Beware ‘sunk cost’ of campaign vows

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Beware ‘sunk cost’ of campaign vows

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I made fish boiled in soy sauce, but it turned too salty. I must have put salt in the sugar jar, so I mistakenly added too much. Fortunately, I started with two pieces of fish, so I added two more. But it was still too salty, so I put in three more, hoping for the ingredients to absorb the saltiness. But in the end, I could not save the dish and had to throw out a pot of boiled fish.

If I had thrown out the first two pieces and started over, I would have wasted only two pieces. In economics, the cost that has already been incurred and cannot be recovered is called “sunk cost.” In my disastrous cooking session, the first two pieces of fish was the sunk cost.

Humans can be reckless. When you know that your investment decision was not profitable, you often put in more money to make up for the initial loss instead of stopping. To spare the first 10,000 won ($9.50), you hope for a miracle and invest 20,000 won. The daughter of my friend is not very talented in music, but my friend wanted to make her a pianist. She invested a fortune in music lessons, but her daughter gave up on music. Now, she is happily married and raising children. My friend said that she figured her daughter was not talented about a year after starting to play the instrument. However, she did not want the money she had invested to be in vain and groundlessly believed her daughter would excel someday. But the family had to sell the house to support the music education before she gave up. It is always best to forget about bad investments and start anew.

Many government projects remind me of their sunk costs. After the four river restoration projects, the water quality is said to be even worse. The large reservoirs in mid-stream increased the flux, but the flow became slower. However, the key to the water quality is not building reservoirs, but blocking pollutants. Building sewage treatment plants and conserving water may help solve the problem. We have to work hard in order not to make the 22 trillion won for the four rivers project turn into the “sunk cost.”

I am also concerned about President-elect Park Geun-hye’s election promises. In order to keep up her four welfare promises, she estimates it would cost 16 trillion won over her five-year term. But experts say the welfare benefits she promised would require twice that. Park may need to listen to the ministries saying that some of her pledges will be hard to fulfill. If she pushes for them in order to keep her word, she may end up adding more worries five years later. A wise man of principles who values the outcome would correct wrong decisions if necessary, even if it means changing election promises.

I still regret making so much boiled fish yesterday.

The author is a guest columnist of the JoongAng Ilbo.

by Eom Eul-soon

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