In today's lesson, Steven Mazie explores the ways that "sunk costs," investments we make in the past that influence our future behavior, can be beneficial. Economists tell us that making decisions based on sunk costs is a bad idea. We will stay committed to eating a mediocre bowl of ice cream because we paid for it and we have a tremendous aversion to loss.
On the other hand, as Mazie points out, we can use sunk costs to our advantage. If you buy season tickets to the opera or lay down money for multiple spin classes, you will be creating a strong incentive to participate in these activities instead of staying at home on your couch, getting fat and uncultured.