The Trap of Foolish Policymakers for Wise Policymakers
The Trap of Foolish Policymakers for Wise Policymakers
Three strategies to avoid getting knee-deep in the mud of foolish decisions: Focus on net future benefits, define exit criteria from projects, and remove sanctity from policy decisions.
History is full of policymakers and managers who are not foolish, yet find themselves trapped in foolish decisions. Why? Let’s review three examples together and then analyze their roots. Despite heavy human losses and financial costs, the U.S. remained in the Vietnam War for a long time. American politicians, due to the money spent and soldiers lost, and the fear of losing credibility, refrained from a swift withdrawal. This war continued until 1975.
In these twenty years, six presidents from the two main parties, Democrats and Republicans, came and went.
The continuation of the Concorde aircraft project: The British and French governments continued the supersonic jet Concorde project despite rising costs and decreasing economic justification, knowing that the project was no longer profitable. This led to significant financial losses.
The Soviet presence in Afghanistan: The former Soviet Union maintained its military presence in Afghanistan for a decade despite international condemnation and heavy losses. This prolonged, futile presence resulted in economic pressure and political instability within the Soviet Union.
Why do policymakers get knee-deep in the mud of foolish policy? The root can be identified in the concept of sunk costs, meaning when individuals, organizations, or countries are reluctant to abandon something they have invested money or time in, even if continuing is unprofitable and illogical.
Well, if we want to delve into this, we reach interesting topics. Let me mention two for now.
1. Loss aversion tendency: We are very sensitive to losses. Losing something we already have causes more psychological harm than not gaining something new. 2. Escalation of commitment: Individuals or organizations tend to stick to their previous decisions despite new evidence. This behavior stems from social pressure, the need to prove ability, fear of others’ judgment, or loss of credibility.
Do politicians always get their knees stuck in the mud of foolish decisions? No. One of the best examples is the change in international and economic policy in Vietnam. Reforms in Vietnam are one of the outstanding examples in modern history, showing how a country’s leaders can make decisions despite losing credibility and being accused of retreat and betrayal.
3. Economic policy reforms: After the war with the U.S., the communist government of Vietnam implemented a centrally planned economy inspired by the Soviet Union, including nationalizing industries and state distribution of goods. The result of these policies was economic stagnation, food shortages, and increased poverty.
In 1986, the Vietnamese government introduced an economic renovation program, including economic liberalization and support for the private sector. The Communist Party of Vietnam emphasized Marxist-Leninist ideology, and these reforms negated the fundamental ideological principles the party had promoted for years.
Vietnamese leaders faced internal criticism from party conservatives who considered these changes a betrayal of the revolution’s ideals. Ultimately, the economic reforms were successful, and Vietnam became one of the fastest-growing economies in the world, and the Communist Party of Vietnam maintained its power and credibility despite changes in economic policies.
4. International policy reforms: After the Vietnam War and the invasion of Cambodia in 1978, Vietnam was sanctioned and isolated.
In the late 1980s, Vietnam decided to withdraw from Cambodia and improve its relations with neighbors and the world, striving to rebuild diplomatic relations with the West and the U.S., eventually normalizing relations with the U.S. in the 1990s. Changes in international policies could be perceived as Vietnam’s weakness against external pressures and a retreat from previous positions and decisions.
Three strategies to prevent costly decisions: Focus on net future benefits instead of calculating the costs we’ve paid and are done with; base your decisions on net future benefits, benefits from this moment onward minus costs from this moment onward. Define exit criteria for policy/project: No policy or decision is right for all situations and times, so before starting any project/decision/policy, clearly define the conditions under which it should be abandoned to avoid decisions without an off button. Remove sanctity from policy/decision/project: What matters is solely and exclusively public welfare.
