The Loop Trolley and the Sunk Cost Fallacy
Are backers of the Loop Trolley asking the East West Gateway Council of Governments for another $1.3 million in federal funds because they say: A) people want to ride it, or B) a lot of effort has already been put into the trolley? If you guessed “both,” you would be right.
However, reality paints a different picture. For option A, the trolley shut down in December 2019 because hardly anybody wanted to ride it. Neither ridership nor ticket sales exceeded 10 percent of what the Loop Trolley Company predicted.
Option B is an example of what economists call the sunk cost fallacy. The sunk cost fallacy is when an individual keeps doing something that isn’t working just because he’s already invested time or money into it. It’s like buying a movie ticket, realizing that the movie is terrible after ten minutes, but deciding to stay anyway because you already bought the ticket. The money is a sunk cost. The movie will not magically get better just because you paid for the ticket.
Similarly, taxpayers have already spent $51 million on the trolley. The trolley made less than $33,000 in its one year of operation, meaning that for every dollar the trolley made, it received over $1,500 from taxpayers. It suffered numerous construction delays, routinely cut its operating hours, and its extended construction harmed the local businesses it was supposed to help.
It strains credulity to think another $1.2 million of taxpayer money will somehow make the Loop Trolley successful. It’s even less logical to think that this $1.2 million is necessary because of the first $51 million taxpayer dollars.
If backers of the trolley want to find private investors to support the trolley because investors think it’s a worthwhile idea, that’s one thing, but trying to make taxpayers the investors is a different story. Several members of the East West Gateway Council of Governments just recommended that the full body vote for approval of the $1.3 million in federal funds at their October 27 meeting. However, members of the East West Gateway Council of Governments should make sure to look at the big picture before committing any more taxpayer money to the Loop Trolley.