An economist and a lawyer were waiting in line at the electronics store Circuit City with the economist lecturing the lawyer about sunk costs. The line is moving slowly so the economist explains the Coase Theorem. As the line begins to inch forward, the lawyer "accidentally" smashes his cart into the economist's. The lawyer says, "I'm sorry about that, but I think we can internalize the transaction costs." So the economist pays the lawyer $10.
As the line inches forward again, the lawyer smashes into the economists cart again. Again, the lawyer suggests that they internalize costs. The economist rebuts, "I just paid you for the last accident!" The lawyer reminds the economist about sunk costs. The economist pays the lawyer $10.
The lawyer and economist repeatedly play this game until the economist tries to check out and finds he has no money left. While holding his empty wallet, the economist explains to the cashier, "I got smashed."
Three leading economists took a small plane to the wilderness in northern Canada to hunt moose over the weekend. The last thing the pilot said was, "Remember, this is a very small plane and you will only be able to bring ONE moose back."
But of course, they killed one each and come Sunday, they talked the pilot into letting them bring all three dead moose on board. So just after takeoff, the plane stalled and crashed. In the wreckage, one of the economists woke up, looked around and said, "where the hell are we?"
But of course, they killed one each and come Sunday, they talked the pilot into letting them bring all three dead moose on board. So just after takeoff, the plane stalled and crashed. In the wreckage, one of the economists woke up, looked around and said, "where the hell are we?"
The second economist said, "Oh, just about a hundred yards east of the place there we crashed last year."
My dictionary defines "insanity" as doing the same thing over and over and expecting a different result. To ignore sunk costs is insanity.
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