We learnt yesterday how the sunk cost fallacy leads investors to throw good money after bad.
Well, here’s what I read in a leading business daily that talks about the impending financial crisis in the western world:
“An apocalyptic Lehman-style moment seems unlikely right now, because US legislators will likely come to some sort of a deal that will allow the federal government to resume borrowing, while Europe has invested too much in the integration project to let things collapse in the first episode of stress.”
Note the words – “invested too much…to let things collapse”.
Now, this is a case of ‘sunk cost fallacy’ on a massive scale.
Pity the poor taxpayer!