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 considers sunk costs, which are costs that have already been incurred and cannot be recovered, in making future decisions. This is a fallacy because future decisions should be based on incremental costs and benefits, not on costs that have already been spent and cannot be changed.

The Government Has Been Trying to Decide Whether or Not