Historical costs, sometimes called sunk costs, are irrelevant to decision-making because they are costs that have already been incurred. That?s something that?s not intuitively obvious, even for some trained economists. On a couple of occasions, I?ve recommended to a graduate student, having difficulty with his Ph.D. dissertation, that it might be wise to start all over again with a different topic. The response:
“Professor Williams, but I?ve spent so much time on the dissertation so far.” I reminded the student that the time already spent should have nothing to do with his decision to either stick with his chosen topic or choose another one. His question should be: Which choice, sticking with the chosen topic or choosing another, will more readily lead to successful completion of his doctorate?
