The economic concept that will change your life

The name of this post might seem a little weird. Who knows… maybe that’s why you clicked on it, maybe you’re intrigued about what a 16-year-old girl is going to tell you about economics and life changes?

Well, this post is not about one simple hack that will change how much money you spend or earn. In fact, this post has nothing to do with money at all. It’s about an economic concept, which, when applied, not in an economic context, can really change your life.

I’m a Junior studying economics, so in no way am I qualified to give you real economic advice. But a few weeks ago I was doing my homework, like the good student I am, and I came across something very interesting. I often read things in school, or I see things while I’m out, and I think of how they would make really interesting and unique blog posts, actually, that’s how I came up with my different ‘English-es’ blog post. This time was no different… I was reading my economics textbook when I came over the concept of Sunk Costs.

In an economic context Sunk Costs are costs that have already happened, they are things that regardless of the decisions you make next, they aren’t going to go back and change. For example, if you’re shopping at the mall and you buy a non-refundable dress, and you walk into the next store and see a dress you like even more. Buying the first dress has already happened, you can’t change that. But you can choose whether or not to buy the second dress, and you shouldn’t let your first decision affect your second one, as no matter how much you think about the first one, you can’t undo it. Of course, this is a very mild example. But this concept is usually used to explain much more serious problems such as rent or salary. However, regardless of the context, the concept still means the same thing: it doesn’t matter what happened in the past, you can’t change that. And it shouldn’t affect your future plans because you can’t go back and change what happened.

You may be able to see where I’m going with this. If we take this academic and complicated concept outside of school and textbooks and actually look at what it’s saying we can apply it to our everyday lives, and that’s where the magic is. We shouldn’t let our past decisions affect the decisions that we make next. Whatever we went through in the past or whatever it cost us can’t be recovered, and that past action is still going to cost us the same thing regardless of our next decision. How many times in your life have you let yourself be held back by something that you or someone did in the past? Yes, you should make educated decisions, but your past shouldn’t be something you dwell on or something that holds you back. You should make every decision in your life based on what you think could happen, not what has happened in the past.

There is a difference between speculating on the past and reflecting on it. I’m only 16 and I’ve been through so much. So I can’t imagine how much people older than me must have been through. Sometimes it’s hard to know that what I do now can’t make up for the mistakes I’ve made, or something I do now can’t change what’s already happened, but I’m getting better at it and I encourage you all to practice it as well.

This economic concept may seem a little abstract when taken out of context, but there is still reality to it. Let me know what you think, and if you agree with this idea of ‘sunk costs’ in our everyday lives. Comment down below your opinions and I hope you enjoyed this post!

See you next week,
Little Miss Expat

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