tag:blogger.com,1999:blog-7225373.post589880008515033916..comments2024-02-29T03:34:23.190-05:00Comments on Who Were the Sea Peoples?: Sunk Costs and Subjectivismgcallahhttp://www.blogger.com/profile/10065877215969589482noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-7225373.post-83838446236538651842013-02-20T00:24:11.179-05:002013-02-20T00:24:11.179-05:00This is a great point. A lot of people forget that...This is a great point. A lot of people forget that guilt is a cost. So when certain people chastise game show contestants for not taking a chance to double their money, they're not considering the fact that those contestant could be remorseful for the rest of their lives: they had one chance to get $20,000, and they blew it by being greedy! That could be something that could haunt them for years. Unknownhttps://www.blogger.com/profile/08990715051451620558noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-28422540785149930382013-02-19T13:49:18.880-05:002013-02-19T13:49:18.880-05:00Hey, Gene. I think I can see the sunk cost fallacy...Hey, Gene. I think I can see the sunk cost fallacy interfering with decision-making in the opposite direction. Most examples show the problem with continuing a project because, "Look how much I've already spent." But here's an attempt at an example of bailing when you shouldn't because of sunk costs.<br /><br />I raise and finish cattle on grass. This is a low-margin business: all in, I expect to spend $1,000 raising a beeve to maturity and sell it for $1,040, posting a 4% profit. These numbers are not exact, but not too far off the actual numbers I saw in a worked example from a grass-farmer a couple years ago.<br /><br />The night before I'm to load Beefy on the truck to the slaughterhouse, she slips the fence and gets into Deacon Smith's yard. Deacon Smith hates me because he thinks humane treatment of animals "threatens the uniqueness of human beings" or some such hoo-hah. So he declares that it will cost me $100 to ransom the trespasser, Beefy. I do a quick, faulty reckoning that tells me if I pay the ransom, I'll now be upside-down on Beefy to the tune of ($60). I love my cattle, but I'm not in business to sell them at a loss, so I tell him, "Hey, keep her, she's yours."<br /><br />What I've just done, because of sunk costs, is turn down an opportunity to make $1,040 on a hundred-dollar expense. Cause the other $1,000 is gone already.<br /><br />I doubt a single real farmer would make this miscalculation, but it might do for an illustration.Jimhttps://www.blogger.com/profile/08018705513587424497noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-37061631460851965942013-02-18T12:23:07.403-05:002013-02-18T12:23:07.403-05:00Yes, I am, Kevin. Here I am just noting the often ...Yes, I am, Kevin. Here I am just noting the often unacknowledeged tension between two ideas that often sit side-by-side in the same text. gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-58627173342971665552013-02-18T11:51:48.529-05:002013-02-18T11:51:48.529-05:00Gene: So much the worse for subjectivism. We have ...Gene: So much the worse for subjectivism. We have good reasons for ignoring sunk costs, whether or not we recognize these reasons. I thought that you were a fellow opponent of normative nihilism!kevin quinnhttps://www.blogger.com/profile/04880872194080353414noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-21315370841918960732013-02-18T11:32:21.902-05:002013-02-18T11:32:21.902-05:00Interesting, Raoul. I am contemplating your point....Interesting, Raoul. I am contemplating your point.gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-45149359423208335112013-02-18T11:31:48.728-05:002013-02-18T11:31:48.728-05:00Yes, I think that is right.Yes, I think that is right.gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-19989710960817882722013-02-18T11:24:56.142-05:002013-02-18T11:24:56.142-05:00Thanks for writing about this topic. I was precise...Thanks for writing about this topic. I was precisely thinking of it, from the point of the antitrust law. <br /><br />In this context, the concept of (objective) sunk cost is slightly less absurd. The idea is that "sunk costs", i.e. costs which are not retrievable, constitute a "barrier to entry". <br /><br />Now, in this perspective, I think only "sunk" costs are genuine costs ; if you can buy factors of production, enter a market and easily sell the factors back if the business is bad, you don't really incur any cost (except the interest).<br /><br />So, from the antitrust point of view, the only costs should be the "sunk" ones. But even these real costs don't constitute "barriers to entry", because they are discounted in order to take into account the risk. <br /><br />Am I right/wrong/beside the point?<br /><br />- RaoulAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7225373.post-37832896665222105942013-02-18T10:22:06.753-05:002013-02-18T10:22:06.753-05:00The past certainly "exists" as present m...The past certainly "exists" as present memories!gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-71851732892933139892013-02-18T10:21:38.096-05:002013-02-18T10:21:38.096-05:00"But in this case, the costs wouldn't rea..."But in this case, the costs wouldn't really be sunk, because one's present decision (whether or not to eat the dish) would entail future feelings of anguish, guilt, etc."