Economics 101

Sunk Costs & the Cultural Mandate

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When we last discussed the topic of “sunk costs,” you might have thought that this is too good to be true.

We discussed how stewardship requires that we understand the economic concept of sunk costs. When you think about commitments you have that are draining your resources, you ought to think about the sunk costs compared to the future value and the opportunity costs. And, if the future value is too low and the opportunity costs too high, then it might make you a better steward to walk away.

What a liberating thought! If you are in the middle of a degree program that you hate, but your family expects you to complete it, you might be a better steward to walk away. If you are in the middle of a job that is taking you in the wrong direction, you might be a better steward to walk away. If you are living in a city that is too expensive without enough opportunities, you might be a better steward to move elsewhere. The possibilities are endless.

Knowing When It’s NOT OK to Walk Away

However, understanding sunk costs is not a license to suddenly quit your life and abandon your family! As Christians, there are areas in life from which we can’t walk away: marriage, participation in a church, and our vocation being among them.

A rightly-oriented Christian life should have these things as primary goals, and we should use economic decision-making to help us reach these goals. Will I marry that person? Is this job limiting my ability to be active in my Church? Is this graduate degree in line with God’s calling for my life?

We achieve this rightly-oriented life by having a proper understanding of stewardship—the very reason we are considering sunk costs in the first place. Stewardship originates in Genesis. Not only were the first humans tasked with caring for the Garden and the animals prior to the fall (which means that stewardship is innate to our very identities as humans and not a product of the fall), but they were tasked to “be fruitful and multiply and fill the earth and subdue it and have dominion over the fish of the sea and over the birds of the heavens and over every living thing that moves on the earth” (Gen 1:28).

Remembering the Cultural Mandate

This is called the “cultural mandate” or the “creation mandate.” We’ve looked before at how we are created in God’s image, and as the great J.R.R. Tolkien has described it, we are “sub-creators” working with our God-given talents to improve the fallen world around us. In a conversation about worldview, I touched on this saying,

God created everything out of nothing, which in turn means we can create economic value out of scarcity. God redeems us from our sins, and we work towards redeeming others from poverty, ignorance and disease. God respects our freedom, even to reject Him, and we respect the freedom of others.

Dr. Shawn Ritenour, professor of economics at Grove City College, has explained that stewardship in this manner can often take the form of entrepreneurship. This is because entrepreneurship does “not waste capital that has already been accumulated.” Not being wasteful is an important element of stewardship, and it brings us back to where we began this discussion of sunk costs.

Understanding past sunk costs can lead us to be better stewards of our resources in the present to prevent them from becoming future sunk costs. It is a necessary tool to fulfilling our cultural mandate, not a license to abandon it.

Further readings on Economics 101

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Knowing When It’s OK to Walk Away

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