Incontinence, honouring sunk costs, and rationality
| Abstract | INCONTINENCE, HONOURING SUNK COSTS AND RATIONALITY According to a basic principle of rationality, the decision to engage in a course of action should be determined solely by the analysis of its consequences. Thus, considerations associated with previous use of resources should have no bearing on an agent’s decision-making process. Frequently, however, agents persist carrying on an activity they themselves judge to be nonoptimal under the circumstances because they have already allocated resources to that activity. When this is the case, agents are said to be honouring sunk costs. Honouring sunk costs is thus typically viewed as irrational economic behaviour. Two striking findings of the psychological literature on the sunk cost effect are that it is, in general, not lessened by having taken previously courses in economics, and that agents who did take such courses and that do honour sunk costs seem to be frequently aware of a cognitive dissonance in their behaviour. Davidson’s account of the possibility conditions of incontinent action renders continent action materially unfeasible. The very idea of incontinent action becomes thus a hollow one. I’ll present an alternative description of these possibility conditions that renders continent action materially feasible, and both, continent and incontinent action, cognitively plausible. In a nutshell, my proposal rests upon the drawing of an essential cognitive contrast between explicit processes of deliberative reasoning and lower level heuristic procedures. I conclude the paper arguing that my redescription of incontinent action accounts for the above mentioned cognitive dissonance effect better than the alternatives and that viewing at least an important subset of behaviours of honouring sunk costs as incontinent actions will enable us to consider them as peculiar manifestations of a more general and meaningful pattern in human behaviour. | |||||||||
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