<br /><br />Yes.gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-24605548395673604702013-02-17T21:25:22.897-05:002013-02-17T21:25:22.897-05:00Bob's piece is good. Maybe the other harmoniza...Bob's piece is good. Maybe the other harmonization is to think of the Sunk Cost Fallacy as being about <em>recognition</em>: for a lot of us, before being introduced to the concept of sunk costs as such, we don't genuinely recognize that <em>those expenditures are gone regardless</em>. Also, can't there be a non-normative lesson on sunk costs which simply says, "If you do choose not to abandon a goal because of the effort you've already made to it, that is an emotional or ethical decision rather than a strictly financial one. You may still wish to proceed on that basis. Just don't confuse it with maximizing return on investment as such."Jimhttps://www.blogger.com/profile/08018705513587424497noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-71165365012125032172013-02-17T21:09:41.894-05:002013-02-17T21:09:41.894-05:00"after all, the student wouldn't feel tha..."after all, the student wouldn't feel that guilt if not for the past cost, would he?"<br /><br />"Past" costs dont exist...Humehttps://www.blogger.com/profile/00471731654454581518noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-57850591378789507222013-02-17T20:12:18.603-05:002013-02-17T20:12:18.603-05:00Yeah I'm glad you caught that. It's defini...Yeah I'm glad you caught that. It's definitely a tricky point. In <a href="http://mises.org/daily/1584/What-Does-Marginality-Mean" rel="nofollow">this article</a> I did the standard finger-wagging in the main text but said in a footnote:<br /><br />"In commenting on examples such as this, the philosopher Roderick Long points out that there is nothing "irrational" in considering "sunk costs." If that's what someone's values are, then that's what they are. (To give a silly example, if someone had strong religious beliefs that he would be damned for ignoring sunk costs, then it would be perfectly sensible to eat the entrée.) But in this case, the costs wouldn't really be sunk, because one's present decision (whether or not to eat the dish) would entail future feelings of anguish, guilt, etc. Despite complications such as these, I still feel that a discussion of sunk costs is useful at the introductory level. Under normal circumstances, the economist would urge people to stop feeling anguish or guilt over costs that are truly sunk."Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-1146881726750527202013-02-17T19:44:27.161-05:002013-02-17T19:44:27.161-05:00I think the student that you are describing above ...I think the student that you are describing above would be Henery Hawk.<br /><br />Maybe in a far more unlikely scenario, "Henery" is someone working a lucrative company and wants to improve his potential earnings by trying to acquire a master's degree or a Ph.D. The company is paying him to take courses at whatever university or college that he chooses as long as it doesn't break the bank. To be frugal and save himself some time, since the job itself might be very strenuous like in an electrical engineering or technological field, Henery decides to complete his degree at an online university like the University of Phoenix or DeVry University, or in the case of some educators that I've met, take courses at Walden University. I believe that in some cases, one could take courses on campus even at the University of Phoenix, so I'm thinking of that kind of a situation or even at a normal state college. He ends up failing many tests not because he hasn't studied hard enough, but the instructor is grading tests on a curve and the majority of the other students are choosing not to study and so forth. Another factor that I'm thinking of is when the school makes their process of adding or dropping courses very difficult whether it is due to outdated technology or a bug in the system. The instructor himself could be someone whose very incompetent and doesn't have an entry on a website like Rate my Professors, so the student doesn't exactly know the exact quality of the professor.<br /><br />Would it really be a waste of $3000 dollars if this student notified the company and the unviversity about the poor quality of the course he was taking and went from there? Perhaps there would be a degree of relief, anger, disappointment, and satisfaction if the student had found legitimate reasons to declare the school he was attending as one of those degree mill scams and sued them in court, especially if he found out that more unfortunate students were being ripped off through student loans? I'm assuming that Henery didn't know any of this and had found out about these colleges legitimately.<br /><br />Hopefully I'm not over-analyzing what you wrote above, but these are thoughts and questions that came to mind.Anonymoushttps://www.blogger.com/profile/05166618601866526009noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-6839567800698731912013-02-17T19:28:09.230-05:002013-02-17T19:28:09.230-05:00Well, but...
DAMN YOU GENE CALLAHAN!!!Well, but...<br /><br />DAMN YOU GENE CALLAHAN!!!Jimhttps://www.blogger.com/profile/08018705513587424497noreply@blogger.com