What Does Barack Obama Know About Behavioral Economics?
Maybe a good bit. Here’s what Obama said yesterday during the Senate Foreign Relations Committee’s hearing with Condoleezza Rice about sending more U.S. soldiers to Iraq:
“And essentially the administration repeatedly has said: ‘We’re doubling down; we’re going to keep on going … because now we’ve got a lot in the pot and we can’t afford to lose what we put in the pot.'”
That, friends, is what’s known as the sunk-cost fallacy. Here’s Wikipedia on the subject and here’s a definition from the Skeptic’s Dictionary:
When one makes a hopeless investment, one sometimes reasons: “I can’t stop now, otherwise what I’ve invested so far will be lost.” This is true, of course, but irrelevant to whether one should continue to invest in the project.
While it remains to be seen if Obama has the qualifications to run for national office, it does appear he’d at least be a pretty good gambler if he put his mind to it.