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Strategic misrepresentation
 
 
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Strategic misrepresentation is the planned, systematic distortion or misstatement of fact—lying—in response to incentives in the budget
Budget

Budget generally refers to a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more good ....
 process. Examples of strategic misrepresentation in budgeting illustrate that it is a contingent strategy responsive to a system of rewards in a highly competitive game where resource constraints are present. Not all budget advocacy requires or involves misrepresentation, nor is all budgetary strategy intended to misrepresent.






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Strategic misrepresentation is the planned, systematic distortion or misstatement of fact—lying—in response to incentives in the budget
Budget

Budget generally refers to a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more good ....
 process. Examples of strategic misrepresentation in budgeting illustrate that it is a contingent strategy responsive to a system of rewards in a highly competitive game where resource constraints are present. Not all budget advocacy requires or involves misrepresentation, nor is all budgetary strategy intended to misrepresent. Strategic misrepresentation is a predictable response to the incentive structure of the budgetary game (see also principal-agent problem
Principal-agent problem

In political science and economics, the principal-agent problem or agency dilemma treats the difficulties that arise under conditions of incomplete and information asymmetry when a principal hires an Agent ....
); it is used because it works under some circumstances. It is used both by budget advocates and controllers and at times by both sides of the left-right political spectrum.

Jones and Euske (1991) identified thirteen budget-process factors that appear to stimulate strategic misrepresentation in budgeting and provide examples to demonstrate under which conditions the budget-process factors result in strategic misrepresentation. The study concludes that no amount of moral handwringing over the evils of strategic misrepresentation is likely to lessen the practice. Rather, the system of incentives that propels strategic misrepresentation requires analysis and reform if the behavior is to be discouraged.

Flyvbjerg et al. (2002) found that strategic misrepresentation explains widespread 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....
 in public works projects. Flyvbjerg (2008) described how strategic misrepresentation may be reduced by improved incentive alignment and 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....
.

See also

  • Budget crisis
    Budget crisis

    A budget crisis is an informal name for a situation in which the legislative and the executive in a presidential system deadlock and are unable to pass a budget....
  • Budget surplus
    Budget surplus

    A budget surplus is a situation in which the government takes in more than it spends.References...
  • Budget theory
    Budget theory

    Budget theory is the academic study of political and social motivations behind government and civil society budgeting. Classic theorists include Henry Adams, William F....
  • Cost-benefit analysis
    Cost-benefit analysis

    Cost-benefit analysis is a term that refers both to:* a formal discipline used to help appraise, or assess, the case for a project or proposal, which itself is a process known as project appraisal; and...
  • 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....
  • Cost underestimation
    Cost underestimation

    Cost underestimation is defined as the act of assessing the cost of a future venture lower than what actual cost turned out to be once the venture was implemented....
  • 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...
  • 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....
  • Rent seeking
    Rent seeking

    In economics, rent seeking occurs when an individual, organization or firm seeks to make money by manipulating the economic and/or legal environment rather than by trade and production of wealth....


Sources