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Planning fallacy
 
 
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The planning fallacy is the tendency to underestimate task-completion times. Real-life examples in public policy
Public policy

Public policy can be generally defined as the course of action or inaction taken by government entities with regard to a particular issue or set of issues....
 may include the construction of the Sydney Opera House
Sydney Opera House

The Sydney Opera House is located in Sydney, New South Wales, Australia. It was conceived and largely built by Denmark architect J?rn Utzon, who in 2003 received the Pritzker Prize, architecture's highest honour....
 and the Big Dig, both of which ran many years past their planned schedule.

In one study, 37 students were asked to estimate the completion times for their senior theses. The average estimate was 33.9 days. Only about 30% of the students were able to complete their thesis in the amount of time they predicted, and the average actual completion time was 55.5 days.






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The planning fallacy is the tendency to underestimate task-completion times. Real-life examples in public policy
Public policy

Public policy can be generally defined as the course of action or inaction taken by government entities with regard to a particular issue or set of issues....
 may include the construction of the Sydney Opera House
Sydney Opera House

The Sydney Opera House is located in Sydney, New South Wales, Australia. It was conceived and largely built by Denmark architect J?rn Utzon, who in 2003 received the Pritzker Prize, architecture's highest honour....
 and the Big Dig, both of which ran many years past their planned schedule.

In one study, 37 students were asked to estimate the completion times for their senior theses. The average estimate was 33.9 days. Only about 30% of the students were able to complete their thesis in the amount of time they predicted, and the average actual completion time was 55.5 days.

Some have attempted to explain the planning fallacy in terms of impression management
Impression management

In sociology and social psychology, impression management is the process through which people try to control the impressions other people form of them....
 theory.

One explanation, focalism, may account for the mental discounting of off-project risks. People formulating the plan may eliminate factors they perceive to lie outside the specifics of the project
Project

A project in business and science is a collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim....
. Additionally, they may discount multiple improbable high-impact risks because each one is so unlikely to happen.

More prosaically, planners tend to focus on the project and underestimate time for sickness, vacation, meetings, and other "overhead" tasks. Planners also tend not to plan projects to a detail level that allows estimation of individual tasks, like placing one brick in one wall; this enhances optimism bias
Optimism bias

Optimism bias is the demonstrated systematic tendency for people to be over-optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events....
 and prohibits use of actual metrics, like timing the placing of an average brick and multiplying by the number of bricks.

Lovallo and Kahneman (2003) have expanded the original definition of the planning fallacy from being the tendency to underestimate task-completion times to being the tendency to underestimate the time, costs, and risks of future actions and at the same time overestimate the benefits of the same actions. According to this definition, the planning fallacy results in not only time overruns, but also cost overruns and benefit shortfalls.

Compare to procrastination
Procrastination

Procrastination is a type of behavior which is characterized by deferment of actions or tasks to a later time. Psychologists often cite procrastination as a mechanism for coping with the anxiety associated with starting or completing any task or decision....
 and optimism bias
Optimism bias

Optimism bias is the demonstrated systematic tendency for people to be over-optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events....
.

See also

  • Benefit shortfall
    Benefit shortfall

    A benefit shortfall results from the actual benefits of a venture being lower than the projected, or estimated, benefits of that venture. If, for instance, a company is launching a new product or service and projected sales are 40 million dollars per year, whereas actual annual sales turn out to be only 30 million dollars, then the benefit sh...
  • Hofstadter's law
    Hofstadter's law

    Hofstadter's Law is a self-reference time-related adage, coined by Douglas Hofstadter and named by himself.Hofstadter's Law was a part of Douglas Hofstadter's 1979 magnum opus G?del, Escher, Bach....
  • Cost overrun
    Cost overrun

    Cost overrun is defined as excess of actual cost over budget. Cost overrun is also sometimes called "cost escalation," "cost increase," or "budget overrun." However, cost escalation and increases do not necessarily result in cost overruns if cost escalation is included in the budget....
  • List of cognitive biases
    List of cognitive biases

    A cognitive bias is a pattern of deviation in judgment that occurs in particular situations .Implicit in the concept of a "pattern of deviation" is a standard of comparison; this may be the judgment of people outside those particular situations, or may be a set of independently verifiable facts....
  • Optimism bias
    Optimism bias

    Optimism bias is the demonstrated systematic tendency for people to be over-optimistic about the outcome of planned actions. This includes over-estimating the likelihood of positive events and under-estimating the likelihood of negative events....
  • Reference class forecasting
    Reference class forecasting

    Reference class forecasting predicts the outcome of a planned action based on actual outcomes in a reference class of similar actions to that being forecast....
  • Risk
    Risk

    Risk is a concept that denotes the precise probability of specific eventualities. Technically, the notion of risk is independent from the notion of value and, as such, eventualities may have both beneficial and adverse consequences....
  • Wishful thinking
    Wishful thinking

    Wishful thinking is the formation of beliefs and making decisions according to what might be pleasing to imagine instead of by appealing to evidence or rationality....
  • Project management
    Project management

    Project management is the List of academic disciplines of planning, organizing and managing resources to bring about the successful completion of specific project goals and objectives....


External links

  • by Justin Kruger and Matt Evans
  • by Mark Pezzo, Jordan Litman, and Stephanie Pezzo