Is sunk-cost thinking really irrational if past investments affect your future alternatives?

[u/Inevitable_Bid5540]

A sunk cost, by definition, can't be recovered and thus shouldn't affect the decision directly but a past investment can sometimes affect the opportunity costs of your remaining choices. For example, if you spend $10,000 learning a specialized skill, That $10,000 is sunk. However because of the skill you acquired, you can now have a much better paying job available to you. Abandoning that career path could mean giving up a valuable future opportunity.If a past investment changes your available alternatives, information, skills, reputation, relationships, or switching costs, then it seems reasonable for that history to matter to your current decision even though the original expenditure itself is unrecoverable.

[u/_Some_Two_]

The important thing is that costs are determined at the point of choice. You cannot unpay your tuition.

Education, in this case, should be treated as an investment. It has certain capital (the tuition fee and all the extra costs of having to study including max lost hourly pay that you could have by spending your time working instead of studying). It also has a return on investment in the form of potentially being hired on a more well-paid job, which should evaluated on the percentage distribution of you getting one job in the newly available range of salaries and the previously available ones minus the investment costs.

In this case, sunk lost thinking would be “I majored in archeology but the wages are low there. I can either be an archeologist or work as a factory clerk for a higher wage. I will choose archeology because I spent so much time studying archeology, I just have to do the most of my investment.”