A construction project in Congressman Foghorn\'s district is unfinished. Foghorn

Question

A construction project in Congressman Foghorn's district is unfinished. Foghorn has asked that a new appropriations bill include funds to complete the project, despite a report by an independent agency that the project is a waste of taxpayer money. Foghorn's project is a bridge that crosses a river between two cities in his district. The press has criticized Foghorn and dubbed the project "a bridge too far" since another bridge, located closer to the same two cities Foghorn's bridge will connect, already exists and can accommodate all traffic between the two cities. Foghorn argues that if the bridge project is not completed, the $50 million already spent will have been wasted. Is Foghorn's argument economically rational? Explain your answer.

Explanation / Answer

The $50 mn already spent on the construction project is a sunk cost and should not be considered for arriving at a decision or calculating the profits of the unfinished project. Additional expenditure on the project would not be justified as it would mean underutilization of both the bridges (the first bridge can accomodate the entire traffic). Therefore, the argument is not economically rational.

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