In For A Dime, In For A Dollar

Picture the following scenario: it’s Friday night, and you decide to see a movie. You go to the cinema and shell out nearly ten dollars for a movie ticket. Perhaps you grab some popcorn and a soda before making your way into the theater. You sit down, attempting to avoid choosing a seat with stuck-on gum while simultaneously dodging spilled jelly beans.

Halfway through the film, you realize you are not enjoying yourself. Not only is it a terrible flick, but your shoes have been soaked. A patron sitting one row behind you has spilled his high-fructose corn syrup-laden beverage, and now you feel a gooey sensation between your toes.

Yet, if you are like most people, you don’t leave the movie theater. You sit through the rest of the awful flick, and perhaps you even gripe about it later on. You rationalize, "Since I already paid for it, I should just stay for the whole thing. I might as well get my money’s worth."

People engage in this type of behavior all the time. Deep down, we know it’s irrational; we even poke fun at it. Remember the episode of Seinfeld where Elaine eats sandwiches from a terrible sub shop? She only does so because she has already eaten one, and she has gotten a promotional card that will let her have her 24th sandwich for free.

There is only one logical thing for the moviegoer in my scenario to do: leave as soon as he realizes he isn’t enjoying the movie — unless there is nothing else he could possibly do instead that he would enjoy even a tiny bit more. Regardless of whether he leaves or stays, he will not get his money back from the theater (the owner of the movie theater cannot resell the seat at full price once the movie has already started). Since the moviegoer has no chance of a refund, the best outcome he can hope for that evening is a chance to do something more fun or productive than watching the bad movie.

It makes good sense. But barely anyone ever follows this reasoning.

Once a person makes an initial investment in something, however small, he usually feels compelled to follow through on it with a larger investment. Sales people know that if they can get a prospect to agree to see a live demo or use a trial version of a product, the prospect is very likely to become a customer. Companies know this, too — that’s why so many of them offer new customers discounts or rewards that can only be redeemed after buying the product a certain number of subsequent times.

There are many other examples of this phenomenon. Political organizations try desperately to get people to sign up for their email lists, because subscribers are more likely to donate or volunteer. People often make one-time charity contributions, but once they begin to receive the charity organization’s reports and mailings, the one-time pledge turns into an annual contribution. Some people even make a point to buy more expensive gym memberships just so that they will feel more motivated to exercise.

After an initial investment of time, energy, or money, people typically follow through. The old expression rings true: if you’re in for a dime, you’re in for a dollar.

It’s important to be aware of this pattern of behavior. In some cases, such as the examples of the charity donation and the health club that I mentioned earlier, it can have positive consequences. However, the fellow who sits through a bad movie is not doing himself any favors. His welfare would be improved if he left the movie theater and did something more fun or productive instead. He cannot get his money back from the movie theater, but at least he can put his time to better use. It is pointless to stay simply because he has already paid. But some strange facet of human nature prevails, and the initial investment compels him to sit and endure the bad film.

The tendency of most people to follow through on a small investment has some interesting political implications. For instance, there are a lot of people who recognize that social security is an inherently bad idea — a pyramid scam, an inefficient method of investing, and a compulsory program that undermines an individual’s choice to save or spend as he thinks best. "But," they reason, "since we have already started paying into it, we simply can’t change it — and heaven forbid we abolish it altogether!"

Some people display a similar attitude toward other social services. I’ve heard parents say that their decision to send their children to public school was largely influenced by the fact that they’ve "already paid for it, anyway" in taxes.

I’ve also heard people say, in reference to the "free" bus system that runs around UMass, "well, we’ve already paid for it through student fees and taxes, so we all should ride the bus as much as possible to get our money’s worth." Sometimes students even make these comments in situations where taking a car may be faster, or on beautiful days when walking or bicycling might be more enjoyable. No matter. They paid for the bus system, darnit, and they’re gonna use it!

Bureaucrats exhibit the same pattern of behavior. They also take it one step further — they know how to manipulate this nonsensical aspect of human nature to justify expansion of disastrous government programs. This is just one of many reasons that government is self-perpetuating. For example, Amtrak has displayed an abysmal track record (pardon the pun) since its inception more than three decades ago. The "government corporation" constantly faces derailments, mechanical failures, and financial problems. But politicians cry out, "Amtrak is essential, and we’ve already worked so hard to build such a wonderful train system! Its problems are only because it doesn’t have enough funding! We can’t just start denying it much-needed finances now!" Then people nod their heads in agreement.

Like the patron of the bad film, we’re all invested in various government programs. For the overwhelming majority of us, it isn’t by our own choosing (due to the compulsory nature of taxes). But the fact remains. We should, however, be aware of the tendency to let an initial investment cloud our reasonable judgment about when to throw in the towel. Especially when it comes to government programs, we need to learn when to cut our losses and walk away. If you’re in for a dime, don’t go in for a dollar — get out!