Could there be such a thing as the sunk benefit fallacy alongside the sunk cost one?
Wednesday 29 March 2017 was a day of celebration for some, and a day of deep sadness for others. For it was the day that Sir Tim Barrow, the UK’s Permanent Representative to the European Union, arrived at the European Council to hand-deliver the letter in which Prime Minister Theresa May officially gave notification of the UK’s intention to withdraw from the EU.
The process so far has provided a rich catalogue of quirks in human behaviour, and the next couple of years, as the negotiation gets under way, promise to be no less fascinating. Perhaps the most prominent and visible one is the emergence of the Leaver and Remainer tribes, fuelled by groupthink. Sometimes it looks as if the nation has completely lost its sense of nuance. The halo effect (about which I wrote before) makes Leavers dismiss whatever a Remainer says as nonsense, and vice versa.
The availability heuristic reinforces black-and-white thinking on either side. Whenever a company announces an investment in the UK, Leavers hail it as a success, often tauntingly adding “despite Brexit”:
And whenever a city firm moves staff from London to a continental location, Remainers present it as yet another sign of the looming disaster of Brexit. Lloyds of London, an insurer dating back to the 17th century, “moving to” Brussels the day after Brexit day (even if it concerned just setting up a small subsidiary with a few dozen staff) was the latest example:
There has been anchoring by the EU side around the magnitude of the exit bill the UK would need to pay. And could confirmation bias have driven Mrs May’s to suggest in her letter that “it is necessary to agree the terms of our future partnership alongside those of our withdrawal from the EU”? The BBC’s political editor would seem to think she saw what she wanted to see rather than what there was:
The response from the other side was swift (and the same it has been in the last nine months): first the divorce settlement, then the future. Maybe we’ve also seen an attempt at a precommitment strategy: Theresa May has repeatedly been saying “no deal is better than a bad deal”.
But the most momentous of them all might still be looming in the shadows, ready to pounce during the negotiations: the sunk cost fallacy. When you have heavily invested in an initiative, not just money, but political and emotional capital, blood, sweat and tears, it becomes exceedingly difficult to abandon it. Even if continuing is sure to lead to a worse outcome, the thought that all the effort has been for nothing is hard to bear.
What about the benefit?
Yet among all these biases and fallacies, there is one that has been overlooked. It is not even found in the literature. Remarkably, a google search for “sunk benefit fallacy” returns just two hits. Nevertheless this appears to be a cognitive quirk afflicting the government and the Brexit adherents.
This first occurred to me when, even before last year’s referendum, I heard someone ask a very fair question: “If we weren’t a member of the EU now, would we join?” Even among Remainers, there are many areas of criticism of the EU, from the way it has handled the euro crisis and the refugee problem to its relentless drive towards more political integration.
But the question itself is misleading because it assumes that the present situation is unrelated to EU-membership. In other words, it assumes the benefits arose independently of that membership, and will persist even after it is relinquished.
In many ways, the sunk benefit fallacy is the mirror image of the sunk cost fallacy. The latter makes us focus on the costs already incurred, even if the gains we hope to make are elusive. The former makes us ignore the benefits of the status quo we stand to lose, and only have eyes for the gains we stand to make.
We are all liable to fall prey to this fallacy as much as the Brexiteers. It is easy to take for granted what we have. If we are moving house, the attractive features of the new place may figure prominently, but we pay a lot less attention to the many nice things of our current place – because we’ve become so used to them. The easy path from kitchen to dining room, or the short walk to the butcher’s are replaced with an awkward doorway and the need to drive for 15 minutes to get fresh meat.
Changing jobs is similar. A new title on your business card and a higher salary have great appeal, but do we realize how much we appreciated the wonderful coffee in the old job, or the smile every morning of the security guard?
This doesn’t mean, of course, that we should hold on to what we have at any cost. But it does mean that when we are contemplating a new direction, we should make sure we properly recognize the self-evident benefits of the present that we might lose. It is precisely the loss of the stuff we had taken for granted that may make us regret our decision.
“You don’t know what you’ve got ’till it’s gone”, Joni Mitchell sang. Perhaps we ought to reflect on the good things we’ve come to take for granted, even if we don’t plan to make big change. And perhaps we should name the sunk benefit fallacy the Big Yellow Taxi fallacy.