Economic Science, Sunk Costs, and the Withdrawal of U.S. Troops from Afghanistan
After nearly 20 years, U.S. troops exited Bagram Airfield in Afghanistan on July 2 as part of a near-complete withdrawal of U.S. forces from the country by September 11, ordered by the Biden administration. (A small force will remain in the country to protect the U.S. embassy.)
Reactions to the withdrawals have been mixed, but a U.S. Marine Corps pilot who was stationed at Bagram in 2012–2013 expressed a common perspective, telling Public Radio International’s The World, “[I’m] very disappointed. I think we need to stick with it. I think we need to honor the sacrifices that many of us have made going there and especially those that shed blood there.”
The pilot’s argument, however, reflects the “sunk cost fallacy,” which results in suboptimal decisions. It has been used by U.S. government officials throughout history to justify foreign interventions regardless of any present national security interests.
Economic science teaches that a sunk cost is a cost that has already been incurred and cannot be recovered. A sunk cost can be money, but, in the case of war, sunk costs include dead or injured soldiers.
The sunk cost fallacy is an error in reasoning that people often make, and it should be avoided. Sunk costs should be excluded from the decision-making calculus because these costs remain the same regardless of the outcome of a present decision. Sunk costs are irrelevant to the decision-making process. Only expected future costs and future benefits should affect present decisions, not sunk costs. The expressions “let bygones be bygones” or “let all things past, pass” encapsulate the proper relationship between sunk costs and present decisions.
The sunk cost fallacy involves valuing an endeavor based on how much has already been invested in it, rather than its true present value. If the net present value (the present value of benefits minus the present value of costs) of an endeavor is negative, the activity should be stopped, regardless of how much has already been invested.
It is irrational to determine the value of future investments based on past costs. A person engages in the sunk cost fallacy (also called the sunk cost trap) when he or she justifies further investments in an activity, else the earlier investments in the activity will be seen as having been in vain. This is the Marine pilot’s flawed reasoning.
One simple example of the sunk cost fallacy in action is the person who drives a considerable distance to order an expensive meal at a restaurant, only to discover that they hate the food. But they reason, “I’ve already spent the time and money driving here and I’m stuck paying the restaurant bill, so I’ll eat all the food,” only to leave the restaurant with a sick stomach.
Perhaps the most discussed example of the sunk cost fallacy is the Concorde airliner project, which was explained by Jim Blasingame in Forbes:
In 1956, the Supersonic Transport Aircraft Committee met in England to discuss building a supersonic airliner by British aircraft and engine manufacturers and the government. The project—named Concorde—moved forward, and in 1962 France joined the group.
When the wheels came up on the first Concorde commercial flight in January 1976, the enterprise was already plagued by prohibitive cost overruns. By the last Concorde flight in 2003, the Anglo/French financial misadventure had become legendary. The good news is it produced a handy metaphor that covers valuable business lessons.
Evolutionary biologists coined the term, “Concorde Fallacy,” as a metaphor for when animals or humans defend an investment—a policy, business, or nest—when that defense costs more than abandonment and an alternative. . . .
The “sunk costs” lesson: When the financial viability of an enterprise is questionable going forward, any decision to continue should not be based on what has already been spent. The Concorde partners learned this lesson 27 years, and lots of taxpayer money, too late.
In the end, British and French taxpayers poured more than $1.5 billion into the venture even before operations began. Governments continued to fund the project long after they knew it was a commercial disaster because they were in so deep already. The expression “throwing good money after bad” encapsulates a common problem that emerges when people base decisions on sunk costs.
War is a particularly dangerous area of human activity in which to engage in sunk cost reasoning because the stakes are so high. But some people have correctly and bravely pointed out the sunk cost fallacy within the context of war, despite the threat of being labeled “un-American” or “dishonoring the fallen.”
One example is former Alaska Senator Mike Gravel who said during a 2007 Democratic presidential debate, “You know what’s worse than a soldier dying in vain is more soldiers dying in vain.” Gravel understood that continuing a war because we have already invested a lot will not bring back the dead or honor the fallen.
Both former President Donald Trump and current President Joe Biden decided to withdraw U.S. troops from Afghanistan by correctly focusing on expected future costs and future benefits, not by focusing on past blood spilled (2,312 U.S. military personnel dead and more than 20,000 wounded since 2001) and treasure spent ($824 billion since 2001) and throwing more money at it because of the level of past investments. After considering future benefits and future costs, each president concluded that a continued U.S. troop presence in Afghanistan is not in the best interest of Americans.
People can argue about what these future costs and benefits are, and how much they are, but blood spilled in the past should not determine future actions.