The Sunk Costs Fallacy or Argument from Waste

Abstract

This project tackles the problem of analyzing a specific form of reasoning called ‘sunk costs’ in economics and ‘argument from waste’ in argumentation theory. The project is to build a normative structure representing the form of the argument, and then to apply this normative structure to actual cases in which the sunk costs argument has been used. The method is partly structural and partly empirical. The empirical part is carried out through the analysis of case studies of the sunk costs argument found in business decision-making, as well as other areas like medical decision-making and everyday conversational argumentation. The structural part is carried out by using existing methods and techniques from argumentation theory, like argumentation schemes. The project has three especially significant findings. First, the sunk costs argument is not always fallacious, and in many cases it can be seen to be a rational precommitment strategy. Second, a formal model of argumentation, called practical reasoning, can be constructed that helps a rational critic to judge which sunk costs arguments are fallacious and which are not. Third, this formal model represents an alternative model of rationality to the cost-benefit model based on Bayesian calculation of probabilities. This alternative model is called the argumentation model, and it is based on interpersonal reasoning in dialogue as the model of rational thinking. This model in turn is based on the underlying notion of commitment in dialogue.