Giants Econ 101: Sunk Costs are IrrevelantThe Giants Curmudgeonbyline‚ Jul. 17‚ 2007Okay Giants fans, don’t get scared off by the economics lingo, but today’s lesson is in “sunk costs.” Apparently the Giants do not subscribe to the basic economic theory that sunk costs should be disregarded when making rational decisions. If Giants management would heed this elementary concept of economics, the Giants could be a championship team within a few years. Here’s Wikipedia’s description of sunk costs: “In economics and in business decision-making, sunk costs are costs that have already been incurred and which cannot be recovered to any significant degree. Sunk costs are sometimes contrasted with variable costs, which are the costs that will change due to the proposed course of action. In microeconomic theory, only variable costs are relevant to a decision. Economics proposes that a rational actor does not let sunk costs influence one's decisions, because doing so would not be assessing a decision exclusively on its own merits.” |