Sunk cost fallacy facts for kids

Imagine you've spent a lot of time or money on something. Even if it's not going well, do you feel like you have to keep going just because of what you've already put in? That feeling is called the sunk cost fallacy.

A fallacy is like a trick your mind plays on you, a mistake in thinking. The sunk cost fallacy happens when someone keeps doing something because they've already invested a lot of time, money, or effort into it. They might feel like they have to finish, even if it's not giving them much back.

What is the Sunk Cost Fallacy?

The sunk cost fallacy is a common thinking mistake. It makes people continue a project or activity. They do this even when it's clearly not working out. This happens because they focus on what they've already spent. They ignore what is best for the future.

The money or time you've already spent is called a "sunk cost." It's gone and you can't get it back. A smart decision should only look at future benefits and costs. Past investments should not influence new choices.

Everyday Examples of Sunk Costs

Think about watching a TV show. Maybe you watched six episodes of Battlestar Galactica. Then you decide you don't really like it. But because you spent six hours watching, you might tell yourself, "I've already spent so much time. I might as well finish the whole show." This is the sunk cost fallacy in action. You're letting past time spent influence a future decision.

Here's another example:

• You buy a ticket to a concert. On the day of the concert, you feel sick. You might still go because you paid for the ticket. But going might make you feel worse. The money for the ticket is a sunk cost. It's already spent. Your decision should be about your health now.

Real-World History and Sunk Costs

The sunk cost fallacy has been seen in big historical events. During the Vietnam War, some Americans supported continuing the war. They believed the United States had already spent so much money. They also felt that too many lives were lost. They thought if the US stopped, all that sacrifice would be for nothing.

This way of thinking is an example of the sunk cost fallacy. It suggests that past losses justify more spending or effort. Even if the current situation isn't good, people might feel trapped. They feel they must keep going to make past efforts seem worthwhile.

The Concorde Fallacy

The sunk cost fallacy is sometimes called the "Concorde fallacy." The Concorde was a very expensive supersonic jet. The UK and French governments spent a lot of money developing it. Even when it became clear the project was too costly, they kept going. They used the past expenses as a reason to continue. They didn't want to "cut their losses." This is a classic example of ignoring future costs because of past investments.

How to Avoid the Sunk Cost Fallacy

It can be hard to ignore what you've already invested. But here are some tips:

• Focus on the future. Ask yourself: "What is the best choice for me right now?"
• Don't think about what you've already spent. That money or time is gone.
• Be brave enough to change your mind. It's okay to stop something if it's not working. This is true even if you've put a lot into it.

Daniel Kahneman is a famous psychologist. He studied how people make decisions. His work helps us understand why we fall for thinking traps like the sunk cost fallacy. Learning about these fallacies helps us make smarter choices.

Images for kids

• 

  The sunk cost fallacy has also been called the "Concorde fallacy." Governments continued the project due to past expenses.

• 

  Daniel Kahneman is a famous psychologist who studied how people make decisions.