KARACHI:
The sunk cost fallacy is the inclination to follow an endeavour if one has already invested time, effort, or wealth into it, whether the current costs offset the benefits. It means making irrational decisions because we favour influences other than the current alternatives.
This theory is not limited to ordinary decision-making but involves institutional and bureaucratic issues as well. For example, Pakistani society has constantly carried out decisions based on past imaginations, which means that we go against evidence that shows it is no longer the best decision. For instance, people in both urban and rural areas have consistently voted for representatives that have had a poor track record. Currently, our economy is also dealing with the same scenario. A dozen new ministers have been tested on inconsistent economic decisions that have strained the economy.
The old, practised laws and modes of commerce need to be regulated and renewed by gauging their pros and cons. Implementing past precedents may somewhat vary from the present because the world is progressively changing, and new regulations will require time. The sitting government successfully broke the bar on the rotten laws and planned new trade strategies, something that signals a positive boost. There may be several reasons for predilection to this sunk cost fallacy. Still, the primary observing factor is loss aversion. Loss aversion is an intellectual prejudice that specifies why, for the individual, the grief of losing is twice as powerful as the pleasure of gaining. Although challenging to overcome such cognitive fallacies, it is difficult to eradicate the gargantuan of irrational choices. Still, we can focus on current and future costs and benefits instead of past commitments. We should focus on concrete actions instead of feeling guilt that accompanies dropping an earlier commitment, as studies have shown that when we are deterred from making decisions based on our emotions, the effects of the sunk cost fallacy are reduced.
Nazim Khan
Karachi
Published in The Express Tribune, December 30th, 2021.
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