Opinion: Sunk costs and lost causes


Commentary by Terry Anker

It seems that along with age is delivered a diminished interest in fighting the uphill battle to stay personally up-to-date. Where once we coveted each and every new style, color and cut, we now, if the suit still fits and well-serves its intended purpose, find an off-trend width of lapel or shade of blue as insufficient to compel replacement. Have we all become collectively less stylish? Do we care not about our presentation or are we stuck in some past decade comfortable with the standards of that now expired era?

But if the sofa/curtain/countertop/suit/whatever is still in good working order, why would we feel a need to replace it? Once we made the decision to acquire the stylish dusty-rose toaster oven, does it make sense to buy another simply because it is skinned in stainless steel? Basic economics teaches us that our sunk cost is only recovered via use. We pay $100 for shoes to walk 100 miles. We then only walk 10 miles. We could argue we have $90 left in them. Unless sold to someone else for $90 (or more), we’ve forfeited the remainder of the worth. Once purchased, the kicks should be used until consumed. Even so, how do we discount for style and convenience? Is there a case where the first 10 miles is worth $100 and the rest nothing?

Some people buy a new house every few years. They want new style, new appliances and new landscaping. Likewise, clothes, worn-once, find a new home through charity (or worse, the landfill). And, leftovers don’t have a home in the freezer but, instead, the garbage. Should we live in a world where sunk costs are a lost cause? If so, how can we hope to measure the right time for the exchange? Maybe it’s time to go shopping.