Inducing Forgetfulness for Fun and Profit

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.