Idea Almanac

“Vince paid $1,000 to an indoor tennis club that entitled him to play once a week for the indoor season. After two months he developed tennis elbow, which made playing painful. He continued to play in pain for three more months because he did not want to waste the membership fee. He only stopped playing when the pain became unbearable. When an amount of money has been spent and the money cannot be retrieved, the money is said to be sunk, meaning gone. Expressions such as “don’t cry over spilt milk” and “let bygones be bygones” are another way of putting economists’ advice to ignore sunk costs. But this is hard advice to follow, as the example from the List about driving to a basketball game in a blizzard, and the story of Vince and his tennis elbow, illustrate.”

Excerpt From: Richard H. Thaler. “Misbehaving: The Making of Behavioral Economics.”