Dear Modiji, Please consider the sunk cost of the lockdown otherwise our ship will be shrunk

The concept of the sunk cost belongs to the field of "behavioral economics". It's a very interesting and important field but largely ignored till now. But it gaining traction. In Previous year's economic survey, our Economic advisor devoted the whole chapter to behavioral economics. This field deals with the micro-level human activities that can make huge differences.

Here like to give one example to understand what this field is -

Richard Thaler always set paper of 137 marks for his students. The reason behind this is, in earlier days of his teaching, when he set tough paper and students get 70/100, Students don’t like that score. But once he set a paper of 137 marks and students get an average 90 marks (which are also 70%), the student feels happy!

Economist make calculations and projection on the assumption the human will make a rational choice. But from the above example, it's clear that we often don’t make a rational choice. From this, it's clear that we human "Misbehave" (This is the title of the book of Richard Thaler).

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Sunk Cost Concept 

Vince paid $1,000 to an indoor tennis club that entitled him to play once a week for the indoor season. After two months he developed tennis elbow, which made playing painful. He continued to play in pain for three more months because he did not want to waste the membership fee. He only stop to play when the pain became unbearable.

When the amount of money has been spent and the money cannot be retrieved, the money is said to be sunk, meaning gone. Expressions such as "don't cry over spilt milk" And let bygones be bygones" are another way of putting economists' advice to ignore sunk costs. But this is hard advice to follow.

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The USA spends 100 billions of dollars in the adventure of Afghanistan for the last 30 years but it failed to produce a result for the USA. For the last 10 years, the American president thinks to walk out of the Afgnistan but they can't cause they don’t dare to accept defeat and can't forget those billions of dollars. So every year America spends 5 more billion in the hope to get a result. (Here figure of 100 and 5 as just example)

Like the USA, I am also stranded in such one carrier adventure. I am failing miserably since last 4-5 years in that adventure. But, the time spends in that adventure push me to take one more chance and "Waste" one more year.

Now you may think that what is this Sunk cost have a link with Lockdown? It has a direct link. Let me start with a question- What is the Aim of the Lockdown? Most of you answer that:-

1. It slows down the rate of the spreading 
2. Gives us time to prepare our medical infrastructure meanwhile. 

Yes, These two are the main objectives of lockdown. We all are well aware of the economic and mental toll of the Lockdown. Every one of us knows that lockdown cannot be a permanent solution. 

As we completed 21 days lockdown, we must have to evaluate  that what we achieved through this lockdown? We achieved the first objective- we slowed down the spread. But we failed to achieve the second objective and that is to prepare the health infrastructure ready.

This is the reason that neither PM, Nor Any CM not citizen dare to think to open lockdown cause all we know that our health system is not ready yet. (Virus going to spread today or tomorrow when we open the economy and society, it's bitter truth). Now let me put another question - When we cannot upgrade our health system in the previous 21 days, what is a guarantee that we will do in the next 19 days? I know all of us subconsciously know that this is never going to happen. There is no fault of anyone in this. Nature is virus is so that none can say anything with certainty.

Now let me put a hard fact - By Lockdown of 21 days, we controlled the COVID 19. Now, we think that - With one more lockdown of the 19 days we can manage the conditions. Yes, we will surely do so but only for the 19 days! Look a line written in bold letters above - 'We knows that lockdown is not a permanent solution"! This is Sunk cost of 21 days that hover in our minds. We have given the Sacrifice of the 21 days. This does not let us allow us to squander it and we prefer to give another 19 days sacrifice. ( 21 lockdown is not a sunk cost exactly but the mindset and thinking of policymakers is closely related to that) 

Now Compare our 21 days lockdown with 30 years of American in Afghanistan - We have spent 21 days in lockdown (Like the USA spend 100 billion), we succeed to contain the COVID 19 (Like the USA killed Bin laden) so let's spend more 19 days (Like the USA spending 5 billion yearly). Nut Neither the billion of dollar spending give USA guarantee of success nor lockdowns give as guarantee to eradicate the virus. I hope you get my point.

My point is not to oppose this phase 2 of the lockdown. In current conditions, I also think that it's the right to step to do so. But I am worried about that, then no one shows guts to think about the post lockdown scenario. 

Don’t you feel weird that - You know that Lockdown is not a permanent solution. Our health infrastructure is not going to be perfectly ready ( Even we cannot project the actual need of infra to fight COVID as the nature of the virus is such that uncertain to project anything). Lockdown taking an immense economic and mental toll. Even after all these calculations, we wish one more lockdown of the 19 days! 

You may get confused after reading all this stuff and maybe thinking that what is the point I want to make? My point is simple. Firstly, we don’t know the real picture of the Spread of the COVID 19 as we are doing very fewer tests. Secondly, we are being lockdown so the spread is less but this is not going to remain permanently, we have to face the question which horrifies us today or tomorrow. Thirdly, we have to make the phase-wise exist to plan and also a long strategy to keep the situation in control. We have to make a billion masks ready, Will have to make millions PPE ready, Will have to make thousands ventilator ready. But, First of all, we just have to come over from the thinking that - We made the sacrifice of the 21 days, let make anther 19 then anther 15 then anther…This is never-ending. 

I like to pose a question to those who don't dare or don't want to think about the post lockdown scenario.  What do you think that the government should need to do on the 3rd of May if the cases increase in the next 19 days at the same rate as the last 21 days? I know Most of you don’t have the answer!!

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( This part of The article is not related to Lockdown but write to understand better the meaning of the Sunk cost)

Now, you may think that - the USA, I and Modi are a fool who got stuck in the Sunk cost trap. It is not. Every one of us is got trap in this. Let me show you a mirror.

You purchased Rs.5000 shoes. But, when you start to use it, it hurt you. Does this Rs.5000 allow to throw shoes in the dustbin? You Subscribed Netflix by paying Rs.500, Don't this Rs.500 indulge you in keep watching even though it wastes your time? You take Amazon prime membership by Paying Rs.100 which provides you quick and free delivery, But this Rs.100 spending push you to make more and more orders on amazon.  ( Amazon actually don't need your Rs.100 but this Rs.100 fetch more orders to Amazon, think ) 

Even the Richard Thaler who is Nobel Prize winner and spent his whole life in Behavior economics also said that he also "misbehaves". When He was writing this book and prepared draft. Many of his friends suggest removing 2-3 chapters with a reason for doing so. Richard Thaler also agrees with the views of his friends but as he spends time writing those chapters so, He didn’t remove those chapters and send drafts as it to the editor. Finally, Editor removed those! ( Not exact story but similar to this) 

There is no author in this world, Write these lines in "Preface" of the Book but Richard Thaler writes it.

Richard Thaler wish that his reader should not "Misbehave". We spend Rs.500 to purchase the book and we don’t like this book, We should not spend more time to read just cause we Spend Rs.500 !!