Value beats sunk cost anyday

We use economic terms all the time.  For instance, economies of scale,[1] efficiency,[2] elasticity,[3] and externality,[4] just to name a few that start with “e”.  For the most part, we more or less know what they mean, even if we don’t use them precisely correctly.

This short foray into economic terms is mere prelude to two short stories:  the first centered on the term “value,” the second on the term “sunk cost.”

Last weekend, I was fortunate enough to be invited to two different homes.  Friday night I visited former neighbors, Sunday night I went to visit my nephew at his new apartment.  Both times, I took (among other things) a small cooler full of drinks.  The cooler is an Igloo brand Tag▪Along 8.  My working theory is that nothing I currently own has provided more value to me.

Value is defined as “a measure of the benefit provided by a good or service to an economic agent.”  https://en.wikipedia.org/wiki/Value_(economics)  I purchased the cooler sometime in the late 1980s for under $10.  In the intervening 30 or so years, I have used it hundreds of times.  It accomodates six cans or bottles of soda, beer, or water, with enough room for sufficient ice to keep the drinks cold for the duration of the event.  The best non-cooling feature is a wide shoulder strap that makes the cooler easy and comfortable to carry.

My best estimate is that I have used the cooler 500 times (a bit more often than once a week) in the last 10,950 days (30 years times 365 – I’m ignoring leap days).  If so, the cooler has cost me two cents per use.  It is unlikely that I have another possession that I have used as often that still provides the same functionality that it provided 30 years ago.

Upon further review, I have come up with a couple of possible contenders.  Flatware is essentially indestructible and gets used daily.  Each individual item is much less expensive; currently you can buy decent forks for $60 a dozen.  I haven’t owned any flatware for 30 years and (like most of you) I don’t keep track of individual forks.  Still, I think we all receive significant benefit from our forks and spoons.

My mother gave me a pot that I have had for at least 30 years.  I still use it often, whether for boiling vegetables or pasta.  It might be an even better value than the cooler because it cost me nothing.  I’ve had some LL Bean boots since high school.  They don’t get much use now that I live in Ohio; they retain significant user value, if not monetary value.

Each of these items is used regularly and each performs according to original expectation.  I would be quite cynical if I didn’t appreciate the fact that they still assist me after all these years.  See Oscar Wilde who defined a cynic as “a man who know the price of everything and the value of nothing.”  From Lady Windemere’s Fan.  https://en.wikipedia.org/wiki/Lady_Windermere%27s_Fan

Though I have a few possessions that have provided long-term benefit similar to my Tag▪Along 8 cooler, none of them has appreciated in value.  Although ebay is an inexact predictor of price, the exact (vintage) cooler I have, is being offered for  $32.  http://www.ebay.com/itm/like/112521252487?chn=ps&dispItem=1  My flatware, pot, and boots are not currently sellable for over three times the original purchase price.  So I’m giving the value edge to the Tag▪Along 8 – it still provides benefit and it’s worth more than when I bought it.  It has been an excellent value play.

Do you any long-held possessions that have generated excess value?

The next vignette is not nearly so positive.  A “sunk cost” is “a cost that has already been committed and cannot be recovered” — the virtual opposite of value.  https://quizlet.com/460890/100-economics-terms-flash-cards/  I never hear or read the term without offering up an internal chuckle.

A few months after purchasing the Tag▪Along 8, I bought new skis, bindings, boots, and other assorted skiing necessities.  They cost much more than my cooler, but I had been skiing enough to justify purchasing equipment instead of renting it.  Or so I thought.

The very next day (literally), I went skiing with friends and they took me on a slope that was beyond my capability.  I managed to get to the bottom, after many flips, spills, and falls, without damaging my body or equipment.  My ego was another matter.

The rest of the group was assembled at the bottom of the hill, waiting for me.  In what was (I hope) an aberrant fit of pique, I vented my frustration by taking off my equipment and outer ski garments throwing each one to the ground while yelling – it’s just a sunk cost.  I threw my skiis muttering, I don’t care how much money I wasted, it’s a sunk cost.  I threw my goggles, saying, it’s a sunk cost.  Over and over as I threw each item, I uttered some variant of it’s just a sunk cost.

My best friend’s father-in-law, one of the nicest, most interesting and generous men I have ever met, could not stop laughing.  Virtually every time he sees me, the story is revisited.  And he chuckles and I chuckle.  Not one of my better moments, but then, they can’t all be.

Well, I’m off to a neighborhood Labor Day party.  I’ll fill my Tag▪Along 8 with my beverage of choice and I promise not to shed gear and clothing while screaming “sunk cost.”

[1] “the property whereby long run average total cost falls as the quantity of output increases”  https://quizlet.com/460890/100-economics-terms-flash-cards/

[2] “the property of society getting the most it can from its scarce resources”  Id.

[3] “a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants”  Id.

[4] “the impact of one person’s actions on the well being of a bystander”  Id.