicate that wearing the cloak increases her utility; she just has to be careful to remember it as an option.
If the cloak is the best thing to wear because of its price, it still isn't sunk cost.
It's when the cloak is worn because of its cost, despite not being the best thing in the wardrobe, that sunk cost applies.
In poker, if I raise $80 on a value bet, and an opponent raises that by $1 (causing me to update the chances that I have a better hand), it is sunk cost to figure "There is a 1% chance that I will win the pot, but I've already put in $80 so I might as well lose another dollar". It is perfectly rational to figure "There is a 1% chance that I will win the pot, and the pot will contain $162 dollars if I risk $1, and that call will end further betting. I expect +$.62 dollars from calling, and +0 dollars from folding."
That's what I meant.
It's almost exactly the opposite of what you wrote.
I'm not sure what we are exactly disagreeing about.
I'm assuming that the cloak is not a Veblen good, hence the utility of wearing it is not correlated with its price.
What do you mean by "best thing in the wardrobe"?
"The best thing in the wardrobe" is that which, when worn today, will have the highest expected utility.
If the price correlates with the amount of effort you put into convincing yourself to enjoy wearing it, and that effort correlates with how much you enjoy wearing the cloak later on, then yes the price is correlated with the utility of wearing the cloak.
If this price-causes-effort-causes-enjoyment chain brings the total net utility of the cloak from "not the best thing" to "the best thing", then you're still winning because there was a potential profit margin in the enjoyment compared to the price and effort costs, and you took the opportunity to make some utilitarian profit.