Why don't law schools offer a basic psychology course as part of a law degree? The best lawyers understands the psychology behind their clients' decisions and reasoning and tailor their advice accordingly. An awareness of possible cognitive biases frames the position adopted by a client or opposing party, and enables the lawyer to take steps to cancel the bias, or at least bring it to the attention of the client or other party. Cognitive biases lead to bad decision making, and explain irrational behaviour. "Escalation of commitment to a failing course of action", can be a particular problem for a lawyer to deal with. When a client insists on proceeding with a course of action which the lawyer believes is doomed to failure, an awareness that this cognitive bias may be the reason for the client's position can help.
What we are talking about is continuing to invest in something after it becomes clear the investment will be unsuccessful or unprofitable - put simply, refusing to "cut your losses and run". The client's position is "in for a penny, in for a pound", the lawyer sees it as "throwing good money after bad".
Irrational escalation occurs when people justify further investment in a course of action, when there is evidence that the decision is probably wrong, because they cannot accept that their previous investment was wrong. Simple examples are the gambler who keeps betting in an attempt to win, justifying that he has lost too much to back out now, or the investor who hangs onto shares which have dropped dramatically in price since their purchase, in the hopes the price will eventually rise.
In litigation, the investment can be the legal costs, time and energy spent in conducting a matter. The greater the investment, the harder it becomes to back out. An example is a client who has spent many $1000s in running a case, and when a good settlement offer comes along, wants more because of the money he has spent. He continues to incur more costs because he needs to get a better settlement to cover the increased costs, even when it is clear there is little likelihood of any better outcome than the current offer.
It is vital for the lawyer to keep the potential goal in front of mind for the client, and aim to keep costs well under the potential rewards. Once it becomes apparent that the current course of action is not a good one, focus on the outcome of continuing with the current course, rather than the process of proceeding with a plan. Ideally, set limits for a client at the commencement of a matter. This helps the client recognize when the costs are sunk, and encourages them to have the willingness to walk away.