The Plane

So in Palin's speech to delegates at the GOP convention she said she sold her predecessor's luxury jet, "That luxury jet was over the top. I put it on eBay." At the time I wasn't sure if she was serious or joking, but my first thought was that it was a joke. Looking back on it now, I would say it was a little of both.

Palin did indeed put the jet on e-bay, but bids weren't high enough, so they later had a broker sell it for 2.1 million.

Some of the media has been hard on her for her statements, saying that her e-bay statement was misleading. In truth, she didn't say that she sold it on e-bay, just that she put it on e-baby.

However, they are even harder on McCain for bragging on the campaign trail about how she made a profit on this plane. The fact of the matter is that the government originally payed 2.7 million dollars for the jet.

That can hardly be called making a profit, if you consider making a profit to be based on the concept "I sold it for more than I bought it for." With the 8 years of jet use, it certainally wasn't worth 2.7 million dollars anymore. On the other hand, it was probably still worth more than 2.1 million.

Usually Americans think of profit as making more than you bought it for, so in my opinion McCain certainally made himself look a bit stupid when this hit the news. I do agree that selling the jet was a profitable move though. If Palin wasn't planning on using the Jet much, then keeping it would have a waste of fuel and maintenance costs. Furthermore, selling it would get back some of the cost of buying something that the state didn't want her predecessor to buy in the first place.

In McCain's defense, There is such an economic concept as a sunk cost:

Sunk Costs - A non-recoverable cost expended prior to the start of the project. Because sunk costs have been irrevocably expended or committed, they are not considered in the cost/benefit analysis.

Sunk Costs - Expenditures that are at least partially lost once an investment is made.

Sunk costs - Costs that represent expenses already incurred in the development of a new product. Have been written off, involve no capital asset, and no anticipated salvage value. For purposes of net present value, sunk costs are ignored. After the project is over, an overall recap will include all costs, whenever spent.