If you don’t know what a “sunk cost” is, Wikipedia describes it as follows:
In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. Both retrospective and prospective costs may be either fixed (that is, they are not dependent on the volume of economic activity, however measured) or variable (dependent on volume).
In traditional microeconomic theory, only prospective (future) costs are relevant to an investment decision. Traditional economics proposes that an economic actor not let sunk costs influence one’s decisions, because doing so would not be rationally assessing a decision exclusively on its own merits. The decision-maker may make rational decisions according to their own incentives; these incentives may dictate different decisions than would be dictated by efficiency or profitability, and this is considered an incentive problem and distinct from a sunk cost problem.
Evidence from behavioral economics suggests this theory fails to predict real-world behavior. Sunk costs greatly affect actors’ decisions, because many humans are loss-averse and thus normally act irrationally when making economic decisions.
The BART Oakland-Airport Connector project appears to be a textbook case of sunk cost fallacy, where humans (i.e. the BART Board) is making an irrational decision based on money already lost:
“It doesn’t look like we are going to be putting the brakes on this project,” said Robert Raburn, a BART board member who would clearly love to do just that. Raburn, whose district includes the area around Oakland International Airport, asked interim GM Sherwood Wakeman to estimate how much it would cost to kill the proposed $484 million connector.
The answer: The $95 million that BART has already spent on the planned 3.5-mile line from the Coliseum Station to the airport would be money down the drain. Paying off contractors who have already been hired would cost another $30 million to $150 million. The project’s backers say it will create construction jobs and raise the Oakland airport’s regional profile. Some transit activists think the money would be better spent on increasing bus service in the area or fixing up BART itself. “We still don’t have the local money for buying new cars, which is a top priority with everyone,” Raburn said.
The line’s biggest backer was former BART Director Carole Ward Allen – whom Raburn unseated in the November election.
“It would be a huge waste of public funds to stop at this point,” said BART Director Joel Keller, whose district stretches across northern Contra Costa County.
BART estimates the OAC will require some $10/trip operating subsidy — more than 5 times required for a BRT. And the BRT would provide faster door-door travel time, meaning it would likely generate higher ridership. The fact that $100 million has already been spent is irrelevant here.
Systemic Failure 
Im confused about the operating subsidy. I presumed airtrains are cheap to run because they are completely automated. Would this cost be lowered by going with a rail-based people mover instead of rubber tired like SFO’s Airtrain?
Note: Ive often wondered why the extensive Airtrain at SFO couldnt have just gone to San Bruno or Millbrae along the wye, and in fact a much cheaper wye than the one built for BART. I dont think i actually see the benefit to the one-seat ride everyone is so excited about with trains going to airports, especially since BART as-is goes to a parking garage rather than a terminal.
I don’t understand what is the problem with the current OAK-BART shuttle. It’s fast, there’s seldom any traffic on the airport road, it drops me off at the terminal, it runs frequently, it costs only a few dollars round trip, and it already exists with capital and operating costs paying for themselves.
Why would there be any impetus to replace the existing infrastructure or spend any money at all on changing it?
The story I always heard was that the local pols were in cahoots with whatever union represented the people who would build the thing. Politicians are often more interested in the “job-promoting” aspects of transit than the actual mobility/urbanism benefits.
Yes, two local politicians managed to shepherd this project through 10-years of under the radar negotiations, and then promised literally “3-5,000 direct, local construction jobs” to the people of East Oakland, where unemployment is over 30%. The actual estimates? An average of less than 70 construction jobs per year during the three and a half year construction period.
It’s a classic case of inertia and fatigue, talk about something long enough and it gets built, no matter how prices explode and benefits decrease. It becomes a fait-accompli because decision-makers find it more and more difficult to change course.
BART will be going to voters next year or so to ask for money to buy new cars (they have the oldest rolling stock in the US). But are taking out over $100 in new loans for the OAC.
I haven’t heard as much about BART expansion the other way, to Livermore. Do you have any thoughts on this? (See here: http://www.arounddublinblog.com/2011/05/bart-to-livermore-ca-in-jeopardy/#more-4220)
[…] While it is a bit of a hassle to make the changeover, I’m not sure that it’s worth $484 million. Nor would I be willing to pay the full price of the rail trip from the current BART stop to the […]