Maxim: Consider all costs and benefits that vary with the consequence of a decision [if you miss some that is the hidden-cost fallacy]; but only costs and benefits that vary with the consequence of a decision [if you consider irrelevant ones that is the sunk-cost fallacy].
Application: Should St. Louis should restart its money-losing street car?
- 2018: The trolley started operational life —six years behind schedule and about $10 million over budget. Ticket revenue was 10% of what was originally forecast and nearbt businesses hated it.
- 2019: St Lous shut it down, but the Federal Transit Administration (FTA) demanded the return of $37 million the government paid for the project.
Analysis: Reviving the streetcar would require additional operating funds, BUT not reviving it would require paying back $37 million.
Lest you commit the hidden-cost fallacy, returning the federal funds would also hurt the St. Louis ability to secure federal grants for future projects, i.e., from the President Biden's $1.2T infrastructure bill.
Prediction: St. Louis will revive the trolley that no one wants.
HT: Michael
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