The Sunk Cost fallacy, then is a useful mental shortcut passed down to us by our savannah-dwelling ancestors.

We call it the ‘theory of the second best': The more you can remember, the better it is, and you don’t have to commit this fallacy at all. But if it’s a common feature of human beings that they do forget stuff, then the sunk cost fallacy is an optimal response to that forgetfulness. Sunk costs can encode information about decisions you made in the past, and if that’s the case you should take them into account, because if you didn’t, you’d make even worse decisions.

Any student of economics knows this basic rule, which states that rational agents should not take irrecoverable or “sunk” costs into account when making decisions about present or future investments. Nevertheless, human beings break this rule all the time, succumbing to a cognitive bias known as ...