The Government has been trying to decide whether or not to purchase any of the new, advanced icebreakers it has developed. One of the arguments in favour of purchasing the ships is that since
So much money has been spent on their development it would be a waste of money not to buy
Them now. What is the major problem with this argument?

Question

Quizplus · Accepted Answer

The major problem with this argument is that it includes sunk costs in the decision-making process. Sunk costs are costs that have already been incurred and cannot be recovered, and they should not be considered in decision-making going forward. The fact that a lot of money has already been spent on developing the icebreakers is irrelevant to the decision of whether or not to purchase them now. The decision must be based on the projected costs and benefits from this point forward.

The Government Has Been Trying to Decide Whether or Not