Sunk Costs in Medical Education

Physicians commit an immense amount of time, money and energy into their training.  The typical physician attends 4 years of postgraduate school, followed by an apprenticeship of 3-8 years.  The cost of the time alone is tremendous, but when factoring in tuition, lost wages, taxes, and interest; the break even point can be well into a physician’s 40’s or 50’s.  Is it any wonder that physicians have a certain attitude of entitlement when it comes to wages; or panic, anxiety, and occupational dissatisfaction in an increasingly unstable medical economy?  These concerns are perfectly reasonable from the perspective of psychology, but not economics.

Courses in economics or finance are not required of physicians and thus few understand the concept of sunk costs.  When faced with a career decision today, past educational expenses are irrelevant.  Framing effects and loss aversion are two important behavioral economics concepts that trick smart physicians into making stupid career decisions.  For example, they may not choose to pursue a dream outside of medicine because all the work they put into becoming a physician would be “lost”.  What sunk costs demonstrate is that time and energy are already lost, in any moment an individual should be mindful of their best choice.

The value of education is immense and arguably the greatest investment one can make in themselves.  However, the 30 year liability of school loans is a very concrete anchor.  This anchor may negatively bias physicians’ future career decisions, and it is unfortunate when an unhappy physician feels compelled to keep a higher paying job to recuperate sunk costs.

While interviewing medical schools I met a Neurologist dying from ALS (of course he specialized in neuromuscular disorders during his career).  While gasping for air on his Passy-Muir valve, his advice to me was to choose a career and never complain about that choice.  This sage’s paternalistic expression of agonal energy and choice not to be bitter, left an impression we can all learn from.

Undergraduate students need to understand the concept of sunk costs as well as the cognitive dissonance that burdensome student loan debt creates.  If only to have increased awareness of the system and its pitfalls when loved ones become sick the value of a medical education is tremendous.  A young physician is owed nothing by society, the risk they have taken in becoming a physician is entirely their own.  From a temporal perspective, students need to structure the value of their education well beyond the fiscal liability of their student loans.   They need to understand that the time and energy spent in achieving that education can never be recovered.  Ultimately, happiness and career satisfaction is entirely within their personal control.

2 thoughts on “Sunk Costs in Medical Education

  1. Scott

    Thought provoking article, but I’m sitting here drinking my coffee on a post-call morning, and wondering if there isn’t more here than it seems. To wit – lets take two new attendings, Dr. A and Dr. B. Lets assume they are identical in all respects with the exception that Dr. A received scholarships covering all education costs and is debt free, while Dr. B has $400,000 in student loan debt. As I turn this over in my mind, Dr. A seems to have a true sunk cost situation, whereas Dr. B. has both sunk costs as well as future costs. If the concept of sunk costs is intended to illuminate that a rational actor should ignore past costs in economic choice of future investment, then Dr. B’s massive loans (which are non-dischargeable in bankruptcy) are not sunk from her point of view, and the point of view of her lenders. Dr. B is a very constrained economic actor. If Dr. A, on the other hand chooses to become a tree trimmer, then her medical education costs have little economic bearing on the narrow issue of whether she will change careers.

    This of course is still too simplistic (as are so many traditional economic theories assuming rational actors in perfect markets, etc, etc) because both Dr. A and B find themselves servicing multiple goals and foregoing a high future income for a low one has a financial opportunity cost. Nevertheless, I’m left wondering why the debt-saddled Dr. and debt-free one feel like different economic actors.

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    1. I see financing of education as agnostic in the discussion of sunk costs. No matter how you financed it, the costs are sunk. However, due to framing effects and loss aversion it certainly does not feel good to be Dr. B.

      Dr. B is caught in another trap however. “From a temporal perspective, students need to structure the value of their education well beyond the fiscal liability of their student loans.” Dr. B likely can not pursue a dream of being a teacher, poet, or artist without first paying off their loans. This fiscal trap does not feel good either. Undergraduates need to be careful before committing to an expensive private medical institution and decide if the value is truly greater than a state subsidized university.

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