Don't throw good money after bad. When you're in a hole, stop digging. If you've been running in the wrong direction, the first thing to do is, turn around.

These are the kinds of things Americans are hearing and saying about the war in Iraq. It's understandable: Those familiar sayings are often useful. When you gamble and lose, the natural tendency is to double your bet--and when that doesn't work, mortgage everything you have to try to retrieve your losses. But as every undergraduate economics student knows, that strategy is a disaster. Hence the principle of "sunk cost." The fact that I've lost a pile on some enterprise or investment is no reason to lose an even bigger pile. The smart move, economically speaking, is to reassess your decisions on a regular basis. When an investment isn't working, get out. Put your money, your talents, and your energy to better use somewhere else.

All of which seems to apply to Iraq, in spades. A seemingly quick and easy military victory has turned sour. The costs, in blood and treasure, have escalated. Victory looks uncertain and distant. It seems the time has come, if not to cut and run, then surely to cut our losses. If ever the principle of sunk cost applied to warfare, it would seem to apply here.

But that instinct is wrong. Warfare is not like investment banking. At precisely the moment an economist might say to stop throwing good money after bad, a wise military strategist might say to double

Why might that be so? For one thing, willingness to raise the stakes often wins the game. Why do insurgent gangs, who have vastly smaller resources and manpower than the American soldiers they fight, continue to try to kill those soldiers? The answer is, because they believe they only have to kill a few more, and the soldiers will leave. They need not inflict a military defeat (which would be impossible, given the strength of the American military)--all they need to do is survive until American voters decide to throw in the towel, which might happen at any moment.

The proper response to that calculation is to make emphatically clear that the fight will not end until one side or the other wins, decisively. That kind of battle can only have one ending, as Abraham Lincoln understood. In a speech delivered a month after his reelection, Lincoln carefully surveyed the North's resources and manpower and concluded that the nation's wealth was "unexhausted and, as we believe, inexhaustible." Southern soldiers be gan to desert in droves. Through the long, bloody summer and fall of 1864, the South had hung on only because of the belief that the North might tire of the conflict. But Lincoln did not tire. Instead, he doubled the bet--and won the war.

There is another reason economic logic does not readily apply to the fighting of wars. When running a business, one aims to invest just as much as is necessary to make the sale or manufacture the product--no less, and no more. Profit equals revenue minus cost, so minimizing cost lies at the core of wise business management.