Sunk-Cost Effects Made Ancient Societies Vulnerable to Collapse

Abstract:

The collapse of ancient societies such as the Mesa Verde-region pre-Hispanic Pueblos has puzzled generations of scientists. Many explanations for particular cases have been suggested, from combinations of social, political, and economic factors (Tainter 1988), to climatic factors, such as drought. Here we propose a new hypothesis, suggesting why precisely societies that invested in impressive structures became vulnerable to disturbances. Empirical evidence shows that humans have a strong tendency to hold on to previous investments even if this is a rationally bad choice. We argue that this leads to a tendency not to abandon settlements if much has been invested in them, even if resources become scarce. We use a stylized model to illustrate under which conditions sunk-cost-related collapse is likely, and present archeological evidence that sunk-cost effects may be important in explaining the delayed demise (relative to hamlets) of pre-Hispanic Puebloan villages in the face of resource stress.