Sunk costs

George W. Bush is a graduate of the Harvard Business School (MBA, 1975).

I wonder if they taught him about sunk costs?

Sunk costs are unrecoverable past expenditures. These should not normally be taken into account when determining whether to continue a project or abandon it, because they cannot be recovered either way. It is a common instinct to count them, however.

There's certainly good evidence to believe that Bush does not understand the concept.

President Bush, August 22, 2005:

We have lost 1,864 members of our Armed Forces in Operation Iraqi Freedom, and 223 in Operation Enduring Freedom. Each of these men and women left grieving families and loved ones back home. Each of these heroes left a legacy that will allow generations of their fellow Americans to enjoy the blessings of liberty. And each of these Americans have brought the hope of freedom to millions who have not known it. We owe them something. We will finish the task that they gave their lives for. We will honor their sacrifice by staying on the offensive against the terrorists, and building strong allies in Afghanistan and Iraq that will help us win and fight -- fight and win the war on terror.

Clearly, though Bush is quite aware of the costs of the "project" in Iraq, he wants to weigh these costs highly in future decisions.

During the Vietnam era, some public figures came to understand the sunk costs -- even if war advocates didn't. Here's an example from a decorated US military veteran of the Vietnam war, upon the occasion of his testimony to the Senate Foreign Relations Committee, April 23, 1971:

Each day to facilitate the process by which the United States washes her hands of Vietnam someone has to give up his life so that the United States doesn't have to admit something that the entire world already knows, so that we can't say that we have made a mistake....

[H]ow do you ask a man to be the last man to die in Vietnam? How do you ask a man to be the last man to die for a mistake?

Whatever happened to that guy? His name was John Kerry.

Incidentally, there's mounting evidence that the American public understands the situation.

Associated Press/Ipsos Poll, August 22-24, 2005

"All in all, thinking about how things have gone in Iraq since the United States went to war there in March 2003, do you think the United States made the right decision in going to war in Iraq or made a mistake in going to war in Iraq?"

Right Decision 43%
Mistake 53%
Unsure 4%

This may explain headlines like this one from USA Today, Friday August 26: "Bush popularity at all-time low, poll finds."